PCI Reports Mixed Emotions on Key Mass. Bills

June 14, 2005

The Property Casualty Insurers Association of America (PCI) expressed mixed emotions Tuesday concerning numerous insurance-related bills that were introduced in the Massachusetts Legislature’s Financial Services Committee Hearing held earlier in the day. Peter Robertson, local counsel for PCI, testified on the organization’s behalf on 10 key insurance bills.

“Massachusetts is a critical state in our efforts to improve the nation’s insurance markets,” said Robertson. “Our mission in each state is clear – we will continue to support legislation that will increase the availability of insurance and marketplace competition, while at the same time opposing legislation that would impede those efforts.”

PCI testified in support of legislation that would modify the Standard Fire Policy to allow for terrorism exclusions in commercial policies. The three identical bills, House Bills 1552, 3046, and 3902, would amend the Standard Fire Policy that is mandated by Massachusetts law to permit a commercial policy to exclude coverage for loss by fire or other perils if they were caused by terrorism.

“Ten states have already passed laws allowing for this provision,” said Robertson. “We hope that Massachusetts legislators will follow their peers by recognizing the problem and including the modification.”

PCI was on the other side of the fence however when it came to the numerous bills that centered on homeowners’ policies. The majority of bills that were introduced seek to further restrict insurers’ ability to make underwriting decisions in the homeowners’ market. Robertson testified in opposition to six homeowner-specific bills including:

* House Bill 1565, which would prohibit the exclusion of any type of domestic animal from coverage and mandate that homeowners’ insurers offer coverage for the liability of owning a “domestic animal” as an option.

* House 1569, which would require that the decision of an insurance company to renew or cancel a policy be based on factual claim experience and not on projected information.

* House 1503, which would prohibit homeowners’ insurers and the F.A.I.R Plan from refusing to write or to renew coverage because of weather conditions or the history or probability of storms in the area where the property is located

“Over the past two years, the Massachusetts homeowners’ market has become very challenging for insurers and consumers alike,” remarked Robertson. “Reinsurers have significantly raised rates to homeowners’ insurers for catastrophe coverage causing a huge strain on the market. As a result, many companies have reduced writing policies, which has left many consumers without sufficient coverage. The passage of these bills would represent a step backward for homeowners’ insurance reform and would only exacerbate the current problems.”

The final bill of note, Senate Bill 628, centers on the catastrophe reinsurance fund, or the CAT fund, which is modeled after the program that has been successfully functioning in Florida for several years. The fund is aimed at helping to preserve an orderly and competitive private homeowners’ insurance market in the face of devastating hurricanes and a difficult reinsurance market. However, since Massachusetts’ topography, weather and economic situations are different that those in Florida, there is no assurance that a comparable model will work in Massachusetts, therefore further study must be done.

“While we wish to applaud Senator O’Leary for creating legislation that represents a thoughtful approach to addressing the homeowners’ insurance market, we feel this highly complex issue deserves further study and analysis,” said Robertson.

“Overall, we are pleased Massachusetts legislators are focusing their efforts on reforming the state’s insurance market,” added Robertson. “We look forward to working with them and on behalf of any legislation that will keep the Massachusetts insurance marketplace moving in the right direction.”

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