Insurance interests in California said they welcomed the defeat in the state legislature this week of measures to regulate workers' compensation insurance rates and ban insurers' use of credit-based information.
The latter bill, SB 603, authored by State Sen. Deborah Ortiz, D-Sacramento, was voted down Wednesday by the California Assembly Insurance Committee.
"We are pleased the committee did not approve this extreme measure," said a statement from Janine Gibford, American Insurance Association (AIA) assistant vice president, Western Region.
Ms. Gibford noted that California had considered measures to ban the use of credit-based information by insurers several times, while insurers have supported an alternative approach based on the model law designed by the National Conference of Insurance Legislators (NCOIL).
"The enhanced NCOIL language would provide strong consumer protections while ensuring that consumers pay appropriate rates based on their likelihood of risk," said Ms. Gibford.
Use of credit information to assess customer risk has drawn the fire of opponents who say credit scoring unfairly impacts racial minorities and lower income groups and can be skewed by a number of factors. Insurers argue the process helps as many low income and minority customers as it hurts by providing them with good rates.
The measure that would have regulated workers' compensation insurance rates, SB 46, also failed in the Assembly Insurance Committee.
The panel voted 4-0 against the bill, which was sponsored by Sen. Richard Alarcon, D-Van Nuys, who chairs the Senate Labor and Industrial Relations Committee. In the Senate the legislation was approved May 31 on a vote of 23-14.
"The committee did the right thing, we applaud their foresight. They understood that the workers' compensation market is changing, decreases are being passed along to employers and rate regulation would have hurt the progress we have made in California," said Ken Gibson, AIA Western Region vice president.
In the wake of a series of legislative reforms passed in recent years, most notably last year's SB 899, insurers have been criticized by lawmakers, state officials and worker advocacy groups for failing to pass along the much heralded cost savings through reduced premiums. Mr. Gibson said such charges are untrue, noting that drastic reductions have occurred since the reforms' enactment.
"Conservative estimates show that rates have come down a minimum of 30 percent only six months after implementation of SB 899 was begun," he said. "The failure of this bill tells workers' compensation insurers that California is serious about returning stability, objectivity and predictability to what was once considered the worst system in the country."
AIA noted that the committee had also amended several homeowner bills that the organization had concerns about.
SB 2, authored by Sen. Jackie Speier, D-San Francisco, will now require insurers to train their broker-agents on how to advise consumers about the available limits of coverage for their structures. SB 518, authored by Senator Christine Kehoe, D-San Diego, will require insurers to extend to two years the time frame in which they provide additional living expenses to policyholders after a declared state of emergency.
"Both Senators Speier and Kehoe worked closely with insurers on these measures, which were designed to address concerns raised by the victims of the 2003 wildfires," said Ms. Gibford. "We thank them and appreciate their willingness to listen to our concerns and for working with us to find common ground."
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