Can Homeowners' Policy Checklists End Consumer Confusion?

Florida’s growing familiarity with hurricanes over the last several years has taught consumers, agents, carriers, and regulators many hard lessons. From the consumers’ perspective, however, perhaps no lesson has had more of a lasting impact than the realization they understood little about their insurance policies and what was and wasn’t covered. For instance, many homeowners were shocked to learn that damage to screen enclosures and other outlying buildings was excluded under their policy. Other policyholders were greeted by the Byzantine world of sorting out claims for damage to their home that was caused by wind, which was covered under their private insurance policy, and claims for damage caused by flooding and storm surge, which was covered under the federal flood insurance program. That is, if the consumer had the foresight to purchase flood insurance. And that is not to mention the fact that many consumers learned that their coverage only kicked in after they paid a large hurricane deductible, which could range from between one and five percent of the value of their property.

Faced with thousands of consumer complaints being lodged with regulators and lawmakers, the legislature in the 2005 comprehensive homeowners’ reform bill called for the chief financial officer to create a task force to study the possibility of developing an industry-wide standardized policy. The 10-member Standard Personal Lines Committee was charged with studying the feasibility of creating a standard policy and a checklist that would provide an easy explanation of the coverage provided under a policy. Further, the law stated that the policy and checklists must be written in plan English so they would be easily understood by policyholders. In addition to providing information on coverage, the policy and checklists must include any information on deductibles and/or policyholders’ out-of-pocket expenses.