Insurers Assail Calif. HO Bills

By Daniel Hays

July 9Insurance trade organizations lined up last weekto blast a pair of California measures designed to regulatehomeowners insurance.

The bills, S.B. 691, sponsored by Sen. Martha Escutia,D-Norwalk, and S.B. 64, from Sen. Jackie Speier, D- San Mateo, werescheduled for a hearing before the Assembly InsuranceCommittee.

Sen. Speiers bill “poses a dangerous threat” to the Californiahomeowners insurance market, the Washington-based AmericanInsurance Association said in an announcement prior to thehearing.

The measure would require insurers to seek prior approval ofunderwriting criteria from the insurance department, would setlimits on insurers ability to non-renew policies, and wouldprohibit the use of information obtained from consumer reportingagencies.

Bill Gausewitz, AIA assistant vice president for the Westernregion, said the measure would essentially create “a state-runinsurance program, because all aspects of underwriting and pricingwould be controlled by state regulation.”

He suggested that “policymakers should proceed carefully and noteliminate the ability of insurers to operate in the state,” warningthat California will become a nearly impossible place to offerhomeowners insurance.”

Sen. Escutias bill, which seeks to ban insurers from usingcredit-based insurance scores to underwrite and rate homeownersinsurance policies, came under fire from Sam Sorich, president ofthe Association of California Insurance Companies and Westernregional vice president of the National Association of IndependentInsurers.

A statement from the groups said ACIC believes that a ban on theuse of insurance scores will mean homeowners will have to pay morefor their policies and that it will restrict insuranceavailability, “further damaging an already sagging economy.”

NAII cited a California Chamber of Commerce study that found a10 percent reduction in homeowner policy availability would lead toa $6.1 billion decline in the states annual gross product, a dropof $517 million in indirect business taxes and 10,000 jobslost.

Both bills are strongly supported by Democratic State InsuranceCommissioner John Garamendi. In a prehearing announcement, hecalled the bills “much needed consumer protection measures forhomeowners.”

Early last month, he was sued by insurer groups for putting outa lengthy advisory notice saying, in part, that ratings forpotential home insurance clients should have a substantialrelationship to an insureds loss exposure.

Earlier this month, Mr. Garamendi also sent emergency homeownersregulations to the state Office of Adminstrative Law. The proposedregulations seek to restrict the insurers use of the ComprehensiveLoss Underwriting Exchange data bank.

Reproduced from National Underwriter Edition, July 14, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved. Copyright in this article as anindependent work may be held by the author.