Nick DiUlio
When thinking about buying home insurance, the average consumer probably considers such matters as structural integrity, flood potential and maybe even the possibility of a tornado touching down in the neighborhood. He probably doesn’t think about snakes, even though owning one can affect whether his home is covered.
Consider Bryan Hughes of Arizona. As a snake owner who works professionally with numerous species of the slithery reptiles, Hughes says he has been denied home insurance and renter’s insurance several times.
“It was quite unexpected,” Hughes says of the first time he was denied coverage. “The rules are, of course, there to rule out any potentially dangerous animal. But almost all of the snakes kept by casual owners cannot cause more harm than a few cuts, and that’s only if they’re particularly mean.”
Ironically in Hughes’ case, it wasn’t the snake that ended up causing harm, but rather the fact that he wasn’t insured.
In terms of home and renter’s insurance, Bryan Hughes has been bitten by his ownership of snakes.Nine years ago, Hughes’ uninsured apartment was burglarized. He lost almost everything he owned, including silverware, food and clothing. Just about the only thing the thieves didn’t take was his pet boa constrictor — the animal responsible for him not being insured in the first place.
“She still lives with me and has never harmed anything other than her food,” Hughes says of his boa.
If you own a snake (or are looking at getting one), make sure you pay attention to these four points.
1. Be honest — to a point.
According to Jeff Reinig, senior vice president of homeowner’s insurance at Farmers Insurance, most consumers shopping for home or renter’s insurance will be asked whether they have any “exotic” or “dangerous” animals.
“Then it becomes a judgment call,” Reinig says. “Can you make the argument that a rattlesnake is exotic? How about dangerous? Yeah, you can. But there are also a lot of big snakes that don’t do any harm.”
How literal you are in answering this question is a matter of interpretation. Since Hughes’ burglary encounter nine years ago, his insurance agent has advised him to classify his snakes as “aquarium pets” — since, technically, that’s what they are.
2. Consider the snake’s habitat.
Should you answer yes to the exotic pets question, your agent is then going to ask several questions about the snake. For example: Where is it kept?
Dick Luedke, a spokesman for State Farm, says his company isn’t as concerned with the possession of a snake as it is with its enclosure. If it turns out there’s a snake in the house, he says, the underwriter will ask whether the snake is going to be kept in an enclosed container and how often the snake will be removed from that container.
“We don’t attempt to evaluate the danger of individual snakes,” Luedke says. “We are concerned if the snake is going to be removed from its container.”
If the prospective policyholder does plan to remove the snake from its container, Luedke says, State Farm might have some concerns from a liability perspective. “It is certainly possible under those circumstances that we would not write the policy,” he says.
3. Don’t despair.
Mike Barry, a spokesman for the Insurance Information Institute, says that although every insurance company differs in how it handles the snake situation, most insurers won’t deny coverage completely, but rather will exclude coverage of the pet in question or offer to provide coverage at a higher cost.
Farmers’ Reinig likes to use the example of a family dog with a history of biting.
“If you have a dog with a bite history, we don’t tell you that you can’t have a dog or that we won’t insure you, we just might not cover you against liability if the dog injures someone,” Reinig says. “In 30 years, I’ve never come across a situation where someone simply wasn’t covered at all.”
4. Look at the bigger picture.
The most significant consideration is safety, according to Reinig. In other words, don’t put yourself or others at risk simply because you’re trying to get home or renter’s insurance.
“If you think the animal is at all dangerous or can do harm, the most important thing is to protect others from that,” Reinig says. “You think about dogs and fences, and when you think about snakes, you should think about lids. That’s most important. The more others are protected, the fewer problems you’ll have with your insurance.”
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Filed under insurance by on Jul 20th, 2011. Comment. 
John Egan
The U.S. House on July 12 passed legislation that would extend the life of the National Flood Insurance Program for five years while also phasing out taxpayer-subsidized insurance premiums and paving the way for private companies to sell flood insurance.
Supporters say HR 1309 would shore up the finances of the flood insurance program, which is nearly $18 billion in debt, largely because of flood insurance payouts for Hurricane Katrina.
On a 406-22 vote, the House sent the Flood Insurance Reform Act of 2011 to the U.S. Senate. If the bill isn’t signed into law by Sept. 30, the flood insurance program will expire.
U.S. Rep. Judy Biggert, R-Ill., who introduced the bill, says the National Flood Insurance Program “is too important to let lapse and too in debt to continue without reform.”
Among other things, the bill would:
• Phase in premiums that more accurately reflect a property’s flood risk.
• Raise the cap on annual premium increases from 10 percent to 20 percent. Some House members fought unsuccessfully to keep the cap at 10 percent.
• Reduce federal subsidies for certain insured properties, including buildings in high-risk flood zones that experience repeated flood insurance claims.
• Link maximum coverage limits to the inflation rate.
Floridians hold 40 percent of policies
More than 5.6 million policyholders, including millions of homeowners, participate in the National Flood Insurance Program. Forty percent of the program’s policyholders are in Florida. The Federal Emergency Management Agency runs the program.
