A number of consumer protection bills supported by California's insurance commissioner have passed through their respective policy committees.
"Two years ago, when I took office, I vowed to create the best consumer protection agency in the nation," said Commissioner John Garamendi. "I applaud the authors of these bills and the legislature for passing a variety of measures that will protect the rights of consumers and expand the opportunity to purchase and keep their insurance."
In particular, Garamendi targeted what he called insurers' unfair "use it and lose it" practices. "We all pay insurance companies to cover losses in case our homes are damaged or destroyed," Garamendi said. "So why are insurers penalizing us for using the very coverage we bought? It is a reprehensible practice, and I will see that these costly and discriminatory claim games are stopped."
Garamendi's office has drafted regulations to protect homeowners from such practices. The new regulations require that insurers clearly outline the conditions under which a policy may be declined for renewal, provide details on any information from a CLUE or A-Plus database report that has been used to reject an application for insurance, inform potential policyholders of any and all excluded coverages, and provide notification of any changes to rating or underwriting guidelines that may have a negative impact should policyholders make claims. Insurers also must take reasonable steps to verify claim-history database information used to rate policies, and file annual reports detailing occasions when underwriting or eligibility decisions have been based on claim histories.
"The insurance industry has challenged the department on whether it can regulate an insurer's use of use-it-and-lose-it practices," said Garamendi. "We may not be able to issue an outright ban, but I will make sure that homeowners know what the risks are before they become victims of a use-it-and-lose-it insurer."
The legislature is, however, seeking to curtail the practice. A bill addressing adverse underwriting decisions, SB 150, would prohibit insurers and agents from basing decisions on information from insurance-support organizations such as CLUE and A-PLUS, unless the claim or loss information includes specific data elements that will give insurers complete information. If such information is not available, insurers must investigate further before making any adverse underwriting decisions. In addition, the bill prohibits insurers and agents from submitting information to insurance-support organizations unless all of the claim and loss information necessary for evaluating the consumer's loss history also is submitted.
Another bill under consideration is SB 518, which would provide various consumer protections in homeowners' insurance. Specifically, the bill would require insurers to provide policyholders with copies of their insurance policies within 21 calendar days of requests, require insurers to extend the period of time under which they would pay additional living expenses to 24 months after declared states of emergency, authorize the DOI to summarily deny public adjuster and insurance adjuster applications, and strengthen existing public adjuster accountability laws.
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