A Massachusetts Special Commission recently recommended that Massachusetts create a catastrophe fund to reduce the cost of coastal insurance within the Commonwealth. Click here to review the Special Commission’s Report.
The Special Commission, comprised of individuals from the state legislature, insurance industry and consumer groups, had some dissent within its ranks. The majority was in favor of the catastrophe fund, similar to what Florida has created to deal with its coastal insurance issues, believing that it would lower reinsurance costs for insurers and, in turn, the Commonwealth’s citizens would benefit from lower premiums. Opponents of the catastrophe fund, including insurance industry representatives, expressed an opinion that a catastrophe fund would have little effect on premium costs and could lead to premium increases for non-coastal residents.
A majority of the Special Commission also recommends that the Commonwealth do the following:
- create an independent public entity “to study the accuracy and reliability of the catastrophe models used by the insurance industry;”
- develop “consumer education guides which include coverage options and an example of a pricing matrix by option” and mandate “the distribution of the educational guides by producers to all individuals purchasing homeowners insurance;”
- require full itemization of insurance policies “to further consumers’ understanding of how the coverage choices they make affect the overall cost of their policy, showing line-by-line the price of each coverage selected;”
- require that “adequate or comparable information and disclosures [be made] available to consumers in a format that permits comparative shopping;” and
- change Massachusetts’ FAIR Plan to include the allowance of installment payments, adjustments to its credit and assessment system and limitations on FAIR Plan board of directors’ appointments.
The Massachusetts State Legislature will consider the Special Commission’s Report in 2008, and determine whether to implement any of its recommendations.
We will continue to monitor these proposals and provide further updates at InsureReinsure.com.