Under federal law, flood insurance is mandatory if you have a federally backed mortgage for a home or other structure in a federally designated high-risk flood zone. Standard home insurance policies and other types of property insurance don’t include coverage for floods.
The private market for flood insurance is practically non-existent. The reform bill would set the stage for more private insurers to sell flood insurance policies. “The result will be increased consumer choice and competition, and it will prevent the federal government from exponentially expanding its role in disaster insurance,” says U.S. Rep. Spencer Bachus, R-Ala., chairman of the House Financial Services Committee.
The House killed an amendment to the bill from U.S. Rep. Candice Miller, R-Mich., that would have eliminated the National Flood Insurance Program.
Filed under insurance by on Jul 19th, 2011. Comment.
Tamara E. Holmes
In a move to prevent homeowners from being underinsured after disasters, the California insurance commissioner has imposed new regulations for estimating a home’s replacement value for insurance purposes. Some insurers have sued in response, saying the regulations overstep the commissioner’s legal boundaries and could harm consumers in the long run.
“In the wake of the terrible firestorms in California, which destroyed quite a few homes, many homeowners complained to the Department of Insurance that they had been provided less-than-accurate and, in some cases, misleading information about the replacement value of their home at the time that they purchased or renewed their homeowner’s insurance,” Insurance Commissioner Dave Jones says.
‘Extraordinary’ inconsistency in replacement values
Consumer advocates and insurance companies are feuding over California regulations regarding how to set the value of a home for insurance purposes.A Department of Insurance investigation found “an extraordinary amount” of inconsistency in how insurers, agents and brokers were figuring the replacement value of a home. For example, one insurer might not include the cost of debris removal in the estimate for replacement costs, Jones says, while another might provide a labor cost that’s below the going rate.
To combat those contradictions, the Department of Insurance came up with the regulations as a way to ensure homeowners were given basic information from insurance agents or brokers.
For example, information needed to estimate replacement costs now must include the type of foundation, roofing materials and roof; cost of demolition and debris removal; and expense of permits and architect’s plans. The regulations also set training standards for agents and brokers who sell home insurance, and establish new recordkeeping requirements.
United Policyholders, a California-based nonprofit organization that advocates for insurance customers, has applauded the state Department of Insurance “for taking action to stop the industry from underinsuring consumers when their home is damaged or destroyed in a natural disaster.”
However, a number of insurers and industry groups have taken issue with the regulations.
A question of rights
“We challenge the commissioner’s authority to dictate how we do underwriting,” says Mark Sektnan, president of the Association of California Insurance Companies, a trade group representing property and casualty insurance companies in the Golden State. The regulations require insurers to use a state-mandated formula to determine a home’s replacement value even if insurers have better tools to do so, Sektnan says.
The Association of California Insurance Companies and the Personal Insurance Federation of California — whose members include Farmers Insurance, Liberty Mutual, Progressive, State Farm, Allstate Insurance and Mercury Insurance — have filed a lawsuit over the regulations. The suit seeks to halt the portion of the regulations instructing insurers on how to determine home replacement value, as well as parts of the regulations requiring insurers to use specific language when talking to consumers about replacement value.
Kimberley Dellinger Dunn, general counsel for the Personal Insurance Federation of California, points out that the insurance industry supports most of the new regulations, including the call for additional training for agents and the new recordkeeping requirements. “But they don’t have the authority to dictate one specific way that the replacement-cost estimate must be done,” she says.
A boon for consumers?
Calling the lawsuit “unfortunate and disappointing,” Jones insists the regulations are designed to provide consumers with a minimum amount of information. “The insurers can go beyond what we’ve set as a minimum,” he says, “and provide additional information if they so choose.”
But insurers say consumers may be on the losing end. According to a statement issued by the two insurance groups that filed the suit, the regulations provide “a mandated formula and particular words they must use when talking with a customer” who’s interested in home insurance and punishes any insurer that strays from the state-required formula.
Under the regulations, the groups say, any such change to the formula — however beneficial that change may be — automatically is treated by the state as a deceptive sales practice that could lead to an insurer being penalized. To avoid being hit with a charge of engaging in deceptive sales practices, some agents may decide to stick to the state-mandated guidelines and avoid giving consumers information that could help them, which Sektnan says “isn’t in the policyholder’s best interest.”
The Association of California Insurance Companies and the Personal Insurance Federation of California emphasize that the regulations do nothing to address one of the biggest factors leading to underinsurance after major disasters – higher prices for construction and materials because of high demand.
As the lawsuit makes its way through the legal system, insurers will comply with the regulations, according to the Association of California Insurance Companies and the Personal Insurance Federation of California.
The effectiveness of the regulations will be seen over time, Jones says, with transparency as well as “comprehensive and accurate information” being early benefits. “If consumers don’t have that,” Jones says, “they don’t have a fighting chance to make sure they get the proper amount of insurance.”
Filed under insurance by on Jul 19th, 2011. Comment.