Charleston Gazette (West Virginia)

Insurance companies would be able to drop new auto and home policyholders for any reason, and would have an easier time dropping their current policyholders, under a bill recently passed by the Senate Banking and Insurance Committee.

The bill’s sponsor, Sen. Joe Minard, D-Harrison, said the bill (SB468) would do away with laws that force insurance companies to keep covering bad drivers and homeowners who make frequent claims.

“We’re trying to get competition into West Virginia,” he said. “Right now, the problem with our automobile and homeowners, we’re at the mercy of a few insurers. Nobody wants to write insurance here because of the lockup clause.”

That clause requires insurance companies to renew a policy after a driver has been with them for more than two years, unless the driver fails to pay a premium, is arrested on drunken-driving charges, or has two at-fault accidents or two serious moving violations within 12 months.

Under Minard’s bill, companies could drop a current policyholder with two serious moving violations within 36 months, or two at-fault accidents within 24 months.

As for homeowners, insurance companies currently can’t drop a policyholder after four years unless the homeowner doesn’t pay a premium, commits fraud or willfully or recklessly endangers the property.

Under the bill, for policies written after July 1, companies could drop a driver or homeowner for any reason, as long as they did not discriminate on the basis of race or age.

Gary Zuckett of the West Virginia Citizen Action Group said the bill could result in more uninsured drivers on the road. He also questioned whether the bill would lower rates, or pad profits in the insurance industry.

“When have insurance rates ever gone down?” he said.

State Insurance Commissioner Jane Cline said there was no specific study that shows doing away with these restrictions would lower rates. A survey by her office showed that only 10 other states had lockup clauses.

The current system causes good drivers to pay higher rates, Cline said, because insurance companies are not allowed to drop drivers with less-than-stellar records.

“The hope is the bill will improve the availability of insurance, and ultimately reduce rates,” she said.

The bill is expected to undergo changes before it gets to the Senate floor. Cline said one likely amendment would prevent the insurance companies from dropping more than 1.5 percent of their customers in any county each year.

The state’s largest insurer, State Farm, stopped writing new automobile or homeowner insurance policies in West Virginia last year.

State Farm lobbyist Ned Rose said he could not promise the company would start writing policies again if the bill passed. He did say it would improve the climate for insurance companies in the state.

“We do think it will help reduce the cost of car and homeowners insurance,” Rose said.

Senate President Earl Ray Tomblin, D-Logan, said the bill was needed to keep insurance companies like State Farm from leaving the state.

“State Farm in particular is about to pull out of here, unless we make some of these changes,” he said.

Rose said that State Farm had no current plans to leave the West Virginia market, and had not threatened to do so.

Rates could actually increase if the bill passes, according to Doug Heller, a consumer advocate with the California-based Foundation for Taxpayer and Consumer Rights.

“If insurance companies can freely kick people off the rolls, they will do that when times get tight, then sign people up again at higher prices,” he said.

He suggested the state Insurance Commission be given more power look into the waste and bureaucracy within insurance companies, and refuse to pay for excessive costs.

In 1988, Californians faced a similar insurance crisis, and passed Proposition 103, which ordered insurance companies to roll back rates and imposed stringent regulation of the insurance industry, he said.

Since then, the insurance companies have refunded over $ 1.2 billion dollars to California drivers, and the state has blocked over $ 23 billion in automobile insurance rate increases.

“This is actually a very old argument, that deregulating fosters competition and lowers rates, when all it does it push prices higher and line the pockets of insurance executives,” Heller said.
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To contact staff writer Scott Finn, [email protected] or call 357-4323.