Merlin – Amy Bach and United Policyholders Supports Mississippi Insurance Protections

Sun Herald reporter Michael Newsom reported the current current status of insurance legislation pending at the Capitol in House OK’s Compromise:

House Bill 563 passed in a 107-7 vote Wednesday, which included all South Mississippi representatives voting for it. The measure is the lone surviving piece of Hurricane Katrina insurance legislation. Several other insurance bills, which Coast lawmakers file annually, died with a Feb. 2 deadline to clear committee. Coast lawmakers have said the insurance industry carries much influence over the Legislature, which has contributed to the bills failing in the years since Hurricane Katrina.

However, House Bill 563, the subject of Sop’s recent post Watered down policyholder legislation still hanging on in the Mississippi  Legislature, passed the House with language Sop claimed would give insurers “free rein” still in the bill:

In addition to the rights that are specified by the commissioner and the provision regarding reasonable time frames, the Mississippi Homeowners Insurance Policyholder Bill of Rights must include the following provisions:  (a) Unless based on sound actuarial principles, an insurance company may not treat a policyholder differently from other individuals of the same class and essentially the same  hazard when evaluating a claim…(emphasis added)

Keep in mind that Sop is a CPA who knows “adjusting claims has nothing to do with “actuarial principles” and his related opinion is as worthy of consideration as that of those in other professions commenting on proposed insurance legislation:

Taken at its face that language essentially gives an insurer free rein to do whatever the heck they want provided they pay a shill like Robert Hartwig enough to concoct some whopper actuarial principle to justify why it is OK for an insurer to hose a policyholder on a claim.

Sop spoke for SLABBED when he pointed out the red flag language in House Bill 563 and I saw no need to add more until I read this paragraph in Merlin’s related post this morning:

I am certain many may think these efforts are a waste of time because the insurance lobby in Mississippi seems to be in control of the political process. Standing up for the right principle and social policy is always the right thing to do. Like water in a stream relentlessly influencing the earth, just social policy reflected in law will eventually happen. But this will occur only so long as we stand up to those with more significant wealth or power that are attempting to keep the unjust status quo in place.

It is not the strength of the insurance lobby that concerns me.  Instead, my consideration is framing insurance legislation as a matter of “social policy” when the “unjust status quo in place” is a matter of “public policy”.  The distinction is important.

Public policies are generally accepted as  “the body of principles that underpin the operation of legal systems” of state and federal government.  Social policy, on the other hand, would be comparably defined as a body of principles that underpin the social welfare of a population.  Unlike public policy principles reflected in governing laws, social policies are much broader and reflected in the operation of both public and private entities.

For example, the unjust status quo revealed by Hurricane Katrina reflected the extent to which law regulating insurance impacted the affordability of housing at all income levels, a matter of public policy.  However, the lack of affordable housing need accessible to the low income population in the three hardest hit counties on the Coast reflected principles of the social policy that underpin the social welfare of  our State’s low income population.

Translating this understanding to legislation, requires an examination of law governing the regulation of insurance.  Other legislation may also address the social policy principles in law related to the housing needs of our state’s low income population; but, those housing needs may also be addressed in the social policy principles that underpin religious and community organizations.

Approaching insurance as a matter of social policy evokes the adage, “Don’t ever try to teach a pig to sing. It frustrates you and makes the pig mad.”  Taken one step further in relevance to post-Katrina insurance issues, the adage would apply equally to pigs with or without “lipstick”.

Framing a Policyholder’s Bill of Rights as good social policy is a concept contrary to changing law to establish a more just operation of the insurance industry.  In that regard, I would hang my hat on the unbridled authority vested in the state’s insurance commissioner.  Our current public policy provides no oversight other than court rulings resulting from litigation.  Moreover, it is this lack of oversight and unbridled authority that empowers the insurance lobby.

Consequently, it was only after Katrina that the public became aware of the Commissioner-approved change in the terms of insurance policies that attempted to overturn establish law on causation.  Whatever process was in place for reviewing the proposed change in policy language was so ineffective that even Commissioner Dale had to rely on staff research to learn when the change was made, or so he claimed.

