New update of the ISO policy form for owners
The Bureau of Insurance Services (ISO) has released an update to its program for homeowners. This is the first update in 11 years, which is a good thing. You have to wonder why it took so long, but that’s a question for another day.
In this update, a new policy form is introduced, HO 00 14 – Homeowners 14 – Contents Comprehensive Form, which is an alternative to HO 00 04 – Homeowners 4 – Contents Broad Form. It sounds like a good thing, but let’s dive into a few details about this shape and see if it’s really (or maybe more correctly, could be) a good thing.
Before we get into what this form does, we need to figure out where this form came from. According to the IRMI, “the new HO 14 form was born from an ISO survey conducted in 2016 among millennials to understand their lifestyle, their coverage needs, their purchases of goods and services and their understanding. personal insurance ”.
On the surface, we see this and think that at least ISO looks to the consumer and asks the question, “How can we better serve you?” That’s a question more insurance companies need to ask themselves, rather than telling us they know a thing or two because they’ve seen a thing or two. This type of client-centered approach to policy writing should lend itself to a form of policy that targets a consumer who expects to have this kind of input in the world around them.
The problem arises when you realize that it took five years to come up with this form, which is not a major rewrite of a current form. It’s an adaptation of HO 4. It’s not even an adaptation of the old edition of the form. It’s an adaptation of the new edition of the HO 4, which is another part of the owners program update.
Enough of this. How is HO 14 different from HO 4? It’s a good question. There are several changes, but we’ll focus on a few particularly important changes.
First of all, we note a change in the special limits of liability.
If you are familiar with the HO 4, you will know that the special limits of liability include certain specific dollar amounts for certain types of property, including:
- $ 300 in cash, etc. ;
- $ 2,000 on securities, etc. ;
- $ 2,000 on boats;
- $ 2,000 on trailers;
- $ 2,000 for loss by theft of jewelry, etc .;
- See HO 4 for the rest.
On the HO 14, things are simplified, but could potentially be a problem for the insured. This is how the HO 14 reads.
A special limit of 10% of the liability limit that applies to coverage C is the total limit for each loss for all property in the categories shown below. This special limit does not increase the liability limit of coverage C.
Without digging into the individual categories of property, we see that this is potentially a change in coverage for the insured. Rather than having a fixed amount for each type of property listed, these special limits are based on the total limit of insurance. Now the insured can keep over $ 300 in cash, gold, silver, platinum, coins, medals, script, stored value cards and chip cards. At first you consider that many younger generations don’t carry cash like they used to, and that may be true, but this special limit is not limited to cash only. It includes some of the gift cards that people give away today.
This could be a good change for the insured if he knows the value of his personal property. Rather than being a fixed limit, the insured needs to know the value of his personal assets. This value will come into play again, but it is important for this.
Since this form is designed for people “more likely to live with their parents” and “more likely to reside in non-traditional households”, we conclude that many of these special liability limits mean even less to them than they do. could not for previous generations. , which tells us that this change may not be as important to them.
For example, the 10% limit of coverage C for securities, accounts, deeds, etc. includes the costs of finding, replacing or restoring information. These costs could be minimal since this generation is also adept at digital technology and may not have physical copies of these accounts, deeds, titles, etc. They may only have digital, cloud-based copies.
Another change concerns the way this generation uses their home. Because ISO has learned that they are more open to sharing the space with someone else if they don’t use it (for example, by renting it through VRBO or Airbnb), this policy offers a certain coverage to the insured who has a space available at home – sharing services.
Loss of rental value of shared accommodation activities
If an “insured” has entered into a contract or agreement with another person through the use of a “home sharing network platform” for “home sharing hosting activities” for a specified period , and either:
a. A loss covered under Section I renders the part of the “residential premises” used for such “shared accommodation activities” uninhabitable during the period specified in this contract or agreement; Where…
Read the policy for the rest, but it talks about cancellation due to a hurricane. This provides some coverage for the loss of use of the home as an Airbnb ad. In the event of a claim such as the guest room that the insured had already rented can no longer be used, or the reservation is canceled due to a cyclone watch or warning.
This would appear to be a great additional cover for those who use Airbnb to supplement their income. Considering that there are over 300 listings on Airbnb and VRBO in the state of Florida (probably a lot more), this is coverage that might be worth it. Keep in mind that this is included in the HO 14, an adaptation of the HO 4.
There is another change that needs to be addressed in HO 14. I will quote the first sentence of insured risks in HO 14 first and then HO 4 so you can see the differences.
SECTION I – RISKS INSURED AGAINST
HO 14 – We are insured against direct physical damage to the property described in coverage C.
HO 4 – We insure the direct physical loss of the goods described in coverage C caused by any of the following risks, unless the loss is excluded in Section I – Exclusions.
The HO 14 is an open perils (special shape) font, while the HO 4 is a named perils (large shape) font. You already know that a special peril rider was available for the HO 4, but now it’s included in the HO 14. It’s one less thing to worry about checking the quote before you present it to an insured and it responds simply better for the needs of an insured.
How many policyholders would wonder why there is one set of covered causes of loss for their home and another for their personal property in their home? This is a long overdue change, especially as commercial property policies tend to use the same covered causes of loss for real and personal property in many cases. Of course, that’s a generalization, but you get it.
There is another item we should consider before deciding that the new HO 14 could be an improvement over the HO 4, the loss settlement condition. Again, we will cite the HO 14 and the HO 4.
HO 14 – Covered losses for the following items are settled at replacement cost at the time of loss:
a. Cover C…
HO 4 – Covered property losses are settled at the actual cash surrender value at the time of loss, but not more than the amount required for repair or replacement.
You might be getting ready to tell us that there is an approval to fix this, and you would be right. But this new policy does not need to be approved. Like the evolution of insured risks, this is a partial recognition that this is how the client expects their policy to react after a loss.
So, is this policy better than HO 4?
It’s not that different that it would have taken so long to draft, approve, and categorize, but it’s definitely worth reviewing and using. Of course, we haven’t started talking about the process carriers will need to go through to get approval to use the form (you’ll remind me that ISO subscribers can just file a ‘me too’ case with many states. ). In the end, yes it seems that this shape can serve some customers better than the HO 4.