Sunday, Dec. 29, 2013 | 2:01 a.m.
The best approach to dealing with “junk insurance,” as discussed in the Tuesday story “Customers burned by ‘junk insurance,’ ” appears to be more-adequate disclosure.
In the described cases, the plaintiffs were told they were purchasing “full, comprehensive coverage” and “comprehensive, catastrophic coverage.” The actual dollar limits, in the issued policies, fell well short of justifying such descriptions. Even so, nowhere is it alleged that the insurer failed to honor its written, contractual obligations.
In the process of designing such coverage, insurers have to estimate the percentage of policies on which losses will exceed coverage limits. Terms such as “comprehensive” are intended to create the impression that this percentage is quite low.
Regulators would do well to require that, when such terms are used for marketing purposes, estimates of the percentage of policies on which limits will be exceeded, and the average dollar amount of uncovered losses, be disclosed in writing.
A signed acknowledgement before policy issuance should be required, as well as updated disclosures at annual intervals and on websites.