NU Online News Service, Aug. 19, 3:43 p.m. EDT

SEATTLE–Insurance policies lack the standardization consumers, producers and regulators expect for homeowners and other liability coverages and only true transparency will solve this dilemma for buyers, a consumer advocate said.

That was the conclusion from a study done by a professor of contract law who reviewed a series of property and casualty policies purchased by most homeowners throughout the United States.

Addressing insurance commissioners during the National Association of Insurance Commissioners' (NAIC) summer meeting here, Dan Schwarcz, from the University of Minnesota Law School, said he performed a study of homeowners insurance policies covering different aspects of coverage. From his research, he determined that the traditional p&c insurance policy is no longer standardized among carriers.

"There are now substantial deviations of policies within states," he said, in some cases using contract language that has been struck down by courts in the past.

Speaking during the NAIC's Consumer Liaison Committee meeting, Mr. Schwarcz said he researched several perils covering property and liability insurance, comparing the Insurance Services Office (ISO) standard language to other carriers' policies that were substantially different from the ISO forms.

In every case, the deviations showed the ISO forms to be more generous in coverage while language changes adopted by insurers over the years excluded risks that buyers, producers and regulators would assume to be there.

A major problem with these coverage forms is that consumers have no way of comparing policy coverage because they can only obtain the policy after it is purchased, he said. Making matters worse, he said agents and brokers are under the impression that the policy language in all their products is the same and they are as much in the dark as consumers. They too do not have access to the policies until after the consumer purchases it, he noted.

The issue is further compounded by regulators being unaware of the extent of the changes that have been made over the years because they have purged the original policies from their files.

"You have no idea what is going on in your state," Mr. Schwarcz told regulators.

He said the only solution to this issue is transparency, since any attempt to standardize policies now would be logistically impossible.

He suggested that insurers and regulators post policies on the web for consumers to view, allowing them to make an educated choice. Insurers cannot defend against such postings as proprietary information because their forms become public when issued to consumers, he advised.

"If you buy a product, you need to know what is there," he said.

Policy language also came in for criticism from Mr. Schwarcz, who said he spent 10 hours reviewing some policies to understand the meaning of the exclusions, underscoring the difficulty the average consumer faces because he teaches contract law.