Should homeowners insurance be modeled after Obamacare?

A New York official says Affordable Care Act insurance exchanges may be a useful model for reforming homeowners insurance.

Should homeowners insurance be modeled after Obamacare?

Catastrophe & Flood


The insurance exchanges established under the Affordable Care Act are less than a week old, and already some are clamoring for similar reforms to be made to other insurance lines.

Benjamin Lawsky, superintendent of New York’s Department of Financial Services, told Bloomberg he values the uniformity and simplicity provided by the health insurance exchanges and would like to see something similar in the homeowners’ insurance market.

“There’s room for greater standardization,” said Lawsky. “We’re doing it for health insurance and we need to ask, ‘Why not move in the same direction for homeowners’ policies?’”

Uncertainty on home and flood insurance following 2012’s Hurricane Sandy appears to have brought the issue to Lawsky’s attention. In the wake of the storm, many New Yorkers were unaware that their homeowners policies didn’t cover flood damage and expressed frustration with the insurance industry, he said.

Lawsky believes the uniformity of a homeowners insurance exchange would provide greater clarity to customers who are often confused about what their policies cover. It would also help people compare policies from competing carriers.

Meanwhile, insurance producers in the state are not so sure about Lawsky’s idea, though they acknowledge that homeowners’ policies are notoriously difficult to read.

“There are some issues which are not so obvious that can void coverage—specifically when the named insured no longer resides in the insured premises,” said Jeff Schneider, president of Gotham Brokerage Co. in New York City. “Don’t know that coverages need to be standardized, but there are some issues that do trip customers up and should be addressed.”

Justin Foa, president and CEO of New York-based brokerage Foa and Son, was more positive about standardized coverage for some areas of homeowners insurance but also said he didn’t think an insurance exchange was the answer.

“I think standardization would not be a terrible idea in some areas, but at the same time, an exchange isn’t really necessary,” Foa said. “The state already has the ability to standardize forms and other areas of coverage. I’m not sure why an insurance exchange in an already very vibrant market is something they’re looking at.”

Foa added that the nature of the homeowners insurance market also wouldn’t lend itself well to exchanges modeled after those created under the ACA.

“The amount of insurance companies and competition in the homeowners space is very different than the health insurance space,” he said. “With small group health insurance in New York, there are only two or three insurers providing reliable coverage, while in the homeowners space, you’ve got hundreds and hundreds of carriers.”

The policy language and complexity in homeowners insurance would also be a barrier to creating a successful exchange, Foa said.

Should Obamacare-style exchanges be put in place for homeowners' insurance? Let us know what you think below.

Keep up with the latest news and events

Join our mailing list, it’s free!