Homeowners need to be able to buy good insurance coverage and understand what they are buying. When losses occur, insurance companies need to deliver on the protection they have promised. The Essential Protections for Policyholders project analyzes and recommends state laws that make sure that happens.

Every state regulates homeowners insurance and insurance companies, but states differ dramatically in how much and what kind of regulation they provide for the benefit of policyholders. The Essential Protections provide a roadmap in four categories that every state can follow in improving homeowners insurance.

READ A SUMMARY OF THE ESSENTIAL PROTECTIONS

READ THE FULL REPORT

SPECIAL REPORT: USE IT AND LOSE IT

SPECIAL REPORT: BUYING 

SPECIAL REPORT: CONSUMER REMEDIES

Why Essential Protections?

The purpose of property insurance is to be a source of peace of mind and funds to pay for loss recovery. Fires, accidents, and storms cause expensive damage.  A consumer that carries property insurance reasonably expects that it will pay for damage repairs and rebuilding.  Policyholders expect their insurance companies to be trusted partners in the process of coping with losses.

But insurance company products and employees do not always meet policyholders’ reasonable expectations as to the loss recovery funds and claim service their policies will provide. Consumers are limited in their ability to shop effectively for insurance by a lack of information. Policies offered by some insurance companies may have gaps in coverage. Sometimes the policies offered by every company lack the complete coverage that policyholders need and expect. The promise of security can be frustrated by complex, confusing, and surprising terms in  insurance policies. And when losses occur, disputes can arise between policyholders and their insurance companies about the extent of coverage under the policies and the scope and value of the losses.

To address these problems, homeowners insurance is heavily regulated by state law. Legislatures, insurance departments, and courts recognize that the market for insurance can be improved and that insurance carries an important public interest that requires legal regulation.

Again, every state regulates insurance and insurance companies, but states differ dramatically in how much and what kind of regulation they provide for the benefit of policyholders. The Essential Protections provide a roadmap that every state can follow in improving homeowners insurance. The Essential Protections also provide a scorecard to evaluate states’ current systems of regulation and to identify areas for improvement.

What protections are essential for homeowners?

States regulate many aspects of homeowners insurance, and the Essential Protections for Policyholders project focuses on those that are—essential. We had two selection criteria for deciding what to include:

First, the issue had to be important. United Policyholders has decades of experience aiding and advising homeowners about their insurance which provided a unique resource to generate and evaluate potential topics. I have studied the insurance landscape and written scholarly and popular works on the topic. Both UP and I also talk to many people professionally involved in insurance.

Second, the issue had to be one in which state legislation or regulation directly concerns the relationship between homeowners and their insurance companies. That excluded many potential topics such as improving the consumer complaint process that insurance departments administer or interpretation of insurance policy language.

The product is a list of key issues for insurance consumers in four categories: Buying insurance, Coverage, the Claims Process, and Disaster Victims:

In each of the Essential Protections for Policyholders, the report identifies and discusses an issue, recommends action that legislatures or sometimes insurance commissioners should take, usually offers recommended statutory language, and provides context in a summary of current law. Like other scholarship in the law and public policy realm, it requires a certain amount of self-confidence to offer a “best” solution to difficult and important issues.
A feature of the project that justifies that self-confidence is what lies behind the summaries of current law in the report. On each issue we conducted a broad survey of the law—often a 50-state survey—before formulating recommendations. (Being in a law school with interested students and colleagues made that kind of extensive work possible.) Those surveys informed the recommendations by offering alternative approaches and language and often suggesting considerations we would not have thought about otherwise. On many topics there are no comparable, publicly available surveys, although I expect they exist in the files of insurance companies and industry trade groups.
The database of current law has value going forward, too. Here’s an example: A state regulator was considering a new rule on an issue related to mandatory disclosures about the contents of insurance policies. In the discussions with industry representatives and consumer advocates, the question was posed what other states were doing. One industry representative professed ignorance and suggested that it would be a large undertaking to acquire the information. Another participant in the meeting called Professor Feinman, and the next week he was able to provide a seventeen-page memo summarizing other states’ law. As we continue to expand and update the database, we are open to helping others in similar ways.
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Essential Protections for Policyholders is a project of the Rutgers Center for Risk and Responsibility in cooperation with United Policyholders. The Rutgers Center for Risk and Responsibility at Rutgers Law School explores the ways in which society makes choices about risk, its proper allocation, and compensation for the harm caused when risks materialize.
 From Rutgers,  Jay Feinman the author of the report. He teach Insurance Law and other subjects at Rutgers Law School and is a Distinguished Professor of Law and Co-Director of the Center. His books and articles include The Law of Insurance Claim Practices, The Regulation of Insurance Claim Practices, and Delay, Deny, Defend: Why Insurance Companies Don’t Pay Claims and What You Can Do About It. Read more here.
At United Policyholders, Amy Bach is Executive Director. A professional advocate for insurance consumers since 1984 and an attorney since 1989, she is a nationally recognized expert on insurance claim and legal matters; frequently interviewed in print and broadcast media, and the author of numerous publications including “The Disaster Recovery Handbook” and consumer tips and guides in the UP Claim Help Library. She is a Consumer Liaison Representative to the National Association of Insurance Commissioners.
Dan Wade began as a law student volunteer for UP and has been Staff Attorney at UP since January 2014. He works primarily on the Advocacy and Action Program, helping draft and coordinate amicus curiae briefs, legislative advocacy, and legal research in partnership with UP staff and volunteers.
Many others helped in researching this project, notably Rutgers librarian Nancy Talley and students Jessica O’Connor, Evan Kerstetter, Brian Portny.

For more information, see:

RUTGERS LAW SCHOOL IN NEW JERSEY LAUNCHES PROJECT TO IMPROVE HOMEOWNERS’ INSURANCE