Underinsurance cover is not good for policyholders or insurers. Colorado Insurance Commissioner Michael Conway said a lot during his brief appearance at the Rocky Mountain Association of Public Insurance Adjusters meeting on Thursday. IN Colorado Insurance Commissioner Michael Conway continues his efforts to help and assist policyholders affected by the Marshall Sprucee, we applauded Conway for taking a very transparent and informative role on insurance issues in Colorado. While noting that there are no easy answers to the sub-insurance issue, he showed a deep understanding of the issue and promised to do something about it.
One aspect of the issue that Conway addresses is the competition between insurance agents and companies to gain market share. No rocket scientist is required to realize that by underinsuring a building, the premium offered to the potential customer will be reduced. Every customer wants a lower premium. Lower premiums keep policyholders with the same company and invite new customers.
He mentioned that an elected official in Colorado was offered a significantly reduced premium in a posted ad. The company that made the offer simply lowered the value to be insured.
An article, “It̵7;s a blow to the stomach”: Marshall fire survivors fear their home was underinsured and they could not afford to rebuildd, republished by United Policyholders, discusses the underinsurance issues:
Colorado Insurance Commissioner Michael Conway said his office has never collected data on underinsurance following a natural disaster. But now there are plans to do so for Marshall’s fire victims. Data should be available by the end of the month on what amounts people have for total losses, but that will only provide part of the picture, he said.
“We’ll take a close look at what’s going on with some insurance companies to see if we have insurance companies that undercut the market,” said Conway.
His office hears from enough people that it makes state insurance regulators worry about the possibility that there are “a large number of people across the state who are underinsured,” Conway said.
“It is a chronic problem that we must find solutions to and the insurance industry must absolutely be part of the solution,” he said. – It is chronic in the whole country. And it’s not just forest fires.
The article also noted a lawyer who believes that the insurance industry needs to do a better job of making the valuations and raised concerns about market competition as well:
Mark Wiranowski, a lawyer whose home was destroyed by the Marshall Fire, digs into the reasons why underinsurance seems to be a systemic problem.
He objects to all the arguments that the burden of knowing exactly how much insurance to have on a home falls on the owners.
‘Nonsense! How is it possible for each homeowner to assess construction costs each year and find out what the prevailing cost will be, Wiranowski said. “They are the experts. We all trust that our insurance companies will give us that amount.”
But he also said he does not think insurance companies are out to deceive homeowners.
“It’s too simple an answer to say it’s a conspiracy and all insurance companies are conspiring to make it happen,” he said.
He believes that the problem starts with insurance companies struggling in a tight market to get the most customers. If agents told people the real amount they needed to insure their homes, he said, then they would lose customers to bargain competitors.
“This is not a story about homeowners skimping on their premiums,” Wiranowski said. “This is a story about middle-class homeowners trying to protect their biggest investment and being wrongly assured that they have enough insurance to be able to rebuild.”
His idea for a solution would be that the state would require the insurance companies to give homeowners an honest assessment of what is required to rebuild after a total loss, taking into account the costs of supply, labor and special details in a home. If a homeowner says no, it’s up to them. Put a disclaimer on the policy, he said.
From an insurance point of view, property insurance should be written at full replacement value. It is important for insurers and policyholders. I can actually imagine that reinsurers are also questioning this issue because they want their insurance company customers to fully insure themselves to value.
Insurance is a social product, and we are all in this together when it comes to the issue of underinsurance. The answer to the problem will be found in a number of reforms. It was refreshing to listen to Commissioner Conway because he understands the problems, which is the first step in devising possible solutions.
I buy expensive suits. They just look cheap to me.