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"Few of us would enjoy parsing the language in our homeowner insurance policies. But Daniel Schwarcz, an associate professor at the University of Minnesota Law School, has spent a lot of time doing just that — and what he has found is troubling for consumers.
Professor Schwarcz found that the wording used in homeowner insurance policies can vary widely among insurers, despite the common belief that such contracts are uniform throughout the industry. And some wording is better for homeowners than others.
As a result, he is urging state insurance commissioners to post contract language online, so consumers can compare policies. His report will be published later this year in the University of Chicago Law Review.
Most consumers, he said, choose a homeowner insurance carrier based on the premium quoted, the company’s financial soundness or a vague idea about its reputation. That approach assumes that one company’s underlying policy is pretty much the same as another. Yet an analysis of contracts from large insurers obtained from seven states, he said in an interview this week, shows that belief is “a myth.”
Insurers long have relied on groups like the Insurance Services Organization, an industry group, to help them crunch risk data and draft policy language. The group developed a homeowner’s form, called the HO3, that became the industry standard for stand-alone, single-family homes. But as insurers have grown larger, they have begun to rely more heavily on their own data and insight and have started tweaking contracts to their liking. As a result, Professor Schwarcz found, many policies today differ “radically” from the HO3, often in ways that reduce coverage for homeowners."
"Few of us would enjoy parsing the language in our homeowner insurance policies. But Daniel Schwarcz, an associate professor at the University of Minnesota Law School, has spent a lot of time doing just that — and what he has found is troubling for consumers.
Professor Schwarcz found that the wording used in homeowner insurance policies can vary widely among insurers, despite the common belief that such contracts are uniform throughout the industry. And some wording is better for homeowners than others.
As a result, he is urging state insurance commissioners to post contract language online, so consumers can compare policies. His report will be published later this year in the University of Chicago Law Review.
Most consumers, he said, choose a homeowner insurance carrier based on the premium quoted, the company’s financial soundness or a vague idea about its reputation. That approach assumes that one company’s underlying policy is pretty much the same as another. Yet an analysis of contracts from large insurers obtained from seven states, he said in an interview this week, shows that belief is “a myth.”
Insurers long have relied on groups like the Insurance Services Organization, an industry group, to help them crunch risk data and draft policy language. The group developed a homeowner’s form, called the HO3, that became the industry standard for stand-alone, single-family homes. But as insurers have grown larger, they have begun to rely more heavily on their own data and insight and have started tweaking contracts to their liking. As a result, Professor Schwarcz found, many policies today differ “radically” from the HO3, often in ways that reduce coverage for homeowners."