INDIANAPOLIS (March 11, 2009) – A proposal to restrict insurers’ ability to apply hurricane deductibles is not in the best interest of consumers, according to the National Association of Mutual Insurance Companies (NAMIC). A bill before the Rhode Island Legislature would add another requirement to existing laws that limit the circumstances in which insurers can apply a hurricane deductible.
“NAMIC believes that the best approach to addressing challenges in coastal property insurance markets is to encourage competition by allowing insurers the freedom to manage their exposure to catastrophic risk in an effective manner,” said Paul Tetrault, NAMIC’s Northeast state affairs manager, in testimony yesterday to the Rhode Island House Corporations Committee. “The use of deductibles such as hurricane deductibles is an effective means of doing so, and restriction of insurers’ ability to utilize this tool is cause for concern.”
The bill, H-5275, would require that hurricane-force winds must be measured in the state. NAMIC opposes the bill on the grounds that it could lead to confusion among policyholders and disputes – including litigation – following an event.
“Presumably, the additional requirement that would be imposed by H-5275 is meant to ensure that insurers do not take advantage of the existing statutory provisions so as to apply hurricane deductibles in circumstances when wind-related losses occur but the state has not experienced a true catastrophic event. The bill’s underlying concern is, thus, inconsistent with insurers’ purpose in using hurricane deductibles, which is not to take advantage of such circumstances but rather to protect against catastrophic risk in order to maintain financial strength and be able to pay policyholder claims,” Tetrault testified.
Tetrault said the existing laws already impose significant restrictions on insurers’ use of deductibles. “NAMIC believes that adding an additional restriction would be a step in the wrong direction since it would further limit insurers’ ability to manage risk,” he said. “It is based on a concern that is inconsistent with the purpose of hurricane deductibles.”
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Posted: Wednesday, March 11, 2009 12:00:00 AM. Modified: Wednesday, March 11, 2009 10:14:35 AM.
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