From The Founder and Senior Analyst of ZapThink

Ron Schmelzer

Subscribe to Ron Schmelzer: eMailAlertsEmail Alerts
Get Ron Schmelzer: homepageHomepage mobileMobile rssRSS facebookFacebook twitterTwitter linkedinLinkedIn


News Feed Item

Policyholders of America Gives the Nod to the Most Policyholder-Friendly Running in Midterm Election

Who's got the guts to tame the beast?

CHARLESTON, S.C., Oct. 14 /PRNewswire-USNewswire/ -- Today, Policyholders of America ("POA"), a non-profit organization providing free claims assistance to homeowners across the country, issued the list of political candidates scoring highest on the policyholder-friendly and insurance reform meters.

Since 2001, more than 2.5 million people have joined POA because the group gives homeowners with property losses a fighting chance to receive adequate payment for legitimate insurance claims filed under homeowner policies.

Says Melinda Ballard, President, POA, "Homeowner insurance is mandatory for anyone with a mortgage. As such, insurance should offer the same consumer protections other mandated products and services offer. Stronger consumer protections would result in a more affordable and available options which can only be achieved if those making and enacting rules not be beholding to the industry. It's a true David and Goliath story and those elected because of television ads promising to reign-in big business, rarely are willing to wade into the actual battle. If the playing field is to be leveled, we need to elect only those who believe that consumer protection and pro-business are not mutually exclusive concepts and can effectively be balanced. In fact, the very foundation of the free-enterprise system is competition -- providing a better product or service to the consumer to what is currently available, and making unfair business practices unprofitable. For decades, insurance industry lobbyists successfully restricted market entry of any new alternative to the flawed home insurance policies, fought and won rate increases while slashing coverage and built themselves a thiefdom in the process. All the while, the only protections afforded by regulators and lawmakers are to the sole benefit of the insurance industry. It's a slap in the face of the free-market system."

To better understand POA's endorsements, one must understand POA's primary objectives for the next three years. They include but are not limited to:

  • Creating new alternatives for home insurance

It makes no sense for mortgage-holders (banks and other institutions) to require that homeowners maintain coverage despite the fact that it is extremely unlikely that adequate payment will be made if and when disaster strikes. When a legitimate covered claim is denied or underpaid, both the mortgage-holder and homeowner are left stuck with an unsalable damaged home.

The solution is to put the very parties with the most at stake - those with a financial interest in the property -- in the driver's seat. Instead of paying an insurance company whose profit motive trumps the welfare of policyholders and the mortgage-holder, POA is in favour of allowing banks and mortgage companies to create their own insurance co-op or exchange made up of the homes (and homeowners) in the mortgage portfolio. The homeowners participating in the co-op or exchange would be owners of the insurance co-op or exchange.

The co-ops or exchanges would be managed and administered, for a small fee, by mortgage-holders (banks). The infrastructure currently exists for state and/or federal oversight.

The net effect would be entities with the most to lose if a home is not repaired properly actually guide the repairs. This makes for a streamlined, faster and fairer claims response, lower premiums, and a creative revenue stream for banks and mortgage companies and investment returns for homeowners.

  • Penalize carriers when they bill taxpayers for perils covered under homeowner policies

The fox guards the henhouse when flood waters rise. Homeowner policies allegedly cover wind and driving rain but NOT rising flood waters. Those living in flood prone areas are usually required to buy flood policies issued under the National Flood Program by FEMA and underwritten by the U.S. taxpayer. FEMA has no sales staff or adjusters that work for them directly so they allow most of the major insurance companies to sell flood insurance and adjust flood claims as they arise. Sounds good but there is a huge, undeniable problem - FEMA paid someone else's tab.

Here's the reality: A hurricane hits. A roof is blown off (covered by a homeowner policy) causing $50,000 in damage; Rising water also entered the home (covered by a flood policy) causing $75,000 in damages. Total damages totaled $125,000. For our purposes here, the homeowner was issued by Doowey, Cheatham & Howe (DCH), a fictitious insurance company, and a flood policy issued by the National Flood Program. The homeowner files a claim under both the homeowner and flood policies. DCH sends adjusters to the site to adjust the homeowner policy claim and the flood policy claim. DCH adjusters -- be they on staff or independent -- have a built-in incentive to lessen the financial load for DCH by stealing from Peter to pay Paul -- charging the taxpayer $125,000 ($50,000 more than the $75,000 the flood policy should have paid), reducing the DCH's responsibility to zero ($50,000 less than what DCH should have paid). The homeowner received his or her repair money and may not know or care who actually paid the claim, No checks and balances have ever been put in place to end this systemic practice even though Congress heard testimony confirming that it is a common problem.

Magnify this one instance by the thousands of claims filed after a disaster. The ill-gotten gains add up to tens-, if not hundreds- of billions of dollars in stealth bail outs diverted from unwitting taxpayers to profiteering insurance giants.

POA proposes that once a disaster is declared, FEMA be required to dispatch an advance team of adjusters to the hard hit location, spot check damaged homes, determine if damage is caused by wind or rising water, document such damage, compare their records against what is being submitted by the carriers, and determine the magnitude of the mischarges. If and when irregularities are discovered, guilty carriers and adjusters would face serious consequences including fines and criminal charges.

While the drumbeat is getting louder for insurance to be federally regulated, insurance is currently regulated at the State level -- making Governors, State legislators and State Insurance Commissioners -- the key players. However, the advancement of the POA initiatives discussed herein -- mortgage-holder insurance co-ops/exchanges and greater oversight of the adjustment of claims filed on flood policies -- may require Federal legislation and regulation, hence US Senators and US Representatives may become instrumental to these and other reform proposals.

Given the foregoing, POA is pleased to provide the identities of the candidates who've emerged as the most policyholder-friendly. Their challengers, on the other hand, have displayed a propensity to protect the insurance industry at the expense of the consumer.

Click here (http://www.policyholdersofamerica.org/poa_endorsements.htm) to access the map. Point to the state and the names of the candidates with high scores will appear.

About POA's endorsements: All candidates running for a particular office were equally scrutinized. Factors weighed by POA included: past voting records (whenever available), insurance industry ties (campaign contributions from insurance company employees, employment records, etc..), interviews conducted by POA and others, statements made while campaigning, track record of the candidate under pressure from special interests (i.e. Did he/she cave under pressure from the lobby?), position statements, questionnaires, and input from members of POA who've had direct

contact with the candidate(s) running for a particular office.

Media Contact: Melinda Ballard (843) 723-0710

SOURCE Policyholders of America

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.