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This article was printed from Standard Publishing Corporation
Article's URL: http://www.spcpub.com/article.cfm?id=183
By: ELA (Thu, Feb/08/2007)
While we here at The Standard focus on New England, the reality is that frequently events outside our fair region can have an impact on these six states.
Take, for example, the decision of State Farm to settle hundreds of lawsuits stemming from Hurricane Katrina. The company's action includes an as-yet unofficial agreement to revisit hundreds of previously denied or closed property damage claims. Will these actions launch a trend nationwide for insurers' claims handling practices to be second-guessed and endlessly litigated? One hopes not, but with one of the country's largest insurers settling what promised to be a costly public relations disaster and federal lawmakers examining the system, it's almost assured. The solution, as with most problems facing the insurance industry, is more openness and honesty on claims, pricing and in general dealing with consumers.
For another example of the beyond affecting our backyard, look to Florida, passing a measure that is more likely to push private insurers out of the market and hurt consumers in the long-term. Florida's catastrophe fund – which lawmakers in Connecticut, Massachusetts and Rhode Island have looked to as a model for their states – would be able to provide lower-cost reinsurance to private insurers. Florida residents stand the chance that they would have more to pay after a catastrophic hurricane. Given the Sunshine State's (near) history, is that a chance they should take? And will other states take up Florida's optimism that this legislation will stabilize rates as evidence that they too should launch similar reforms?
Again, hopefully not, since the best efforts to resolve problems take into account the individuality of states and regions. For instance, recent complaints in New England that insurers, hit hard by Hurricane Katrina, are taking out their troubles on the Northeast. The fact is that Katrina was a catalyst along with many other factors that are more region-specific – like building costs, characteristics of storms that hit New England, reinsurance and years of low-priced homeowners insurance. These points have been made before, on these pages and out in the industry. But clearly, they aren't having the desired effect in many cases.
Rather than simply sending out nonrenewal notices with brief explanations, perhaps the insurance industry and regulators should work together on a consumer guide that explains the current situation – making it clear that this isn't turmoil that can be easily swept away.
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