Most Coloradoans are not aware, until it is too late, that some fairly recent everyday practices that have developed in the homeowners’ insurance industry threaten their ability to buy a home in Colorado and insure it.
Homeowners who call their insurance companies to report damage or make a coverage inquiry – but don’t make a claim or receive funds – are being penalized, and in many cases cancelled. Insurance companies are using private databases such as C.L.U.E. or A-PLUS to track calls homeowners make to their insurance companies, often times recording a simple INQUIRY as a CLAIM that could hike rates, or worse, result in dropped coverage.
One homeowner called in to inquire about her coverage for a ring she had lost and though she did not make a claim, her homeowners’ insurance policy was cancelled less than 1 month later. Many are the stories of first time home buyers or people with not so perfect credit who qualify for a home loan, close on their house with an “insurance binder”, only to have their homeowners’ insurance policy cancelled up to 60 days later because of their credit history – thus making their home loan due IMMEDIATELY. If you look up the word “Binder” in the dictionary it states: “Legal: A payment or written statement making an agreement legally binding until the completion of a formal contract, especially an insurance contract.” There is nothing in that definition that says “unless cancelled within 60 days of being issued.”
While no fair minded, free thinking Coloradoan would want to regulate an industry’s ability to conduct FAIR and EQUITABLE business in our free market, it is clear that these fairly recent developments in the homeowners’ insurance industry are neither. These practices directly impact housing affordability and the ability for people WHO QUALIFY for a home loan to purchase the American Dream.
Insurance companies have a duty to separate claims from coverage inquiries, and keep homeowners informed of the data used to calculate their rates. As in the Credit Reporting Industry, consumers should have access to and the ability to contest inaccuracies in the information insurers use to assess them. They should feel confident that insurance companies would stick to their word when issuing a binder for their home unless they have been fraudulent in their application. Also, shouldn’t Coloradans feel secure knowing that the Colorado Division of Insurance knows how their rates are engineered – as with auto insurance?
The answer to these questions is – Absolutely! And Gov. Bill Owens now has the opportunity to correct these problems by signing HB 1292 supported by an OVERWHELMING bipartisan majority of the Republicans and Democrats in the Colorado State Legislature. However this support does not ensure that this legislation will be signed by the Governor. Coloradoans MUST contact the governor and let him know that the time has come to protect the fair and equitable right of Colorado’s homeowners to purchase and feel secure in their homes. Tell Governor Owens to SIGN HB 1292!
- Brian Wess, Colorado Springs