The District of Columbia Department of Insurance, Securities and Banking (DISB) published a bulletin clarifying the provisions of the Unfair Trade Practices section of the DC Municipal Regulations.
Subsection 5001.1 states that an insurer cannot refuse to renew a homeowners insurance policy solely because of claim or loss frequency unless there have been two or more claims during the last three-year experience period.
An insurer is not permitted to consider any of the following as a claim or loss:
- The first claim for a loss caused by weather, unless the insurer can prove the insured failed to reasonably maintain the property and that failure contributed to the loss
- Any claim that was reported to the insurer as an inquiry, for which the insurer made no payment
- A loss for which there was no investigation or other claim activity
- A loss caused by a catastrophic event
DISB has received reports that some insurers have understood this regulation to mean that they can significantly increase a policyholder's premium, change their rating classification, or add a surcharge on the policy because of a first claim for loss due to a weather-related event, as long as they do not non-renew the policy. DISB advises that those actions are an attempt to evade the regulation and are also prohibited.
DISB clarifies that insurers are not prohibited from changing the rate they charge to any class of insureds as long as that rate change applies to all persons in the rating class and is approved by regulatory review. A policyholder may not have their rating class changed due to a first claim for loss caused by a weather-related event.
The bulletin can be found here.