The purpose of this bulletin is to remind insurers of their responsibility to fully explain to policyholders and applicants any changes in types of coverage and premium costs for residential property insurance policies approved or adopted by the Texas Department of Insurance under Article 5.35 of the Texas Insurance Code. It is important that insurers advise consumers of recent changes in types of coverage and premium costs for residential property policies so that they may make an informed decision regarding their insurance needs.
I. Disclosure
Because the homeowners insurance market currently is transitioning from standardized, promulgated policy forms to individually filed policy forms, it is critical that insurers inform policyholders about changes and reductions in coverage so that such policy terms are fully and clearly represented to them. For example, insurers that propose to replace an HO-B with an HO-A must include a full written explanation of the coverage differences between the policy that is being non-renewed and the policy that is being offered.
Additionally, insurers must provide premium costs for all available mold, water damage, and foundation coverage options.
Please note also that Article 5.36, Texas Insurance Code, requires insurers to provide policyholders with a prior written explanation of any change in coverage made by an endorsement to the policy that reduces coverage. This provision applies to any policy form to which Article 5.35 applies, but does not apply where the policyholder has requested the endorsement that reduces coverage.
II. Non-Renewal
Insurers who choose to offer a policy that reduces coverage under an existing policy to renewal customers, must comply with Article 21.49-2B of the Texas Insurance Code. Renewal of a policy has been interpreted to mean providing like and similar coverage to the existing policy. Therefore, insurers that choose to offer renewal customers a policy, which does not provide like and similar coverage to the existing policy, must comply with Section 5 of Article 21.49-2B by mailing proper notice of non-renewal to the insured no later than the 30th day before the date the policy expires. Also, Section 9 of Article 21.49-2B requires insurers, at the request of an insured or applicant for insurance, to provide a written statement of the reason for a cancellation or non-renewal of or determination not to issue a policy. In addition, Article 21.49-2E requires an insurer's written statement giving the reason or reasons for cancellation, declination, or non-renewal to fully explain a decision which adversely affects an applicant or policyholder as specified in subsection (a) of Article 21.49-2E.
Companies writing residential property insurance must also ensure that agents have the necessary information available to provide a full explanation of the changes in coverage discussed in this bulletin.
Questions regarding this bulletin should be directed to:
Texas Department of Insurance
Attn: David Nardecchia, CPCU, Director
Personal and Commercial Lines Division
P.O. Box 149404
Austin, TX 78714-9104
512-305-7544 david.nardecchia@tdi.state.tx.us
José Montemayor
Commissioner of Insurance