In the three plus years it took to reach the related Supreme Court decision, untold thousands of Katrina cases were settled and litigated and some number never reached that point because the policyholder had no resources available for any option other than accepting the claim was denied.  The only way to address this unjust status quo is to change the principle of underpinning public policy to one that demands oversight and pass related law establishing same and limiting the unchecked authority vested in the commissioner.

While SLABBED commends the initiative of Kevin Buckle and the support provided by Amy Bach and United Policyholders, “standing for the right principle” is only the right thing to do when insurance legislation is rightly recogonized as a matter of public policy, albeit one with implications for the social and economic principles that underpin social policy in our State.

16 thoughts on “Merlin – Amy Bach and United Policyholders Supports Mississippi Insurance Protections”

  1. So well said Nowdy.

    I challenged Kevin on my post on this to justify the language contained in HB 563 that I found so objectionable and the lack of a reply speaks volumes. I am not throwing stones at Kevin but it seems no one, from the bill’s author to its main citizen advocate wants to discuss the meaning of this language which literally goes against decades of insurance lore and practice in adjusting claims.

    As a Mississipian and Katrina survivor that is comitted to living a lifetime under the laws passed by our legislature I take a certain amount of offense by the framing of this issue by Chip Merlin. This is a 2 steps back 1 step forward proposal IMHO. And the silence on explaining the meaning of the compromise langauge inserted in this bill is deafening. IMHO the beneficiaries in the long run should this deeply flawed bill pass will be the bar not the ordinary citizens for which Nowdy and I blog. For all these reasons we can not and will not support it.

    I challenge the insurers in Mississippi to join with Slabbed in opposing HB563.

    We made the decision today to write a formal letter to the legislature in opposition of HB563. It is my hope that despite our differences that insurers are willing to join us in this endeavor.

    The road to hell is paved with good intentions. Having been there on 8-29-05 I have no desire to set my son up for the same experiences that visited the community his parents lived in after 8-29-05.

    Kevin I’m sorry but you are being lead down the primrose path.


  2. I don’t know how many people realize our legislature has no policy analysts on staff. In terms of professional staff, the legislature operates with a small number of budget analyst and the also small number of attorneys in legal services. Everyone else is some level of “support staff”.

    Another interesting thing about our legislature is the composition – part-time positions filled by citizens that are representative of our population in terms of education, employment, race and so forth.

    A quick glance at the list of bills filed this session indicates shows 1645 in the House of Representatives and over 1100 in the Senate – excluding all the resolutions. The Session only lasts 90 days and approximately 30 of those 90 days to pass legislation introduced in each chamber for consideration by the other in a similar amount of time.

    Complex and controversial legislation is time consuming and given the small amount of time, difficult to get passed. When you add the something confusing to the mix such as the concept of insurance as a social policy issue, the difficulty of passing legislation increases many times over.

    That said, the members have had little time or opportunity to focus on the extent of authority vested in the commission of insurance as a matter of public policy – and until that happens, any legislation passed can make things “different” but still not result in meaningful change.

  3. Nowdy and SOP,

    This language:

    “(a) Unless based on sound actuarial principles, an insurance company may not treat a policyholder differently from other individuals of the same class and essentially the same hazard when evaluating a claim”

    makes no sense. I agree.

    I disagree that policyholders should scrap the chance to get a Policyholder Bill of Rights passed just because this “watered down” bill does not have everything a consumer advocate would want in it.

    As critical students and fans of music, I think you may agree with what a brilliant young artist once said:

    “You cannot always get what you want. But if you try sometimes,well…you find you might just get what you need.”

    I hope you can get more, but if not…

  4. Before responding, I took the time to read my post and Sop’s comment again to make certain neither of us was pressing for something to be included.

    My concern was/is framing the legislation as “social policy”. Sop’s, as I understand it, is the inclusion of Section 1(a) – the section which “makes no sense” on its face. I don’t think either of those concerns has to do with something not included in HB563.

    However, when I printed a copy of the bill, I noted there were no Code Section citations – an omission worth a mention because (1) there are existing Code Sections that apply and (2) there’s a “rule” that Code can not be amended by reference (in other words, the Code Section subject to amendment must be identified).

