Bill Text: MA S453 | 2009-2010 | 186th General Court | Introduced
Bill Title: For legislation relative to homeowners insurance
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2010-08-05 - Accompanied a study order, see S02594 [S453 Detail]
Download: Massachusetts-2009-S453-Introduced.html
The Commonwealth of Massachusetts
_______________
PRESENTED BY:
Stephen J. Buoniconti
_______________
To the
Honorable Senate and House of Representatives of the Commonwealth of
Massachusetts in General
Court assembled:
The undersigned legislators and/or citizens respectfully petition for the passage of the accompanying bill:
An Act relative to homeowners insurance.
_______________
PETITION OF:
|
Name: |
District/Address: |
|
Stephen J. Buoniconti |
Hampden |
[SIMILAR MATTER FILED IN PREVIOUS
SESSION
SEE SENATE, NO. S02778 OF 2007-2008.]
The Commonwealth of
Massachusetts
_______________
In the Year Two Thousand and Nine
_______________
An Act relative to homeowners insurance.
Be
it enacted by the Senate and House of Representatives in General Court
assembled, and by the authority of the same, as follows:
SECTION 1. Chapter 175 of the General Laws, as
appearing in the 2006 Official Edition, is hereby amended by inserting after
section 4C the following section:-
Section 4D. The commissioner shall adopt regulations to require all insurers
licensed to write and engaged in the writing of homeowners insurance the
commonwealth and the joint underwriting association, established in chapter
175C, shall produce a standard outline of coverage written in language
prescribed or approved by the commissioner that describe the features of the
coverage. Each insurer, including the joint underwriting association, shall be
required to provide this information to each policyholder upon the issuance or
renewal of a policy.
SECTION 2. Said chapter 175, as so appearing, is
hereby amended by inserting after section 99C the following 2 sections: -
Section 99D. (a) In all instances where an insurance company licensed to write
property insurance in the commonwealth offers or includes any deductible for
wind related damages and mitigation measures related to such deductible, the
insurance company shall provide prominent and clear notice to the insured that
shall be included with the policy issuance or renewal package, and shall fully
disclose all details pertaining to any such deductible and mitigation measure
in a format approved by the commissioner of insurance.
(b) An insurer may only apply a deductible for wind related damages in personal
lines of insurance, where:
(1) the deductible is specifically approved by the commissioner and shall not
exceed 3 per cent of the insured value of the dwelling;
(2) the deductible shall be applicable to losses due to a hurricane during the
period commencing with the issuance of a hurricane warning or hurricane wind
speed warning for any part of the state by the National Hurricane Center and
concluding 24 hours after the termination of the last hurricane warning or
hurricane wind speed warning for any part of the state;
(3) the deductible, whether a flat dollar amount or a percentage of insured
value, shall be presented in at least 2 examples that illustrate the
application of the deductible to the insured. Nothing herein shall prohibit the
insurer from providing any additional information to the insured to assist in
the insured’s understanding of the deductible to be applied to the insured’s
policy.
(c) The commissioner, in consultation with the board of building and
regulations and standards, shall investigate mitigation measures designed to
reduce losses from wind related damages. Based so far as reasonably feasible on
national standards for such measures and practices in other comparable states,
the commissioner shall adopt regulations describing approved mitigation
measures and the minimum corresponding benefits, such as credits, lower
deductibles, and reduced premiums that policyholders will receive from insurers
upon completion of said measures and either inspection of the property by the
insurer or submission of satisfactory proof of installation of the approved
mitigation measures by the insured.
(d) The commissioner shall adopt regulations to implement this section.
Section 99E. (a) There shall be a Center for Hurricane Research, hereinafter
referred to as the center, at the University of Massachusetts at Lowell. The
center shall employ such expert, clerical, or other assistants as the work of
the center may require. For the purpose of carrying out its duties as set forth
in this section the center may expend such funds as may be appropriated to the
University of Massachusetts at Lowell.
(b) The center shall develop criteria for hurricane loss projection
models and methodologies that are specific to Massachusetts and may from time
to time adopt revisions to these criteria. In establishing the criteria, the
center shall consider any models, model software, methods, principles,
standards, data, inputs, manuals, validation studies and output ranges that
have the potential for improving the accuracy of or reliability of the
hurricane loss projections used in homeowners’ insurance rate filings. The
criteria developed under this subsection shall be based on actual data on Massachusetts
construction practices, codes, and buildings. Criteria developed by the center
for this purpose shall be a public record.
