Insurers Assail Calif. Homeowner Insurance Bills

By Daniel Hays

NU Online News Service, July 9, 10:48 a.m.EDT?Insurance trade organizations were lining up today toblast a pair of California measures designed to regulate homeownersinsurance that the groups see as a "dangerous threat" to themarketplace and the state's economy.

The two bills authored by a pair of Senate Democrats andstrongly supported by Democratic State Insurance Commissioner JohnGaramendi, were scheduled for a hearing before the AssemblyInsurance Committee.

Mr. Garamendi has said provisions in the legislation could stopcredit scoring, which may unfairly impact women and racialminorities.

The measures are S.B. 691, sponsored by Sen. Martha Escutia,D-Norwalk, and S.B. 64, from Sen. Jackie Speier, D- San Mateo.

Sen. Speier's 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 setslimits 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 orCalifornia will become a nearly impossible place to offerhomeowners insurance."

Sen. Escutia's 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 consumers will have to pay morefor their homeowners insurance policies and that it will restrictinsurance availability "further damaging an already saggingeconomy."

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 state's annual gross product, a dropof $517 million in indirect business taxes and 10,000 jobslost.

The NAII said it has the support of minority business groups andcited a letter from the publisher of the Latino Journal inSacramento, which supported credit scoring asking Sen. Escutia whyLatinos would want "to pay higher premiums to help others who havenot been as responsible."

Commissioner Garamendi, in a prehearing announcement, called thebills, "much needed consumer protection measures forhomeowners."

Early last month he was sued by insurer groups for putting out alengthy advisory notice saying, in part, that ratings for potentialhome insurance clients should have a substantial relationship to aninsured's loss exposure.

In a previous statement, Mr. Garamendi said that the "insurancemarket is filled with fear for homeowners" that if they make aclaim they will lose coverage.

He also said insurers were "using credit scoring, which hasgreat potential to discriminate against minorities and women."

Mr. Garamendi said he would not allow insurers to "rely solelyon electronic databases to make decisions on what to chargeconsumers, or whether they get insurance."