Hurrahs for Commissioner Denn and the Delaware Dept. of Insurance. There is absolutely no justification in cancelling or nonrenewing a Homeowners Policy for events that are totally outside an insured\’s control. Insurers are allowed, and certainly do have, elements in their rates and premiums that allow for things such as windstorms, fallen trees, and virtually all of the causes of loss that an insured has no control over.
Clearly there has been some grumbling about insurance carriers allegedly dumping homeowners for making claims as a result of losses beyond their control. I\’ve heard of moves to prevent carriers from non-renewing homeowner policies on account of losses stemming from losses that have been assigned a CAT code.
Such rules may not seem unreasonable on their face. But they may also ignore any number of things – such as: 1) increased use of sophisticated modeling to help \”map\” or predict future weather patterns, and; 2) arguably more mundane or traditional (albeit perhaps increasing) concerns about coverage disputes arising with all the homeowners who arguably failed to properly maintain their property, eg fix old roofs.
More importantly, rules that constrain insurance companies to write or renew coverage beg the question of why any insurance company should ever be so duty bound. I\’m invariably a bit bemused by the outrage over carriers threatening to pull out of a market after taking a beating…as so often happens in the wake of a hurricane. It\’s as if an insurance carrier\’s inviting a knockout blow after getting rather bloodied and black-eyed in the ring should be requisite.
But where did state insurance commissions ever get the power to compel insurance companies to stay put and not leave in the face of deteriorating market conditions? What other class of business is compelled to \”stay the course\” in areas where they\’ve taken big hits and lost a lot of money? Why is the application of a tourniquet in the face of hemorrhaging ever such a bad thing? And what ever happened to freedom of contract and association anyway? This is a great mystery to me frankly…
I took a look at Reg 703. It does not merely ban a carrier from nonrenewing an HO policy in the event of a loss \”beyond the control\” of an insured. Rather, Reg 703 places the onus or burden of proof on a carrier to show that the insured risk has gotten more risky.
Maybe that doesn\’t sound so unreasonable to some. But #1 it assumes there is – or at least should be – some sort of automatic legal right to a renewal. And more importantly it forgets two crucial things: 1) Insurance companies are in business to write insurance policies and so they typically will write as much business as they safely feel they can, 2) it is arguably not in the long term public interest to be forcing carriers to write business for which they have no stomach as it may well cause long term market disruptions – including but not limited to insolvencies. In short, availability or capacity can be seriously strained in the long haul by forcing the \”invisible hand\” of the market…by cuffing it to the stove that burned it.
Lee
PS Reg 703 does seem to look very much like legislation exceeding the limited rulemaking power of an administrative agency…something Arcy seems not to care much about as he likes the result this time. But will he NEXT time? Remember…it\’s Delaware.
The DOI has to be out of its mind. The utilization of loss history has been, and continues to be one of the back bones of underwriting. Without it, insurers, would be hard pressed to precict on any acturial basis loss costs vs. adequate premium. This is absolutely idiotic.
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Hurrahs for Commissioner Denn and the Delaware Dept. of Insurance. There is absolutely no justification in cancelling or nonrenewing a Homeowners Policy for events that are totally outside an insured\’s control. Insurers are allowed, and certainly do have, elements in their rates and premiums that allow for things such as windstorms, fallen trees, and virtually all of the causes of loss that an insured has no control over.
Clearly there has been some grumbling about insurance carriers allegedly dumping homeowners for making claims as a result of losses beyond their control. I\’ve heard of moves to prevent carriers from non-renewing homeowner policies on account of losses stemming from losses that have been assigned a CAT code.
Such rules may not seem unreasonable on their face. But they may also ignore any number of things – such as: 1) increased use of sophisticated modeling to help \”map\” or predict future weather patterns, and; 2) arguably more mundane or traditional (albeit perhaps increasing) concerns about coverage disputes arising with all the homeowners who arguably failed to properly maintain their property, eg fix old roofs.
More importantly, rules that constrain insurance companies to write or renew coverage beg the question of why any insurance company should ever be so duty bound. I\’m invariably a bit bemused by the outrage over carriers threatening to pull out of a market after taking a beating…as so often happens in the wake of a hurricane. It\’s as if an insurance carrier\’s inviting a knockout blow after getting rather bloodied and black-eyed in the ring should be requisite.
But where did state insurance commissions ever get the power to compel insurance companies to stay put and not leave in the face of deteriorating market conditions? What other class of business is compelled to \”stay the course\” in areas where they\’ve taken big hits and lost a lot of money? Why is the application of a tourniquet in the face of hemorrhaging ever such a bad thing? And what ever happened to freedom of contract and association anyway? This is a great mystery to me frankly…
I took a look at Reg 703. It does not merely ban a carrier from nonrenewing an HO policy in the event of a loss \”beyond the control\” of an insured. Rather, Reg 703 places the onus or burden of proof on a carrier to show that the insured risk has gotten more risky.
Maybe that doesn\’t sound so unreasonable to some. But #1 it assumes there is – or at least should be – some sort of automatic legal right to a renewal. And more importantly it forgets two crucial things: 1) Insurance companies are in business to write insurance policies and so they typically will write as much business as they safely feel they can, 2) it is arguably not in the long term public interest to be forcing carriers to write business for which they have no stomach as it may well cause long term market disruptions – including but not limited to insolvencies. In short, availability or capacity can be seriously strained in the long haul by forcing the \”invisible hand\” of the market…by cuffing it to the stove that burned it.
Lee
PS Reg 703 does seem to look very much like legislation exceeding the limited rulemaking power of an administrative agency…something Arcy seems not to care much about as he likes the result this time. But will he NEXT time? Remember…it\’s Delaware.
The DOI has to be out of its mind. The utilization of loss history has been, and continues to be one of the back bones of underwriting. Without it, insurers, would be hard pressed to precict on any acturial basis loss costs vs. adequate premium. This is absolutely idiotic.