U.S. Senator Trent Lott, R- Miss., wants to require insurers to disclose property insurance coverage and noncoverage in plain language on the front page of each homeowner’s policy and has introduced a bill giving the Federal Trade Commission enforcement authority to see this is done.
“Insurance policies are notoriously hard to read and understand because they’re primarily written in complex legalese,” Lott said in introducing his bill. “While insurance is a legal contract, it also is a product purchased by consumers. That’s why I believe every insurer should include a plain-English description of a homeowner’s policy, prominently displayed on the policy’s first page.”
Lott’s bill will require this basic description be contained in a “noncoverage disclosure” box stating in bold font, twice the size of the body of the policy’s text, all conditions, exclusions and other limitations pertaining to the individual policy’s coverage.
The bill further requires the Federal Trade Commission to enforce this disclosure requirement, and it establishes penalties for insurers who fail to comply through the FTC’s existing laws governing unfair or deceptive practices.
Lott contends his bill, the Homeowners’ Insurance Noncoverage Disclosure Act, would save money and time associated with insurance policy disputes.
“Consumer groups have estimated a provision like this could have saved consumers anywhere from $55 billion to $65 billion in Hurricane Katrina’s aftermath,” Lott said. “Having a clear, concise description of every policy serves the best interest of consumers, insurers and taxpayers.”
But insurers oppose the bill, arguing that it duplicates state regulatory requirements involving “plain language” insurance terms and will in fact increase costs.
According to June Holmes, interim chief executive officer of Property Casualty Insurers Association of America (PCI), many states – including Lott’s home state of Mississippi – “are already doing an excellent job in enacting and enforcing these ‘plain language’ requirement.’
Holmes said Lott’s proposal “will do nothing to enhance the ‘plain language’ requirements already on the books in almost every state. But by calling for the FTC to enforce this redundant and unnecessary requirement, Senator Lott’s proposal will add another layer of costly and duplicative federal oversight of a function best left to the states—not to mention the confusion that dueling federal and state regulations would cause for consumers.”
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