Calif. Department of Insurance Chief Lists Expectations for Market Conduct

Joel Laucher, chief of Market Conduct at the California Department of Insurance, recently spoke to attendees at the 75th Annual Meeting of the Inland Marine Underwriters Association about California’s requirements and expectations for inland marine insurance. Laucher referenced Calif-ornia’s Proposition 103 enacted in 1988 which required the filing of all forms, rates, and rating plans. He noted that the provisions are still applicable and apply to inland marine as well. He also stated that each underwriting file must contain documentation of each rate applied.

According to Laucher, the more judgment one uses in determining a rate, the more documentation is required. With inland marine, he said, “we want to see how you develop a price. We’re also looking for fairness and consistency within the law.”

He pointed out that the Department primarily focuses on what affects the most people and sometimes examines things that it hasn’t looked at in quite awhile. “We take consumer complaints very seriously,” Laucher said. “And this applies to inland marine as well,” he added. He noted that complaints from consumers about inland marine service and rates are very few, numbering less than 20 out of the 17,000 plus complaints filed last year for all other lines.

Another part of the Department’s role is to examine new legislation as well as follow the handling of crises. He noted that most of the Department’s concern has centered mainly on homeowners’ coverage. This occurred because of two major fires in the fall of 2003 in the San Diego and San Bernardino area. The issue was consumers didn’t know the quantum of their replacement cost, which was required within a year, because their home wasn’t rebuilt or repaired within a year. The Department reacted by extending the replacement period to two years. In some cases, this decision impacted inland marine insurers and those who purchase it, Laucher said.

In conclusion, he noted, there has been some controversy about how much authority the Department exercises over underwriting. Sometimes the concern focuses on when consumers or businesses move away from conventional insurance to monoline inland marine coverage. Jewelry and fine art coverage for consumers, and insurance for contractor’s special equipment illustrate three of the department’s special interests in inland marine.

Topics California