(c) Insurers filing rates for approval by the commissioner shall submit to the
center all hurricane models, model software, methods, principles, standards,
data, inputs, manuals, validation studies and output ranges relevant to the
insurer’s hurricane loss projection model or methodology that is intended to be
used during a rate proceeding on an insurer’s rate filing in advance of the
rate proceeding. The center shall review the accuracy or reliability of
particular models, model software, methods, principles, standards, data,
inputs, manuals, validation studies and output ranges submitted to the center
by insurers and shall make recommendations relative to the accuracy and
reliability of the particular models, model software, methods, principles,
standards, data, inputs, manuals, validation studies and output ranges
submitted to the center by insurers using the criteria developed by the center
under subsection (b). The center shall have discretion to review findings made
by similar centers, commissions, or regulatory bodies and to focus on those
aspects of the hurricane loss projection methodologies submitted to the center
by insurers that are specific to Massachusetts. All models, model software,
methods, principles, standards, data, inputs, manuals, validation studies and
output ranges shall be submitted to the center for review within a reasonable
period of time, as determined by the center, prior to being admitted as
evidence during a rate proceeding before the commissioner of insurance. If any
insurer fails to submit any item or items required by the center under this
subsection, the commissioner shall direct the insurer to remove the hurricane
loss projection from its filing.
(d) There shall be a rebuttable presumption that the recommendations made by
the center relative to the accuracy or reliability of particular models, model
software, methods, principles, standards, data, inputs, manuals, validation
studies and output ranges submitted to the center by insurers shall be
considered by the commissioner to be relevant evidence in a rate proceeding on
an insurer’s rate filing, provided, however that an exemption from the disclosure
of trade secrets to the public may apply as set forth in subsection (e).
(e) A trade secret used in designing and constructing a hurricane loss model or
methodology, provided by an insurer to the center under subsection (c), is
confidential and shall not be deemed a public record, as defined in clause
Twenty-sixth of section 7 of chapter 4. The center shall maintain custody of
any records made confidential by this paragraph using a secure location or
website. That portion of a rate proceeding on an insurer’s rate filing at which
a trade secret is discussed shall be deemed confidential and not open to
disclosure under the open meetings law, but may be discussed at a closed
meeting as provided for in section 11A ½ of chapter 30A. Employees, volunteers,
and students of the center will be bound not to disclose information made
confidential.
(f) The center may form a multi-state center with the states of Rhode
Island, Connecticut and any other interested state in furtherance of the goals
of this section.
SECTION 3. Clause (1) of subsection (A) of section 177O of said chapter 175, as so appearing, is hereby amended by striking out, in line 7, the word “producer” and inserting in place there of the words “reinsurance intermediary broker”
SECTION 4. Clause (1) of subsection D of said section 177O of said chapter 175, as so appearing, is hereby amended by striking out the second sentence.
SECTION 5. Section 1 of chapter 175C of the
general laws, as so appearing, is hereby amended by striking out definition of
“Basic property insurance” and inserting in place thereof the following
definition:-
“Basic property insurance”, insurance against direct loss to property as
defined and limited in the standard fire policy and extended coverage
endorsement thereon, filed with and accepted by the commissioner, and insurance
against direct loss to such property from the perils of vandalism and malicious
mischief and dwelling coverages, including liability coverages for one (1) to
four (4) family owner and non-owner occupied dwellings either by endorsement or
as a stand-alone policy and homeowners coverages, excluding the unlimited
guaranteed replacement cost endorsement, but including the scheduled personal
property endorsement and such other coverages as the commissioner after public
hearing shall determine or the secretary of the United States department of
housing and urban development shall designate by rule made in accordance with
the provisions of the Urban Property Protection and Reinsurance Act of 1968
(Public Law 90-448) but shall not include insurance on automobile or
manufacturing risks except such classes of manufacturing risks as may, after
proper hearing, be designated by the commissioner.
SECTION 6. Chapter 175C of the General Laws, as
so appearing, is hereby amended by striking out section 4 and inserting in
place thereof the following section:-
Section 4. (a) All insurers licensed to write and engaged in writing in this
commonwealth, on a direct basis, basic property insurance or any component
thereof in multi-peril policies, shall cooperate in organizing a joint
underwriting association which shall provide basic property insurance to
eligible applicants who are otherwise unable to obtain such coverage in the
voluntary market. Every such insurer shall be a member of the association and
remain a member as a condition of its authority to transact such insurance
within the commonwealth.
