U.S. Senators Mark Dayton (D-MN) and Trent Lott (R-MS) today introduced legislation, the “Honesty is the Best Insurance Policy Act,” which would require insurance companies to state clearly on their policies’ front page what their policies don’t cover.
“I have seen too many Minnesotans, whose lives have been devastated by natural disasters or illnesses, become further devastated by discovering that their insurance policies do not cover their misfortunes,” said Dayton. “People work hard for the money with which they pay their insurance premiums. They do so in good faith that they will be protected. This bill will provide that protection.”
“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.”
Insurance policies are notoriously long, complicated, and written in legalese. The urgent need for legislation to address insurance consumer confusion and disappointment is being brought home, literally, by the reported thousands of Hurricane Katrina victims who bought homeowners insurance. Many who saw their homes damaged or destroyed later learned, to their dismay, that they could recover nothing at all.
The bill, which is strongly supported by the Consumer Federation of America and the Consumers Union, would specifically require all exclusions and limitations to be listed in a box, at the top of the insurance policy’s first page, in a font twice the size of the policy’s text.
The Consumer Federation of America estimates the Dayton-Lott bill could save consumers hundreds of billions of dollars. In the aftermath of Hurricane Katrina, the group estimates that there was $55 billion in hurricane damage that Katrina victims could not recover because they only had homeowners insurance, which they didn’t realize didn’t cover flood damage.