    That becomes important because the State (MID) has had a “Policyholder’s Bill of Rights” since 2007 under authority established in the Code

    “This Regulation is promulgated by the Commissioner of Insurance pursuant to the authority granted to him by Miss. Code Ann.

  5. Chip aside from the detailed reasons listed by Nowdy, our opposition does not derive from getting less than what we wanted, rather, it is because the language that everyone seems to agree is confusing appears on its face to roll back one of the few legal protections policyholders have in Mississippi: The right to a good faith adjustment of their claim.

    I simply do not see how policyholders gain anything by allowing an insurance company to discriminate against entire classes of people when adjusting a claim.

    And lets call this bill for what it is, window dressing that is in no way shape or form designed to help policyhoplders gain stautory rights, especially not when you have give up the fundemental right to a fair adjustment. This is all about politicians, that have done nothing for 4 years, getting a bit of cover before they have to face the voters next year.

    I expressed this opinion on the Sun Herald and I stand by it. The coastal legislative delegation as a whole has failed their constituants.


  6. SOP, I understand that you don’t believe me when I say this, but, I’m going to say it anyway. The insurance industry operates on the principal of “utmost good faith”. Always has. Of course, we do expect “good faith” on both sides of the table. Now, what this means to this discussion is simply this: NOBODY in the insurance industry is opposing this legislation because of good faith issues – or lack thereof. We are opposing it because it is simply a waste of paper. It does absolutely nothing but kill trees and adds another 1/2 dozen pages to your insurance policy. It doesn’t impose any restriction – on anyone – that is not already there by virtue of the insurance contract. Furthermore, state law gives authority to the DOI to regulate the insurance industry and the DOI has already has a PBOR regulation. The only difference between the DOI regulation and this proposed law is this issue of requiring insurance companies to treat similar claims “similarly”.

    But, back to the issue at hand…why do you feel this legislation is needed? In what way are insurance companies treating “similar” claims differently? And, if one could be developed, why would you be afraid of an actuarily sound prinicipal of adjusting claims? (And why are you afraid of Robert Hartwig? He’s really a nice man. Really.)

    SOP, “if” there was an actuarially sound basis for adjusting similar claims differently, you should embrace the concept, not run from it. Aren’t you just assuming that “actuarily sound” means you’ll get less? What if it means you’d get more? Would that change your opinion?

    The result of any actuarial analysis is that YOU get treated FAIRLY. I don’t want to pay higher premiums in order for YOU to enjoy your coastal vantage point anymore than YOU want to pay higher premiums for ME to drive my sports car with a beer in one and and a cell phone in the other. That’s just not fair. But, without the benefit of an actuarially sound rate study, that’s exactly what would happen.

    While I am not aware of any industry practice that allows for similar claims to be treated differently according to individual risk characteristics, I’d certainly be in favor of the idea IF it resulted in improved loss ratios which, in turn, results in more competition and reduced pricing. So, I’ll ask you ……why would YOU not want that?

    As Nowdy pointed out, our legislators have very limited time & resources (and, in some cases, brains). For that reason, I’d prefer that they spend their time and resources working on legislation that is going to bring better paying jobs to Mississippi, or reduce our obscene crime statistics. In other words, there are bigger fish to fry. State law has given sufficient regulatory authority to the Dept of Ins for issue such as this.

    Regardless, I’m not in favor of any Policyholder Bill of Rights legislation, per se. It ranks right up there with requiring a prescription to buy sudafed. You cannot legislate morality. Crooks will always be crooks. If there really is a loop hole in the law or in the DOI regulations that allows unethical insurance companies to take unfair advantage of Mississippi policyholders, then we need a more specific, focused legislation to address it, not a generalized, do nothing, policially motivated piece of junk legislation like this one. I’ll volunteer MY time to help with the cause if you will help me understand exactly what you are trying to fix. How about Mr. Merlin? Will he donate HIS time to the cause?

    Meanwhile, if there is an specific insurance company out there operating in an unethical or immoral or illegal fashion, take appropriate action against THAT company. Get Merlin to (DONATE his time to) take ’em to court. STOP BUYING from them. Whatever. But don’t paint us all with the same brush.

