A proposal introduced in Texas that would put restrictions on insurers’ ability to make decisions on writing homeowners coverage when a water damage claim has previously been filed is being opposed by the Alliance of American Insurers.
Under the proposed regulation, an insurer would not be allowed to use an underwriting guideline, or a rate that is based on a previous water damage claim, when deciding whether or not to write a policy on a residential property. The only exception would be if the insurer inspects the property and determines that the water damage has not been repaired.
“We strongly believe that insurers must have the freedom to underwrite using the risk characteristics that they determine to be relevant,” Kirk Hansen, the Alliance’s director of claims, said. “Free-market, not government intervention, should decide what coverage should be offered and at what price.”
Alliance regional manager Joe Woods, based in Austin, said this proposed regulation would put undue requirements on the insurance company. “By requiring companies to conduct a physical inspection of the house, the Department is placing a tremendous responsibility and cost on the company. Without an expensive and thorough inspection, serious problems, such as damage behind walls previously caused by water, might not be detected. That could leave the company on the hook for future claims. Companies shouldn’t be forced to foot the bill for inspections, or to take the risk of writing coverage when there’s a possibility damage exists because of previous claims.”
The Alliance will speak against the proposal at a public hearing slated for Oct. 22 in Austin.
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