AAI Discourages Md. Mold Coverage Mandate
November 8, 2002
The Alliance of American Insurers (AAI) pressed the Maryland Insurance Administration
not to establish coverage mandate, arguing that such a mandate would destabilize
the state's homeowners insurance market.
"Any appropriate solution to the mold issue must address availability,
affordability and choice, otherwise the Maryland consumer will be the ultimate
loser," said Neil Malady, Alliance Mid-Atlantic regional manager speaking
at an informational hearing.
"Extensive coverage for mold was never contemplated in insurance underwriting
and pricing until recently," explained Kirk Hansen, Alliance director of
claims. "And mandating its coverage will only create financial instability
for insurers and availability and affordability problems for consumers. By allowing
insurers to offer a variety of coverages at a range of prices, consumers would
be allowed to choose the coverage they need at a price they can afford."
Hansen noted that wherever mold coverage has been mandated, it has resulted
in higher claims costs that have led to higher insurance premiums. "Texas'
experience should serve as an excellent example as to why Maryland shouldn't
mandate coverage for mold," he said. "Because Texas in the past mandated
use of a homeowners policy that did not require water discharge to be sudden
and accidental, as required by standard policies in most other states, it has
the dubious honor of having the highest homeowners premiums in the nation."
On top of that, he noted that the Insurance Department estimated Texas consumers
would face double-digit rate increases for the next several years if insurers
weren't allowed to limit coverage. "The department now has begun approving
national homeowners forms, thus giving insurers more freedom to underwrite and
customers more product choices," Hansen said.
He added that a majority of states have seen the wisdom of this approach,
with insurance departments in 36 states and the District of Columbia having
approved homeowners exclusions for mold. "The insurance industry functions
best when free-market forces are allowed to operate," he said. "Consumers
are best served when the free market is allowed to decide what coverages should
be offered and for what price."
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