    Finally, I get really tired of hearing how the DOI is bowing to pressure from the insurance industry. How about some evidence of that? Isn’t it just possible that they are actually “bowing to” the best interest of the policyholders in Mississippi???? Remember, you can’t FORCE insurance companies to do business in Mississippi. They’ve got to WANT to. And right now, THEY DON’T. You should WANT an industry-friendly environment. Increases competition, reduces rates…it’s a GOOD thing!

  7. Since your points about actuarial rates were addressed to Sop, I’ll leave those for him and comment on the “killing” of trees and the Commissioner’s regulatory authority and ask a couple of questions.

    First, where does the MID PBOR address the time frame for handling claims? Not only could I not find any related provision, I noticed a related entry on Buckel’s PBOR website stating the Commissioner declined his request to add a time frame to the Department’s PBOR.

    I definitely agree the Commissioner has the authority to implement the provisions of HB563 through regulation – with the reservation that regulations can not amend or be contrary to existing Code.

    The Commissioner walks a tightrope balancing the needs/demands of insurance companies with those of policyholders.

    What I don’t see, however, are any provisions that balance the various opportunities insurers have to participate in the regulation of insurance with similar opportunities for policyholders.

    Consequently, it’s impossible to communicate anything other than “bowing” when consumers have no recognized voice – and impossible to create an industry-friendly environment that doesn’t include policyholder-friendly provisions. The current imbalance negates claims of operating in “the utmost good faith”. “Good faith” IMO means policyholders are respected in the environment and seated at the table, not on the outside looking in.

    I’d like to see all requests for rate and policy changes subject to a peer and policyholder review process that is advisory in nature. The Commissioner has the authority to make that happen and it would be an effective way to address what you see as “painting us all with one brush”.

    A similarly constituted, balanced advisory body is needed to review the Department’s 11-page [!] PBOR before more trees die. All direction and sample documents related to the requirement for an “Outline of Coverage and Comprehensive Policy Checklist” should be an appendix to the PBOR which need only contain the requirement (clearly and concisely stated). Even with this change, the BPOR will still be a four-page document and IMO,still too long for effective communication.

    I saw a lot that could be cut without taking any “right” away from policyholders; but, any attempt to reduce the document to meaningful provisions will be subject to controversy if decisions are made without stakeholders at the table equally representative of insurers and policyholders.

    JMHO, Nowdy

  8. Lynda first off I am happy we agree HB 563 needs to die in its current form even though our reasons are vastly differing. This is good news as we also agree on the need to put a bullet in AIG’s head.

    In terms of the bastardization of the claims process and the institutionalization of bad faith clams practices at certain retail insurers such has been very well documented, most recently on slabbed here. I would hope you would buy a copy of Professor Feinman’s book as it touches on that subject directly and it is an easy read.

    I do not believe in trickle down economics. If insurers improve loss ratios they will find a way to retain the money rather than reduce rates spending it on higher year end bonuses and executive salaries.

    There is no basis in the applied statistical mathmatics that constitutes the actuary science to discriminate against claimants based on geography, peril or any other distinction an insurer might make. Good faith claims adjusting is a set of principles that has no basis in statsitics such a the prompt and thorough investigation of a claim, consideration of all available information in determining damage causation and the like. Based on our experiences here after Katrina putting language like is contained in HB 563 is an invitation for insurers to screw their policyholders.

    I’m not afraid of applied mathmatics far from it in fact. Certain of the concepts that make up statsitcial theory makes me money playing stocks when those concepts are framed with human psychology (Ie behavioral finance and economics). What I am afraid of is the misuse of modeling to justify rate increases that bear no relationship to the underlying risks – that garbage in gospel out scenerio that Karen Clark so well describes. Along those lines we have criticized ERM as it substitutes computer output for judgment. Little reported was the use of ERM and related management tools that lead AIG, Bear Sterns, Lehman and others straight to insolvency.

    Finally I’d again like to address head on your contention we paint all insurers with the same brush. We don’t and I even posted on good faith insurers Chubb and Amica, how their loss ratios are better than their bad faith bretheren and while I think old fashioned get your hands dirty underwriting kills the glorified cattle call methods used by large retail insurers.

