INDIANAPOLIS (June 14, 2007) — Legislators must give careful consideration to potential unintended consequences of any legislation proposed in response to coastal property insurance market developments, NAMIC warned members of the Rhode Island House Corporations Committee this week.
In testimony delivered to the committee at a June 12 hearing, NAMIC Northeast State Affairs Manager Paul Tetrault pointed out that Rhode Island’s property insurance market has remained fully functioning and competitive, despite the significant challenges that insurers have faced relative to coastal market conditions.
“Utmost care should be taken that any measures that may be adopted in response to market developments do not threaten the continuing vitality and viability of the competitive market but, rather, have the effect of maintaining and enhancing the strength of the market for the benefit of the consumers it serves,” Tetrault said. “Measures presumably intended to counter marketplace developments by making coverage more available and less expensive could ultimately have the opposite effect."
Tetrault’s testimony was directed at bills being considered by the Corporations Committee that are based on a House commission’s study of the effects of natural disasters on property insurance costs in Rhode Island.
One of the bills, H-6468, would establish certain restrictions and conditions for insurers using percentage deductibles and mitigation requirements. In his testimony, Tetrault pointed out that deductibles and mitigation requirements are tools that insurers in coastal regions have used to manage their exposure to ensure they will be able to pay claims in the event of a catastrophe.
“Removing a tool or imposing restrictions and conditions that render a tool ineffective can severely limit an insurer’s ability to manage its exposure,” Tetrault explained. “This, in turn, can force a company to have to take more drastic action. The ultimate effect of such actions could have substantial negative ramifications for the marketplace.”
Tetrault also noted that deductibles and mitigation requirements can help keep insurance costs down for consumers, an important point considering the fact that rising insurance costs has been a focus of consumers’ concern regarding coastal insurance market developments.
“As the committee considers measures responsive to changes in the coastal market, we urge you to reject proposals that would constrain insurers, making market conditions worse, ultimately negatively affecting consumers,” Tetrault asserted in his testimony. “We urge you to endorse, instead, only proposals that would sustain a healthy market and maintain or enhance insurers’ ability to manage their exposure responsibly.”
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Posted: Thursday, June 14, 2007 12:00:00 AM. Modified: Thursday, June 14, 2007 3:56:38 PM.
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