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State regulator wants tighter restrictions on home insurers

December 16, 2002
By: Jason McLure
State Capital Bureau

JEFFERSON CITY - If a tree falls on your car, your auto insurance company is not allowed to raise your rates. But if it falls on your house, you risk losing your homeowners coverage altogether.

That's not fair, according to Insurance Department Spokesman Randy McConnell, and he said his department will ask the legislature to rectify the situation.

"If you get hit by a hail storm, your insurance company can use it against you as if it was something you could have prevented," McConnell said. "But obviously you can't move your home out of the way of a hailstorm."

That's why Missouri should prevent insurers from canceling homeowner's insurance because of a single storm-related claim, McConnell said. Texas, Arkansas, and Oklahoma already have similar regulations.

In a statement last month, Insurance Department Director Scott Lakin said many Missourians are finding it difficult to get and keep any homeowner's insurance. This was evidenced by the growth in applications to Fairplan, the state's "pool of last resort" for homeowners unable to find coverage, which have shot up 74 percent this year.

Lakin's office also reported that the number of consumer complaints about insurers' refusal to renew policies jumped 77 percent last year, and that the situation has just gotten worse this year.

McConnell said that more Missourians were having their homeowners' insurance canceled because insurers are becoming more "profit-concious". As a result, people with a history of at least one claim may find it difficult to get a mortgage because banks are reluctant to lend money to someone without homeowner's insurance.

Department of Insurance Director Scott Lakin said obtaining and keeping homeowners' insurance has become a difficult task for Missourians.

"Consumers have the right to become irate because they had no control over whether a hail or wind storm damaged their homes," Lakin said in a prepared statement. "Many policyholders also cannot believe that, after decades of claims-free histories with an insurer, they are given only 30 days to find replacement coverage after they file one or two minor claims."

Calvin Call, director of the Missouri Insurance Coalition, said he was surprised and puzzled by the regulator's announcement. He said the department had not informed insurers' that it would be making such an aggressive move when they met last month.

He added the state should not be micro-managing an industry that is just recovering from huge losses related to storms in Kansas City and St. Louis in the past two years.

Call disputed the Insurance Department's claim that nonrenewal complaints have risen sharply. He said the regulatory agency has a history of manipulating statistics.

"I take a little offense that a state agency would politicize a competitive industry," he said.

Gov. Holden's office refused to comment as to whether it would support the Insurance Department's proposal. Spokeswoman Mary Still said they would need to study the issue further.

McConnell said the Insurance Department would also ask legislators to raise the coverage limits on Fairplan. Currently homeowners with the plan are covered only for up to $100,000 of losses. McConnell said that's not nearly enough to cover the homes and furnishings of many in metropolitan areas.

The Insurance Department reported that homeowners rates from the seven largest insurers rose 30 percent from July, 2001 to last June.

The department expects complaints to increase as State Farm Insurance, Missouri's largest homeowner's insurer, raises rates an average of 30 percent in the coming months.

State Farm, which holds one in every four Missouri homeowner's policy, did not return calls about the issue.