Ala. Regulator to Insurers: Halt Non-renewals Based on Single Policies

Licensed Alabama property and casualty insurers that non-renewed policies on the condition of having other policies with the company must re-offer coverage to the consumers affected, according to a bulletin issued by the Alabama Insurance Commissioner Walter A. Bell.

Also, insurers are directed to stop offering coverage on a single line such as property on the condition that the consumer also purchase another policy, such as a life or automobile policy.

“These activities, we strongly believe, are prohibited by the Alabama Trade Practices Law,” Bell said. “The law specifically says that inducements not specified in the policy are prohibited.”

The practice was used by some insurers in 2007 to drop property insurance policies in Mobile and Baldwin counties in order to reduce hurricane exposure, according to Bell. This was accomplished by choosing a fixed date in the past as to determine whether a customer was a single-line customer or a multi-line customer. At least one company used this measure to decide which policyholders would be non-renewed. Under this method, single-line customers were non-renewed, according to the commissioner.

“By this action we are taking, we are telling every insurer that has non-renewed a policy using this method to rescind the non-renewal and offer the consumer coverage again,” Bell said. “Furthermore, we are directing insurers to cease the marketing practice of making one line of insurance – that is difficult to obtain – available only on the condition of the purchase of another line.”

Insurers have been directed to cease the practices immediately and inform the Alabama Department of Insurance with in 10 days whether it has been engaged in such practices.

Source: Alabama Department of Insurance