Property/casualty insurers that write homeowners insurance in Texas can now use policy forms developed by the American Association of Insurance Services (AAIS). AAIS is a national advisory organization that develops forms and rating information used by more than 600 insurers nationwide.
AAIS said the Texas Department of Insurance approved the use of forms in the AAIS Primary Homeowners Program. The move by TDI represents the department’s latest in a series of such approvals.
Approval of the AAIS forms is another step in a regulatory transformation in Texas. Carriers in Texas have been required to write homeowners coverage using policy forms and rating benchmarks promulgated by the insurance department. However, forms developed by AAIS and other providers can now be used by “reciprocal exchanges” and “Lloyds” organizations, which are currently free from rate regulation.
In response to regulatory incentives, many insurers have created reciprocal exchanges and Lloyds organizations, which have come to dominate the Texas homeowners insurance market.
Use of the AAIS forms, like those of all other providers, is subject to several requirements, including:
–Companies must agree to offer applicants the option to purchase property coverage similar to that found in the promulgated forms for dwelling foundations, water damage from seepage or leakage, and damage arising from fungus, up to a limit.
–Companies must provide detailed plans for how they plan to phase in and implement use of AAIS forms.
–Companies must provide policyholders being changed from a promulgated form to an AAIS form with a detailed letter explaining changes in coverage that will result.
In addition, companies using AAIS forms must file with the department rates and rate changes for policies that include AAIS forms. This requirement will be in effect for at least two years.
AAIS is also developing an advisory manual that will include some Texas rules and rating factors.
For information on affiliating with AAIS for use of its Homeowners Program, contact Rick Anderer, marketing director, at richarda@AAISonline.com or by calling (800) 564-AAIS.
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