Alabama Warns Hundreds of Insurers to Register or Face Fine

Hundreds of property/casualty insurance companies have not registered with Alabama regulators as required, prompting the state insurance department to issue a warning and extend the registration deadline to March 31.

The department is warning property/casualty insurers that they must all register in order to comply with a new law requiring homeowners insurers to begin reporting certain data to the state or face a $2,500 fine.

Regulators are also reminding the industry that a new law requiring homeowners insurers to provide policyholders with a checklist of coverages applies to surplus lines insurers with homeowners customers as well as to standard market insurers.

Last year, state lawmakers enacted several new laws in response to homeowners’ complaints that there was little transparency or data on how property insurers justify rate increases.

The “Alabama Property Insurance Clarity Act” requires insurers to report certain data on homeowners policies including wind and hail losses on Oct. 1, 2013 and thereafter on an annual basis. To implement this reporting rule, the state asked all insurers with a property/casualty certificate of authority tot register with the system by Dec. 31, 2012, even if they are unlikely to fall under the homeowners data reporting requirement.

In a recent bulletin, however, regulators noted that “hundreds of companies” have not complied with the registration requirement. The department now says that all unregistered companies must register by March 1, 2013 or face a fine of $2,500 a month for each month they are found not in compliance.

Lawmakers also enacted the “Alabama Homeowners Bill of Rights” that states that as of July 1, 2013, insurers must provide prospective policyholders with a comprehensive checklist that outlines their coverages, their policy’s monetary limits and whether claims payments are calculated on the basis of replacement cost or actual cash value.

The requirement applies to homeowners, renters and tenants, dwelling and fire policies, and mobile homes. The requirement does not apply to farm owner or condominium unit owner policies.

The law is directed at insurers admitted to do business in the state. However, lawmakers also included a provision that the legislative intent of the law is to “improve homeowners understanding of their policies and to better enable a policyholder to understand their coverages.”

In a recent bulletin, Alabama insurance officials announced that based on the legislative intent of the law, surplus lines insurers must also provide a checklist to their customers buying one of these home policies. Surplus lines insurers have until July 1 to comply with the new regulations.