(b) Such association shall be authorized to inspect properties, issue policies,
collect premiums and accept payment in installments under plans approved by the
commissioner consistent with plans offered by voluntary market insurers and
reflecting options for at least 6 payments annually, adjust claims and pay
losses on behalf of its members, employ officers, agents and other employees,
enter into contracts, sue and be sued in its own name and take all other
actions necessary or appropriate to carry out its functions.
(c) The association shall submit to the commissioner a proposed plan of
operation, consistent with the purposes of this chapter, to provide for the
prompt and efficient provision of basic property insurance to eligible
applicants who meet reasonable underwriting standards and are otherwise unable
to obtain coverage from insurers in the voluntary market. Such plan of
operation shall provide for economical, fair and nondiscriminatory
administration including, but not limited to, provisions for preliminary
assessment of all members for initial expenses necessary to commence
operations, establishment of necessary facilities, management of the
association, assessment of members to defray losses and expenses, commissions,
reasonable underwriting standards and limits of liability, purchase of
reinsurance and procedures for determining amounts of insurance to be provided.
(d) The plan of operation shall be subject to approval by the commissioner and
shall take effect 10 days after the commissioner approves it. If the
commissioner disapproves the proposed plan of operation, the association shall,
within 30days, submit for review an appropriately revised plan of operation
and, if the association fails to submit such a plan or if the revised plan is
also disapproved by the commissioner, the commissioner shall adopt a plan of
operation consistent with this section. The association may, on its own
initiative or at the request of the commissioner, amend the plan of operation,
subject to approval by the commissioner.
(e) (1) All members of the association shall participate in its writing,
expenses, profits and losses in the proportion that the premiums written by
each such member for basic property insurance, as defined in section one,
except premiums for insurance on automobile and manufacturing risks excluded
from the plan and that portion of the premiums attributable to the operation of
the association during the preceding calendar year, bear to the aggregate
premiums for such insurance written in the commonwealth by all members of the
association. Such participation by each insurer in the association shall be
determined annually on the basis of such premiums written during the preceding
calendar years as disclosed in the annual statements and other reports filed by
the insurer with the commissioner.
(2) The participation of each member of the association writing personal lines
coverage shall be adjusted based on the homeowners premiums written by such a
member in any credit-eligible zip code, defined as all zip codes in
Massachusetts where the Fair Plan market share exceeds 1.5 times the Fair Plan
statewide market share, never less than 15%, averaged over the latest three
calendar years, in accordance with the following clauses:
(i) The participation ratio of each member writing personal lines insurance
shall be recalculated, in accordance with the procedures set forth in
subparagraph (1) but subtracting the premium written by members of the
association writing only commercial lines insurance from the aggregate premiums
written in the commonwealth by all members of the association.
(ii) The participation ratio of each member writing personal lines insurance as
recalculated in clause (i) shall be multiplied by the sum of the total premium
written by the association in the commonwealth and 150% of the total industry
homeowners credit eligible premium written in credit-eligible zip codes, as
defined in this chapter.
(iii) The product of the multiplication described in clause (ii) of this
subsection shall be (A) reduced by subtracting therefrom 150% of the homeowners
premium written by each member in any credit-eligible zip code in the year of
an MPIUA loss or (B) shall be increased by adding therefrom 150% of the
homeowners premium written by each member in any credit-eligible zip code in
the year of an MPIUA profit.
(iv) The result of the calculation described in clause (iii) for a carrier,
never less than zero, shall be divided by sum of this calculation across all
carriers. The resulting ratio shall be the adjusted participation ratio for the
member.
(v) The adjusted participation ratio of those members whose participation ratio
is calculated as provided in this subparagraph shall apply to that portion of
the writings, expenses, profits and losses of the association not recovered by
applying the participation ratios of the remaining members of the association
as calculated, as provided in subparagraph (1).
