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Plain English
Needed in Homeowner Policies

by: Sen. Trent Lott       Filed 3/16/07 GCN

        I’ve introduced a bill requiring insurance companies to provide a written, “plain English” explanation on the front page of each new homeowner’s policy.  It’s a common sense, customer-friendly service that could benefit insurers, consumers and taxpayers,

I cosponsored a similar measure during the last Congress.  The changes from last Congress are minimal.  The new bill, called the “Homeowners’ Insurance Nondisclosure Act,” deals exclusively with homeowners’ policies, the area where most insurance coverage disputes arose following Hurricane Katrina.

Homeowners’ policies are notoriously long, complicated and written in legalese.  Even for homeowners who are familiar with legal documents like mortgages and deeds, insurance policies are hard to understand.

That’s because these policies are a contract between two parties, defined in precise legal terms.  In the case of homeowners’ policies, most consumers depend heavily on their agents for a good-faith explanation.

Yet, unlike a mortgage or deed, insurance policies are a competitive product purchased by consumers.  While we can’t erase complex legalese from an insurance document, I do think it’s reasonable for insurers to provide their paying customers with a simple, concise explanation of their policy.

If passed, this bill would require insurers to place a basic description of what the policy will not cover in a “noncoverage box,” stating in bold letters, twice the size of the body of the policy text, all conditions, exclusions and limitations pertaining to the individual policy’s coverage.

Consumer groups like this proposal, and insurers should, too.  It requires nothing of insurance companies except a little extra ink, but it could save insurers, their customers and taxpayers much more.

One consumer group contends that had there been a plain English explanation of homeowners’ policies before Katrina, American homeowners could have saved up to $65 billion in lost claims.  Insurers and taxpayers could save an untold amount of time and money in averted negotiations and court costs associated with disputes.

Using existing laws that govern unfair or deceptive practices, my bill would require the Federal Trade Commission (FTC) to enforce penalties against insurers who fail to comply with the noncoverage disclosure.

Predictably, some big insurance companies are already criticizing this bill, so expect some in the insurance industry to show resistance even in the face of this common sense, cost-effective, consumer-friendly requirement. 

Their reaction is typical of some in the insurance industry’s overall response since Hurricane Katrina – to delay, distract and distort, saying “no” even to the most simple, sincere solutions.

That’s what prompted lawmakers like U.S. Representative Gene Taylor and me to initiate this legislation and other major insurance reforms aimed at making insurance more dependable for the consumers who must buy it.

I hope insurance companies will play by significantly different rules when the next Katrina-like disaster hits America – rules which better protect consumers.  And for homeowners, some of those rules will be clearly displayed on the first page of every new homeowner’s policy, written in plain English.

Senator Lott welcomes any questions or comments about this column. 

Write to: U.S. Senator Trent Lott, 487 Russell Senate Office Building, Washington, D.C. 20510 (Attn: Press Office) or Email

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