Calif. Insurers Dispute Garamendi ?Use & Lose' Rule
NU Online News Service, April 20, 1:12 p.m. EDT?California home insurers said their data shows that Insurance Commissioner John Garamendi's new rule to discourage policy cancellations after claim filings is unnecessary.[@@]
Mr. Garamendi, whose previous attempt to regulate against so-called "use it and lose it practices" was overturned by an insurers court challenge, said last week he had developed a new rule with new language to accomplish the same end.
In reaction the Personal Insurance Federation of California (PIFC) said it had conducted a telephone poll of state homeowners writers and found that they, on average, failed to renew one-half of 1 percent of policies in a typical year.
PIFC's Dan Dunmoyer called Mr. Garamendi's allegations that homeowners policies are being unfairly cancelled after claims submission a "scare tactic with no basis in fact."
Last week the commissioner went to the home of an Allstate policyholder who said she was forced to get new coverage for three times the price when the company failed to renew her coverage after she filed claims in 2000 and 2001.
Allstate spokesman Rich Halberg said company policy prohibited him from discussing any particular policyholder's file.
But he did say that the historical renewal rate for Allstate California homeowners was 99.5 percent, in line with the PIFC finding.
Both Mr. Dunmoyer and Mr. Halberg said that among the main reasons for non-renewal was failure to remedy hazards within a specified period of time.
Mr. Garamendi's proposed new regulation would force carriers to disclose more underwriting information in regard to homeowners policies. Earlier this year, a state court overturned his regulation of the use of loss history in homeowners underwriting.
"We may not be able to issue an outright ban, but I will be sure that homeowners know what the risks are before they become victims of ?use it and lose it' insurers," Mr. Garamendi said.
"We're puzzled by Mr. Garamendi's allegations," said Mr. Halberg. "The facts just don't bear them out."
The new regulations would require an insurer to detail any information from a claims database report that is used to reject an application for coverage. It would require that insurers inform potential policyholders of all exclusions and take steps to verify claims database information used to rate policies.
Additionally, insurers would have to notify policyholders of any changes to their rating or underwriting guidelines that could have a negative effect on the policyholder if they file a claim, and file an annual report to the state department of insurance with the details of any instance in which they apply "use it and lose it" underwriting or deny eligibility where the potential policyholder has filed a claim in the past.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
