The Connecticut Insurance Department published a Notice to all homeowners insurance companies operating in the state concerning valid reasons for nonrenewal. The Department has received complaints from policyholders regarding insurers nonrenewing homeowners and dwelling fire insurance policies due to, in some cases, unsubstantiated concerns about the quality of the property's roof based on information received from aerial footage. The Notice provides the Department's position on the acceptable use of aerial imagery to evaluate roof damage, and the extent of roof damage needed to support underwriting action.
The Department's position is that cosmetic roofing problems such as discoloration and streaking are not a legitimate reason for the nonrenewal of a homeowner or dwelling fire policy. The use of aerial imagery technology showing cosmetic damage alone cannot be used to support nonrenewal actions. There must be evidence of material degradation of a roof that would increase the risk of a loss–aerial images that unambiguously show material damage may be used to support nonrenewals.
After reviewing and investigating consumer complaints where aerial images were relied upon and used to support nonrenewals, the Department found that many of the images did not definitively show material roofing damage. Many showed discoloration of shingles or streaking on the roof's surface, which insurers used to justify nonrenewals. The Department stresses this is not allowed. In contrast, images that definitely show things such as roof ponding, incomplete patching or tarping of the roof are generally permissible reasons for underwriting action.
Insurers are required to file with the Department the underwriting guidelines used to determine whether to nonrenew or renew a policy. Filings must include all rules and conditions in the company's underwriting guidelines so the Department can verify that any decision made complies with the guidelines. The Department states that the use of aerial imagery is not restricted, but there must be guardrails in place to protect policyholders. One such example would be if an aerial image does not show unequivocal material damage to a roof, sending a contractor to do a physical inspection to validate the condition of the roof.
The Department has also received complaints that some insurers are not providing the insured with specific reasons for the nonrenewal of a policy. Insurers are legally required to inform the insured of a nonrenewal at least 60 days in advance, and it must be accompanied with a specific reason for nonrenewal. Nonspecific reasons such as "claims experience", "underwriting judgment", or "increase in hazard", are not acceptable because they do not provide the insured with a practical insight to remedy their situation. Additionally, while 60 days notice is required by law, the Department encourages insurers to provide notice as far in advance as possible, to aid insureds in the challenges that may follow after a nonrenewal notice.
The Notice can be found here.