Maine Property Measure Goes Beyond Market Assistance Plan

Maine insurers are not thrilled that the state is on the verge of implementing a voluntary market assistance plan (MAP) to address a small number of problems in the property insurance market but they are relieved that lawmakers turned down creating a Fair Plan.

Under legislation nearing final approval, Superintendent of Insurance Al Iuppa, who already has authority to implement a voluntary MAP, would be able to make the plan mandatory for all property insurers if enough insurers do not cooperate. The mandatory MAP would sunset after two years under the legislation that was filed by Gov. John Baldacci.

Judging from initial reaction of insurers, they are prepared to cooperate. At the recent Maine Associatin of Insurance Agents annual convention, representatives for Peerless, Maine Mutual Group, Patrons-Oxford and OneBeacon all indicated a willingness to volunteer, pending final details of the plan.

Pat LaVoie, OneBeacon, termed the MAP bill a “reasonable compromise” even though his company originally opposed any type of legislation to address what most observers and the state’s own research agree are market problems besetting less than 3 percent of homeowners.

“At least it’s voluntary at first,” agreed Larry Shaw, Maine Mutual Group, stressing that avoiding a Fair Plan was a positive step. Stephen Myers, Peerless Insurance, made sure to thank the agents for “steering the legislation away from the Fair Plan.”

“I hope we never have to go to mandatory,” said Iuppa. Company executives agreed that a mandatory plan would not be necessary and even questioned the necessity of a voluntary plan. “This is a solution in search of a problem,” quipped Walter C. Smythe, Patrons-Oxford.

Iuppa has never exercised his authority to start a voluntary MAP because he felt “it wouldn’t be worthwhile without a mandate or an incentive.” The threat of the MAP becoming mandatory provides the incentive he wanted for insurers to participate.

Iuppa said he hopes the MAP is only temporary. He suggested the availability problems could correct themselves before a MAP even becomes a reality because the market is already improving and “properties not looked at six months ago are being looked at now” even in coastal areas. He credited improving property and casualty results for the relaxation in the marketplace, characterizing some insurance company profits in 2003 as “obscene” but acceptable in the context of poorer results over the last six to eight years.

Details of the MAP including whether there will be surcharges, special rates, exclusions and commissions remain unsettled.

The Baldacci measure does more than authorize the mandatory MAP. It also contains several non-renewal, cancellation, underwriting and disclosure provisions, notably banning underwriting based solely on the age of a dwelling or on claims by a previous owner. Iuppa argued that the housing stock in the state is old and maintained that insurers should take into consideration that many homes have been updated.

The encroachment on underwriting freedom concerned at least one company executive at the MAIA convention, Patron-Oxford’s Smythe. “This is more than a MAP bill. It deals with the underwriting process and grants less and less latitude in underwriting,” Smythe noted. “This is new territory.”

Smythe is particularly concerned because his company writes a good number of mobile homes. “You don’t see any 15 and 20 year old mobile homes with updated systems. We underwrite these by age,” he said, adding that Patrons Oxford may have “re-evaluate” its mobile home business.

The bill also contains a provision that all rate filings go into effect 30 days after filing unless disapproved before then and guidelines for cancellations involving swimming pools, trampolines, dogs and vacant dwellings.