Garamendi Promises CLUE Crackdown

Although his first term was beset with legal tilts with insurers, industry groups have generally indicated they expect that conditions will make the tune of his tenure different the second time around.

Sam Sorich, vice president and Western regional manager for the National Association of Independent Insurers in Sacramento said, "Times are different." When Mr. Garamendi took office in 1991, "we were in the midst of trying to implement Proposition 103."

The most contentious issue then, he said, was determining how much in rollbacks or refunds companies would have to pay under the proposition.

"He came into office and came up with a method for doing that, and of course it was very controversial," Mr. Sorich said. "It's a different scene now; Prop. 103 implementations are settled. He comes in without pressing issues, but there are some troubled lines in the state."

Mr. Sorich listed insurers' use of the Comprehensive Loss Underwriting Exchange database, or CLUE, as an immediate concern.

Mr. Garamendi, in fact, said in his inaugural speech that the department will "aggressively investigate this dysfunctional market [CLUE] and I will use my full power to address every legitimate concern."

Mr. Garamendi told National Underwriter that he has two concerns about CLUE: the accuracy of the database and the ability of consumers to address any inaccuracies, and the way insurers are using CLUE.

"Presumably the federal fair credit reporting laws are applicable," he said. "But I am certain consumers have no clue about CLUE and therefore no real corrections have taken place except for in isolated incidences."

Consumers have a right to correct inaccurate information, but can't do so if they don't even know the database exists. "I'm looking for a way of adjusting that," he said.

Mr. Garamendi said insurance companies need to inform their customers that the system is being used.

"If you refinance your house, you are given your credit report as part of the process, and an opportunity to correct any issues in the credit report," he explained. "That is something that I can require insurance companies to do."

Mr. Garamendi said he also has an issue with the way insurance companies use CLUE.

"We are investigating those," he said. "I hear complaints; in fact, this department has seen a four-fold increase in the number of consumer complaints originating from homeowners insurance issues, mostly related to non-renewal as a result of CLUE."

During the entire year of 2001, he said, the department received about 320 written complaints related to homeowners non-renewal issues, while "in just the last five months of 2002 we hit 1,200 complaints," he said.