AIA Says No Need for Maine Fair Plan

May 14, 2003

There is no need for the Maine State Legislature to create a Fair Access to Insurance Requirements (FAIR) plan, according to the American Insurance Association. AIA testified before the legislature’s Joint Insurance and Financial Services Committee in opposition to a bill (LD 1601) that would create a FAIR Plan.

“If the legislature enacts this bill, they are choosing to raise costs for every homeowners insurance policyholder in Maine, largely to cover wealthy coastal properties,” said Bruce Gerrity, AIA local counsel in Maine. “The state’s insurance availability focus is on coastal areas with expensive homes that are at a higher risk for catastrophe losses. Often these are vacation homes. A FAIR Plan would result in all policyholders subsidizing the cost of insurance for wealthy homeowners.”

All existing FAIR Plans in other states operate with losses that are subsidized by policyholders in the voluntary market.

“With the way this legislation is structured, costs to policyholders will continually increase,” said Paul Moran, AIA vice president, northeast region. “The mechanism in the bill allowing voluntary companies to recoup their FAIR Plan assessments by surcharging policyholders for one-third of the assessment in each of the next three years means that those surcharges will grow larger each year.”

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