AUGUSTA – The number of Mainers appealing insurance company decisions not to renew their home owners policies nearly doubled last year. And at the same time, rates are continuing to increase dramatically.
“You’ve got like a perfect storm,” said Rep. Christopher O’Neil, D-Saco, co-chairman of the Legislature’s Insurance and Financial Services Committee said Friday. “It is a huge issue and it’s not going away.”
O’Neil said insurers are scrutinizing policies because they have been hit with huge losses as a result of the terrorist attacks and the decline in the stock market. He said companies have used earnings from investments to hold down premiums in the past, but they no longer have that option. As a result companies are now “aggressive” in reviewing existing home owner policies as well as applications for new policies.
“We had 220 appeals in 2001,” Maine Insurance Superintendent Alessandro Iuppa said in a recent interview, “last year we had 492.”
He said 350 of those appeals to his office were from home owners because their policies had not been renewed. But, he said, most of those appeals resulted in a positive result for the homeowners.
“The insurance company prevailed in 57 of those cases,” he said. “So policyholders do stand a reasonable chance of prevailing.”
The increase in appeals is a result on a trend that began two years ago when insurers began to take a close look at homeowner policies, Iuppa said. As companies actually assessed risks at a residence instead of automatically renewing policies, more notices of non-renewal have gone out, as well as significant increases in rates. Tony Payne, vice president of OneBeacon, the largest writer of homeowner policies in the state, agreed with Iuppa.
“We are taking a far closer look than we used to, and so are other companies,” Payne said, “we have to.”
Insurance companies, he said, are in the business of assessing risk and seek to minimize the risk they take when they write a policy insuring a home. He said that means many policyholders have seen significant rate hikes because of increased risk while others have not been renewed.
For example, Payne said, if a person has a trampoline in their yard or a skateboard ramp or a dog that has been classified as dangerous, they may not get their policy renewed.
Iuppa said he does not have specific figures to compare how much rates have increased overall in the state, but he said he has seen several instances of double digit increases in home owner rates.
The tightening of policy criteria by insurers is also starting to affect home buyers. Lenders require that a home buyer have insurance, but state law does not require insurers to provide the ability to buy insurance as they do with health insurance. That has real estate agents worried that deals could come undone, and in the most extreme case, a lender could foreclose on a homeowner because they do not have the required insurance coverage.
“I have only had one deal fall through in my office because the person could not get coverage,” said Don Plourde, a Waterville real estate broker and president of the Maine Realtors Association. “But, we have been hearing about problems across the state.”
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