    You’ll also find that I have criticized the Mississippi bar which includes the corporate types you love along with the trial bar you hate for not taking out their own trash (Ie Dick Scruggs). What Scruggs was doing was evidently some sort of open secret for years in legal circles yet no one would man up and confront it until after the feds nailed him.

    Several years ago you may remember a thing called ENRON and the blackeye taken by the accouting profession as a result. It was deserved because we failed to take out our trash until it was too late.

    Along those lines I can’t think of a single insurer that has spoken out against the well documented abuses of homeless policyholder by certain of their industry peers. Rather what I see is a circle the wagons mentality accompanied silly calls for yet more PR spending. You guys at good faith insurers including the one you call home do not have to adopt USAA, State Farm, Allstates, Nationwide, etc etc sins but you do. And with all due respect I submit that not taking out your trash speaks volumes why major substantive insurance reform is needed in this country.

    Our modern financial economy is fundamentally built on the concept of trust. Trust that the greenback will still spend tomorrow, trust that the parties to a financial transaction will honor their contractual obligations. After what happened here and happens everyday to countless people across this land insurers have systematically destroyed that trust BY THEIR OWN BEHAVIOR. There is no waving a magic wand to put that genie back in the bottle Lynda as trust is earned with most people.

    Mr Chaney’s conclusions that ran contrary to the findings of his own examiner and his actual attack on the Rigsby sisters tells me exactly who owns the man. I wanted him to succeed for the good of our state. Nowdy still tells me offline I am selling the man short in respects. Based on his actions such as ducking his constituants etc tells me we should be counting down the days until the next election.


  9. I’d also like to recognize that Chip Merlin has re-thought his position on this and now agrees with us. While we disagreed with Chip on this issue we know his opinions are sincere and based on what he thinks is best for the policyholders. We continue to believe the same thing of comsumer advocate Kevin Buckel. propertyinsurancecoveragelaw%2FYZft %28Property Insurance Coverage Law Blog%29

    The ability to change an opinion in response to new information is the sign of an enlightened person. The good work Chip does in service to the legal profession and policyholders is little noted and most deserving of recognition. Thanks Chip.


  10. Time is very short this morning but I do want to respond to your question, Nowdy regarding a PBOR and the time allowed to pay a claim.

    I know nothing of the commissioner’s “refusal” to include a time frame in the PBOR regulation but….there is no need for him to do so. As I said, the policy already addresses ALL the issues in the current PBOR.

    Quoting from the AAIS HO-3 policy form:

    “We” adjust each item with “you”. “We” pay an insured loss withing 30 days after an acceptable proof of loss is received and agreed to in writing. If “you” and “we” do not agree, “we” pay within 30 days after the filing of an appraisal award with “us”.

    Of course, “we” means the insurance company and “you” means the named insured.

    Also, regarding a policyholder review board, I don’t disagree, in theory, with the concept. However, it would be rather difficult to accomplish because it would be a full-time endeavor for the board members. There must be DOZENS of filings pending at the DOI on any given day. And, they’d have to be skilled enough to actually evaluate the filings. The reality is, you already have such a board in the Department of Insurance. Those people ARE your representatives. Contrary to popular belief, they work for YOU, NOT for the insurance industry. They benefit NOT AT ALL by favoring insurance companies over policyholders. Remember, THEY are policyholders, too. (Do you think that fact influences them when evaluating a rate increase request from THEIR insurance company??? If so, on which side of the line do you think their sympathies are going to lie?)

    Have you ever visited the Department of Insurance? Or, their website? If you have been to the website, you know that you can access all the regulations & official bulletins published by the DOI. Pick some, at random, and tell me how many you find that work to protect any right of any insurance company. I’ll bet you don’t find one. They are looking out FOR YOU.

    SOP, please give me one good reason why insurance companies should NOT make as much profit as they can generate. Explain to me why you think someone ELSE (insurance company stockholders) should risk THEIR money for YOUR benefit with little, if any, potential for gain. Because it’s “good public policy”? Well, I contend that CPAs have a civic duty to prepare our taxes for us, for free, within 30 days of receiving our records, AND do it in such a way that 99.9% of us get a refund, regardless of the amount we had withheld. “I” didn’t ASK for our current tax process. “I” favor a flat, across the board, pay as you go approach. So, why should “I” have to pay dearly year after year to have my filing prepared? You can make plenty of money the rest of the year doing other CPA stuff without having to make a profit on tax filings, too. That’s just pure greed and we can’t have that!

