Insurers Assail Calif. Homeowner Insurance Bills

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 to blast a pair of California measures designed to regulate homeowners insurance that the groups see as a "dangerous threat" to the marketplace and the state's economy.

The two bills authored by a pair of Senate Democrats and strongly supported by Democratic State Insurance Commissioner John Garamendi, were scheduled for a hearing before the Assembly Insurance Committee.

Mr. Garamendi has said provisions in the legislation could stop credit scoring, which may unfairly impact women and racial minorities.

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 California homeowners insurance market, the Washington-based American Insurance Association said in an announcement prior to the hearing.

The measure would require insurers to seek prior approval of underwriting criteria from the insurance department, would sets limits on insurers' ability to non-renew policies, and would prohibit the use of information obtained from consumer reporting agencies.

Bill Gausewitz, AIA assistant vice president for the western region, said the measure would essentially create "a state-run insurance program, because all aspects of underwriting and pricing would be controlled by state regulation."

He suggested that "policymakers should proceed carefully and not eliminate the ability of insurers to operate in the state or California will become a nearly impossible place to offer homeowners insurance."

Sen. Escutia's bill, which seeks to ban insurers from using credit-based insurance scores to underwrite and rate homeowners insurance policies, came under fire from Sam Sorich, president of the Association of California Insurance Companies and western regional vice president of the National Association of Independent Insurers.

A statement from the groups said ACIC believes that a ban on the use of insurance scores will mean consumers will have to pay more for their homeowners insurance policies and that it will restrict insurance availability "further damaging an already sagging economy."

NAII cited a California Chamber of Commerce Study that found a 10 percent reduction in homeowner policy availability would lead to a $6.1 billion decline in the state's annual gross product, a drop of $517 million in indirect business taxes and 10,000 jobs lost.

The NAII said it has the support of minority business groups and cited a letter from the publisher of the Latino Journal in Sacramento, which supported credit scoring asking Sen. Escutia why Latinos would want "to pay higher premiums to help others who have not been as responsible."

Commissioner Garamendi, in a prehearing announcement, called the bills, "much needed consumer protection measures for homeowners."

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

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

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

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