KANSAS CITY – Insurance providers say the start of a new year is a good time to re-examine options for homeowner's insurance. But some homeowners don't have a choice in finding a new provider some victims of storm damage have to find new plans, after insurance companies didn't renew their policies. As K-C-U-R's Matt Hackworth reports, state regulators in Missouri and Kansas are reporting an increase in complaints from homeowners who've been turned down for policy renewals:
Linda Samples was out of town when last May's tornado obliterated a subdivision not far from her Gladstone home. Even though the storm didn't cause any visible damage to her house, Linda was worried hail may have damaged her roof:
It's my understanding that there can be damage from hail but you can't see it form the ground unless it's so big it makes a hole. Not knowing what all was in the tornado, I thought it only right to have it checked.
An insurance adjuster examined her roof, and found no damage. But Linda later received a letter from the insurance company she's been with for30 years, listing the adjuster's visit as a full claim, and telling her she wouldn't be renewed for coverage for another year.
"I just feel like they gave me the dirty end of the stick "
More and more homeowners like Linda Samples are receiving letters in the mail that mean policies won't be renewed. The Missouri Department of Insurance reports the number of non-renewal complaints to his office has more than tripled since 2001. Director of Insurance Scott Lakin says he worries about the impact of non-renewals on consumers:
What we don't want companies doing is discouraging people from filing legitimate claims. We think that's a problem and gets away from what insurance is truly all about.
Kansas insurance officials also report an increase in complaints. The plains states endured a major hailstorm, a damaging ice storm and a catastrophic tornado, all in a two-year span. The foul weather brought significant claims for damage by homeowners, and forced insurance providers to spread out risk. Some companies stopped selling plans in the area, and many didn't renew policies here. Lakin says for the first time insurance companies put homeowners at risk for non-renewal, for just one storm-related claim.
We think it gets away from the traditional role of insurance and that is, accepting risk and spreading the risk so that when someone does have a loss, they do have it covered. We asked for legislation this past year in the Missouri general assembly. Unfortunately, we were unable to get anything done.
The insurance industry is one of the few businesses that faces little federal regulation, so most of the burden of regulation falls to the states. Lakin's office championed two plans, one in the house and another in the senate that would have blocked companies from not-renewing customers for act of God claims tornados, storm damage and the like. Missouri's plan in the house died in committee. The senate bill survived committee hearing but never reached full debate.
Proponents blame Missouri's insurance lobby, which campaign records show spent more than $230,000 on campaign contributions in the 2001 elections alone. Calvin Call is the executive director of the Missouri Insurance Coalition, and says his group fought the consumer protection plan because it would have restricted the insurance companies' ability to spread out risk.
It was a rough three to five years for the homeowner's market. The line was under priced, leading in to this catastrophic three events. And, a number of companies found themselves in financial situations that they had to reduce the number of policies that they insured in the state in order to remain solvent. And, accordingly, several of them reduced their books by eliminating some policies, and it upset some people.
Call says state regulations require insurance companies to maintain a certain amount of cash in reserve to pay out claims. When the three storms hit in the two-year span, Call says insurance companies had to go to the unusual measure of not renewing customers to comply with the law:
and if they don't have a proper ratio of money in reserve to the exposure they have out there, in terms of policies in force, then they can be taken over by the department of insurance and put out of business. So, some companies had to reduce their numbers of risk during that period of time.
Call says homeowners who lost plans shouldn't worry, because 150 companies sell homeowner's policies in Missouri and all are hungry for business. He also says he's never heard of a homeowner who's had trouble securing another policy, after admitting a non-renewal on a new application for coverage. But Linda Samples says she had to call seven companies before one would insure her:
The insurance company's idea was, you bought insurance and you only file a claim on the ultimate either your house was destroyed because of fire or it was totaled in a tornado. And that isn't right. That isn't what you're paying for. You're paying for any major damage that you just really can't afford to spend out of pocket. And, they're more or less saying, if you don't have the money go get a loan and pay it yourself, don't report it. And that's not right.
At least one Missouri lawmaker says she'll file another bill that would block companies from not renewing customers. And Kansas Insurance Commissioner Sandy Praeger lists a similar plan among her top priorities for the legislative session that begins next month, two years after an ice storm that cost insurance companies an estimated $145 million in claims across both states.