[Congressional Record (Bound Edition), Volume 153 (2007), Part 6]
[Senate]
[Pages 8618-8619]
[From the U.S. Government Publishing Office, www.gpo.gov]


                HOMEOWNERS' INSURANCE NONDISCLOSURE ACT

  Mr. LOTT. Mr. President, I have introduced a bill requiring insurance 
companies to provide a written ``plain English'' explanation on the 
front page of each new homeowner's policy. It is a commonsense, 
customer-friendly service that could benefit insurers, consumers, and 
taxpayers,
  I cosponsored a similar measure during the last Congress. The changes 
from last Congress are minimal. The new bill, called the Homeowners' 
Insurance Nondisclosure Act, deals exclusively with homeowners' 
policies, the area where most insurance coverage disputes arose 
following Hurricane Katrina.
  Homeowners' policies are notoriously long, complicated, and written 
in legalese. Even for homeowners who are familiar with legal documents 
like mortgages and deeds, insurance policies are hard to understand.
  That is because these policies are a contract between two parties, 
defined in precise legal terms. In the case of homeowners' policies, 
most consumers depend heavily on their agents for a good-faith 
explanation.
  Yet, unlike a mortgage or deed, insurance policies are a competitive 
product purchased by consumers. While we can't erase complex legalese 
from an insurance document, I do think it is reasonable for insurers to 
provide their paying customers with a simple, concise explanation of 
their policy.
  If passed, this bill would require insurers to place a basic 
description of what the policy will not cover in a ``noncoverage box,'' 
stating in bold letters, twice the size of the body of the policy text, 
all conditions, exclusions, and limitations pertaining to the 
individual policy's coverage.
  Consumer groups like this proposal, and insurers should, too. It 
requires nothing of insurance companies except a little extra ink, but 
it could save insurers, their customers, and taxpayers much more.
  One consumer group contends that had there been a plain English 
explanation of homeowners' policies before Katrina, American homeowners 
could have saved up to $65 billion in lost claims. Insurers and 
taxpayers could save an untold amount of time and money in averted 
negotiations and court costs associated with disputes.
  Using existing laws that govern unfair or deceptive practices, my 
bill would require the Federal Trade Commission, FTC, to enforce 
penalties against insurers who fail to comply with the noncoverage 
disclosure.
  Predictably, some big insurance companies are already criticizing 
this bill, so expect some in the insurance industry to show resistance 
even in the face of this commonsense, cost-effective, consumer-friendly 
requirement. Their reaction is typical of some in the insurance 
industry's overall response since Hurricane Katrina--to delay, 
distract, and distort, saying ``no'' even to the most simple, sincere 
solutions.
  That is what prompted lawmakers like U.S. Representative Gene Taylor 
and me to initiate this legislation and other major insurance reforms 
aimed at making insurance more dependable for the consumers who must 
buy it.
  I hope insurance companies will play by significantly different rules 
when

[[Page 8619]]

the next Katrina-like disaster hits America--rules which better protect 
consumers. And for homeowners, some of those rules will be clearly 
displayed on the first page of every new homeowner's policy, written in 
plain English.

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