    Seriously, if we are going to criticize the practice of paying corporate executives obscene salaries and bonuses (which I have NO PROBLEM doing, by the way), let’s not limit our criticism to the insurance industry. That practice needs to stop somehow, someway. I don’t have any idea how to accomplish that but I do know that limiting a corporation’s right and ability to earn profits for its stockholders is NOT the way to do it. Nor is withholding bonuses to top perfoming employees. I fully support THAT concept – for insurance industry employees and for every other industry. A bonus is just another method of distributing the salary pool to employees…with the most deserving getting a bigger piece. Whether insurance or any other business, what’s wrong with that?

    Besides, you need not fear a company EVER making excessive profits in Mississippi. Hasn’t happened yet and not likely to in OUR lifetimes.

    1. I have no problem with a company making money Lynda, provided they do it honestly. Now tell em why you think it is OK for a company to shaft its customers in the name of profits?


  11. I don’t think it’s ok. Neither do I think that paying claims according to the contractual terms of the policy is “shafting”.

  12. Me either, Linda.

    However, I also believe claims filed by a policyholder who purchased a “hurricane deductible endorsement had to fully pay for hurricane damage as a matter of law established at 83-5-35 defining deceptive acts or practices as (a) Misrepresentations and false advertising of policy contracts… using any name or title of any policy or class of policies misrepresenting the true nature thereof…

    Yet, case after case in litigation to recover loss of property damaged by Hurricane Katrina would have a statement in the Complaint such as this, “Plaintiffs also agreed to an additional “hurricane deductible endorsement” which provided for a higher deductible in exchange for protecting the Plaintiffs’ property from any and all damage due to a hurricane.”

    Likewise, I believe any claim settled under the State’s “non-binding” [sic] mediation program was unlawful as a matter of law established at 83-1-47 limiting the authority of the Commissioner to non-binding alternative dispute procedures.

    When only some laws “matter” and mediation settlement agreements contain language that binds policyholders tighter than a tick to lowball settlement, however, “shafting” is as good a word as any.

  13. The “Named Storm” or “Hurricane” deductible does not change the language of the policy. It only triggers which deductible applies for a particular loss. The purpose of this was to make the deductible amount different for a catastrophic event as compared to the isolated wind or hail storm.

    The debate is about policy language. If the DOI and legislature decide to require different policy language so be it. However, if they choose that road in MS there will be no private carriers in MS. It is just reality as MS is not an attractive market for insurance carriers.

    I think my affection for MS is well docummented, but it does not change the facts about its appeal to insurers. It is a small state with significant weather exposure, not just coastal. Due to economics of the state and the number of uninsured/underinsured drivers it does not offer the Auto profitability other states offer. Therefore the DOI has to walk a tight line on what requirements they put on carriers.

  14. Sup, that reminds of the time I approached a parent with a form I needed her to sign to have her child’s hearing, checked. I went to great lengths not to alarm her but explained that “Michael” never responded to his name. The expression on her face suggested she didn’t understand what I was talking about – until her face suddenly brightened as she said said, “Michael? He don’t know that’s his name. We’ve always called him Pookie.”

    So, whatever the hurricane deductible did, the document title and additional cost suggested something other than clarification of existing deductibles that applied.

    Plus, Sup, I might think there was just some misunderstanding if policyholders claiming they were told the increased cost meant they were fully cover in the event of the hurricane were all the customers of a single agency and concentrated it one location.

    However, policyholders reporting the same claim to coverage were spread all across the coast and served by multiple agencies. The Complaint I quoted in my earlier comment, however, was filed by respected New Orleans attorney George Fowler, someone with the education needed to understand what he was told and thought he had purchased.

  15. I can understand why policyholders might have been confused about the increased cost when the “Named Storm” deductible was introduced. An astute and professional agent should have advised their clients the increase was because more coverage was being provided. If the previous deductible was a full “wind & hail” deductible then ANY windstorm loss would have the percentage deductible. The new deductible gives more coverage so more premium is charged. The increase is usually in the 5% -10% range.

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