Ellington

I have introduced legislation in the U.S. Senate to make future insurance policies easier for consumers to understand. The "Honesty is the Best Insurance Policy Act" calls for requiring insurance companies to state in plain English and big letters exactly what their policies do not cover.

Most insurance policies are long, complicated and written in legalese. In addition to the policy itself, just about every month, your insurance company probably sends you page after page of addendums and changes to your various policies, also lengthy and complex.

My bill won't do away with all this intimidating language and paper, but it will require the companies to include up front a very un-intimidating, user-friendly "non-coverage disclosure" box as part of the policy's documentation.

In this box you would find a concise re-statement of all conditions, exclusions and other limitations to the policy's coverage – all clearly written in type twice the size of the policy's main text.

We Mississippians in particular know why having clearer insurance policies is so important. Thousands of Hurricane Katrina's victims saw their homes heavily damaged or destroyed, only to learn their insurance policies were practically useless.

Obviously this bill won't help those of us whose homes were damaged or destroyed by Hurricane Katrina and who now are negotiating with our insurers or confronting them in court. But by clarifying policy terms and stating them up front, this act would increase consumer confidence in future insurance products and even reduce litigation for both consumers and insurance companies. In fact, it actually would reduce costs to insurance companies. As policies are clarified, fewer consumers would sue insurers citing obscure policy terms which are subject to interpretation.

More importantly, it could save consumers billions of dollars. If all Katrina homeowners had been adequately insured, total payments to them would be about $100 billion. Instead, Katrina homeowners suffered about $65 billion in unprotected losses, a number that will likely increase when damages are fully and accurately assessed.

This plan has already garnered endorsements from consumer groups, including the Consumer Federation of America and the Consumers Union. It would require no cost to taxpayers, and the costs to insurance companies would be negligible – requiring only some additional ink.

Enforcement would be administered through the Federal Trade Commission's Division of Financial Practices. The federal government already is heavily involved in insurance regulation through the National Flood Insurance Program which insures more than $700 billion in assets through more than four million policies. Clearly there is precedent for the federal government to be involved with insurance regulation.

The Honesty is the Best Insurance Policy Act won't solve the current questions about insurance coverage in South Mississippi and other areas of the country. But Katrina has clearly shown the need for better communication among insurance companies, lending institutions and consumers. Folks buying insurance want and deserve polices that are honest and straightforward. Having a simple explanation of policy provisions is good for consumers as well as insurers, and it should be a standard part of all insurance policies. In anything we do, honesty is always the best policy. That applies to the insurance industry, too. (6/9/06)
Senator Lott welcomes any questions or comments about this column. Write to: U.S. Senator Trent Lott, 487 Russell Senate Office Building, Washington, D.C. 20510 (attn: Press Office)

Previous Comments

ID

141210

Comment

Too bad Trent didn't care about anyone's honesty before HIS house was washed off the hill. He reminds me of Jim Eastland trying to make it right just before the Lord sent him to hell. Hopefully, people will be helped in the future as a result of this.

Author

Ray Carter

Date

2006-06-09T16:02:55-06:00

ID

141211

Comment

You're right, Ray. I tend to think, however, that this is his way of atoning for some of his past actions (or inaction, as it were). I heard him speak at a banquet (800 people, about 70% Black) in March and he said, essentially, "when you lose three things that you love in a short period of time--the majority leader's post, my mother, and then my home--maybe it's time to take a look at yourself and what you're doing". The week before, he quietly pushed for restoring cuts that Bush was proposing for such programs as Head Start, Community Services Block Grant, Meals on Wheels for the elderly, and Low Income Home Energy Assistance. In all his years in the House and Senate, he NEVER once voted to support any of those. At the same banquet he publicly stated, "And I'm going to continue to support those program". To say the least, I was flabgbergasted but mildly encouraged that maybe he's seen the light, if only a tiny ray!

Author

Kacy

Date

2006-06-09T17:11:49-06:00

ID

141212

Comment

Lott's big idea of making larger print insurance policies seems kind of trite... I would think that they could be working on larger issues right now.

Author

Rico

Date

2006-06-09T17:39:26-06:00

ID

141213

Comment

This all came up after Camille hit. The same question of whether water or wind damage occured. If there were ambiguities in the policies I feel sure the insurance companies changed the wording of their policies. What people do not know is that to alter policy language it must be submitted to the Insurance Department of Mississippi. That department has a full time attorney assigned to it by the Attorney General. It is very probable that the Mike Moore, a coast native, or his predecessor approved the current language in the policies.

Author

pneville

Date

2006-06-09T18:51:37-06:00

ID

141214

Comment

Honest question is why people don't read their policies. Do not get me wrong, I'm all for making it simpler but alot of people don't read them. I don't sign any damn thing without reading it. And I'm in the mortgage business. You would be amazed at how many people try their best to get out of insurance coverage. They will walk away from buying a house if it means they have to get flood insurance. They raise hell if we require them to get replacement cost coverage instead of just for the loan amount. Yeah, like they have an extra ten grand to fix their house if a tornado hits it. Trust me, the borrowers usually try to get the least coverage and cheapest coverage possible. My attitude is you never get in trouble being overinsured.

Author

Kingfish

Date

2006-06-09T21:34:01-06:00

ID

141215

Comment

actually Rico if I'd been an insurance agent I'd've written up a seperate disclosure saying this policy does not cover flood. This hurricane policy does not cover....and so on. a couple of extra pages BUT it would've put the policyholder on further notice and also given me additional protection.

Author

Kingfish

Date

2006-06-09T22:22:16-06:00