You arrive home from work and realize your house has flooded from a burst pipe. Fortunately, you have insurance. Your insurance company pays the claim but follows this up with a notice of non-renewal on the policy because you also had a hail claim 30 years ago.
With two losses on your record and non-renewal, you now must find replacement insurance, which will be expensive, or worse, not available.
Under Montana law, insurance companies cannot deny renewal because of a single claim but, there is no limit on how far back in your history they will search. The concept of reviewing claims history is to help predict future risk. However, is a decade, or multiple decades, or even longer a reasonable indicator of future risk?
We do not believe so.
House Bill 195, carried by Representative Ricci, will solve this problem by limiting an insurance company's look-back window to seven years. This common-sense approach will protect consumers, allow better access to preferred insurance companies, and create more affordable rates.
Montana senior citizens are most at risk. Many seniors who suffered a claim at some point in their life risk non-renewal every fire and hail season. Those homeowners that have had two claims, decades apart and at no fault of their own, should not be left without insurance or stuck paying unreasonably high premiums.
The look-back period only applies to claims that will negatively affect pricing. If a homeowner has never had a claim, the insurance company will continue to look as far back as the homeowner had coverage to provide the best possible price. For consumers, this is a win-win.
Another compelling argument for limiting the look-back window is to lower rates for first-time homebuyers. Current law allows insurers to rate policies based on claims made by previous owners.
This lesser-known pricing system means first-time homebuyers are left paying more because the previous owner made claims on the house.
These circumstances are neither fair nor reasonable. Current law hurts homeowners.
In Montana, we often face severe hailstorms and wildfires that push insurance premiums higher. Events like these, especially over the past few years, have resulted in a significant tightening of Montana's homeowner insurance market.
Without changing the law, those in high-risk areas will continue to rely on lender-placed coverage, which is extremely expensive and only covers the lender's interest in the property, not the homeowner.
This legislation has come before the Legislature multiple times in the past. Homeowners cannot wait any longer for this legislation to pass.
Troy Downing is the Montana commissioner of securities and insurance, state auditor.