Insurers Dispel Misconceptions Raised During Congressional Hearing
WASHINGTON, D.C., February 28, 2007 — Property/casualty insurers are encouraged by statements made by House Financial Services Oversight and Investigations Subcommittee Chairman Melvin Watt, D-N.C., suggesting that he wants to gather the facts as his panel examines the way insurers handled claims following the 2005 Gulf Coast hurricanes. Insurers look forward to working with Chairman Watt in his effort to get all the facts in this matter. However, during the Subcommittee's initial hearing on February 28, 2007, some misstatements about the insurance industry were made that cannot go unchallenged. For example:
- The industry did not, as was suggested, conspire to defraud homeowners seeking compensation for property damage they suffered. The statement that insurance companies are legally allowed to discuss and agree on claims handling activities is untrue. The very limited exemption to antitrust laws provided by the McCarran-Ferguson Act permits insurers to pool historical data on losses. This is extremely beneficial to smaller insurance companies that do not have the resources available to accurately price coverage. Insurance companies, like all other businesses, are not allowed to conspire, collude or act in concert to set rates or handle claims.
- Homeowners’ policies are clear in stating they do not cover storm surge. The flood exclusion is explicit. The typical homeowner’s policy language says it will not pay for loss or damage “caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss …flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not.”
- Homeowners insurance companies have not pulled out of states. While insurers in some coastal states are not writing new homeowners’ policies, none have withdrawn entirely from any states. Coverage is available in every state, either through private insurers or a state-operated insurance company. Also, insurers continue to provide coverage to their existing policyholders throughout the contract period.
- Insurance companies have paid homeowners what was owed, based on coverage outlined in the policies. Companies have paid an estimated $40.6 billion on 1.7 million claims for damage to homes, businesses and vehicles in states from Hurricane Katrina. Estimates show that fewer than 2 percent of homeowners’ claims in Mississippi and Louisiana are in dispute, either through mediation or litigation.
The industry appreciates the opportunity to work with members of Congress and other policymakers to find ways to reduce property risks to homeowners, especially those in areas vulnerable to catastrophic storms.
AIA, III, NAMIC, and PCI joint news release
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