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U.S. Senate Bill Seeks "Honesty" in Policy Exclusions

Sen. Trent Lott (R-Miss.) has joined with Sen. Mark Dayton (D-Mich.) to prepare a bill that would require that all insurance policies across all lines...
May 31, 2006

Sen. Trent Lott (R-Miss.) has joined with Sen. Mark Dayton (D-Mich.) to prepare a bill that would require that all insurance policies across all lines of coverage to list on their front pages all perils not covered by the policy. The bill that they are calling the "Honesty is the Best Insurance Policy Act" would require every insurance policy sold in the United States to list all exclusions and limitations in a box that would appear on the first page of the policy, in font twice the size of the policy text.

"Providing a simple, plain English explanation of what insurance policies cover is a welcome service to insurers and consumers alike," said Lott.  "It will foster more trust and communication and help minimize problems when disaster hits.  Given our experience in the aftermath of Hurricane Katrina, Mississippians will be particularly pleased with provisions requiring more candid disclosure by insurance companies."

Lott, the former Senate Majority Leader, filed suit in December against State Farm after the insurer denied a claim made on Lott's homeowners policy. State Farm had asserted that damage to Lott's Pascagoula, Mississippi home caused by Hurricane Katrina was related to the storm's surge and was excluded as a flood peril.

The Lott-Dayton bill is strongly supported by the Consumer Federation of America and Consumers Union. The American Insurance Association has expressed skepticism and the National Association of Mutual Insurance Companies called the bill "entirely unnecessary and misguided" and urged the senators to "let their state officials do their jobs and respect state authority over insurance regulation."

What It Means to Agents:  This proposed legislation is federal, meaning Congress would be usurping the role of the states as the regulators of the business of insurance by seeking to micro-manage policy forms.

Lott, Dayton Call for "Honesty is Best Insurance Policy" Bill (Gulf Coast News 5/26/06)

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