(3) The participation of any member of the association writing personal lines
insurance shall be further adjusted if such member has written homeowners
insurance during the preceding calendar year, hereafter called the base year,
on property that was insured by the association in the year immediately
preceding such base year and which is located in any credit eligible zip code,
defined as all zip codes in Massachusetts where the Fair Plan market share
exceeds 1.5 times the Fair Plan statewide market share, never less than 15%,
averaged over the latest three calendar years. The participation of such a
member shall be adjusted by (i) reducing the amount of premium written by such
member in subparagraph (1) by one hundred percent of the total homeowners
insurance premiums written by the member on property described in this clause
in the year of an MPIUA loss or by (ii) increasing the amount of premium
written by such member in subparagraph (1) by one hundred percent of the total
homeowners insurance premiums written by the member on property described in
this clause in the year of an MPIUA profit. Such adjustment shall not apply to
any insurance written on property that was insured by the member or any
affiliate or subsidiary member in either of the two years preceding the base
year.
(f) The association shall be governed by a board of 18 directors, who shall
serve without compensation. Ten directors shall be elected annually by the
members of the association by cumulative voting; 2 directors of associations of
insurance agents and brokers doing business in the commonwealth appointed by
the commissioner; 4 directors from the general public appointed by the
commissioner; and 2 directors from the general public appointed by the attorney
general. The 6 directors appointed from the general public by the commissioner
of insurance and the attorney general shall serve 3 year terms, staggered in a
manner to ensure the annual expiration of the terms of 2 directors, and shall
not serve as director for more than 3 consecutive terms. The 6 directors
appointed from the general public may not have affiliations with the insurance
industry. Cumulative voting by members shall be permitted at all such
elections.
SECTION 7. Subsection (c) of section 5 of said chapter 175C, as so appearing, is hereby amended by inserting after the third sentence, the following sentence: “Nothing in this subsection shall be construed as to prevent the commissioner from considering the following premium adjustments on owner’s policy forms for homeowners in all territories: adjustments to key factors to keep costs reasonable for applicants with Coverage A amounts less than the median Coverage A amount within that territory, coastal area rating factors that are based upon predicted hurricane losses associated with distance from the coast, approving rating adjustments to keep costs reasonable for primary residents, and approving rating adjustments to keep costs reasonable for insureds over the age of 64.”
SECTION 8. Said section 5 of said chapter 175C,
as so appearing, is hereby further amended by inserting the following
subsection:-
(d) The commissioner shall develop a disclosure form to inform individuals
seeking to purchase basic property insurance about the risks associated with
choosing solely a stand alone liability policy. This form shall be written in
plain language, explained to an individual seeking to purchase stand along
liability coverage as their sole basic property insurance, and signed by that
individual.
SECTION 9. Said chapter
175C is hereby further amended by adding the following section:—
Section 10. The association shall pay a dividend on homeowners insurance
premiums for coastal properties occupied as primary residences having a
Coverage A limit not greater than the median Coverage A for the territory in
which the property is located. This dividend shall be paid in a year which is
the third consecutive year in which there have been no hurricane-related losses
in the territory and this dividend shall be a third of all hurricane loss premiums,
less the cost of reinsurance purchased by the association. This dividend shall
not be paid in a year when such payment shall cause the association to realize
a net loss for that year, and shall only be made in a year in which the
association has purchased adequate reinsurance for hurricane losses, as
determined by the commissioner. The possibility of a dividend shall not be
considered by the commissioner in approving rates proposed by the association
SECTION 10. Notwithstanding the provisions of section 7, the appointment of the 4 directors from the general public appointed by the commissioner of insurance shall be as follows: 2 directors shall be appointed for a term of 3 years, 1 director shall be appointed for a term of 2 years, and 1 director shall be appointed for a term of 1 year. The appointment of the 2 directors from the general public appointed by the attorney general shall be as follows: 1 director shall be appointed for a term of 2 years and 1 director shall be appointed for a term of 1 year. Upon expiration of these appointments, all subsequent appointments of directors from the general public shall be appointed for 3 year terms
SECTION 11. The department of revenue, in
consultation with the division of insurance, shall make an investigation and
study relative to the benefits and viability of a low interest loan program to
assist homeowners in the commonwealth with both the costs associated with the
purchase and installation of approved mitigation measures as described in
section 2 and homeowners insurance deductibles on damage associated with wind
storms. The department shall also study the potential utilization by homeowners
as well as the funding required to support such a loan program.
The department of revenue shall file a report of the results of its
investigation, along with any legislative and regulatory recommendations, with
the joint committee on financial services and the clerks of the senate and
house of on or before January 15, 2009.
SECTION 12. Section 99D of chapter 175 of the General Laws shall apply to all policies issued or renewed on or after June 30, 2009.
