NAII Says Alerting Calif. Data Reporting Requirements Would Invade Privacy

February 28, 2002

According to the National Association of Independent Insurers (NAII), proposed amendments to California’s data reporting regulations would continue to infringe on consumer privacy and impose an unfair financial and administrative burden on small insurers.

The changes that the California Department of Insurance is considering would also repeal incentives for insurance companies to write more policies in “underserved” communities, according to the testimony given by the NAII.

“The proposed changes won’t help achieve the Department’s goal of determining how individual insurance companies are servicing underserved communities,” Sam Sorich, NAII vice president and western regional manager, said. “Instead, these requirements would produce unnecessary changes that would push smaller insurers out of the California marketplace and would discourage new insurers from starting business in the state.”

The DOI will hear additional public testimony Feb. 28 in Los Angeles on the proposed changes to information insurers are required to submit per zip code to the department, which uses the data as the basis for annual reports on underserved communities.

A community is deemed “underserved” in California if the proportion of uninsured motorists is 10 percent above the statewide average, the per capita income of the community is below the state’s 15th percentile, and the community is predominately minority.

“This means that a community with an extremely high proportion of uninsured drivers could not be called ‘underserved’ unless members of that community are poor and receive low wages,” Sorich said. “The wisdom of these criteria should be reviewed.”

The proposed amendments would no longer exempt an insurance company writing less than $10 million in a line of business from reporting information on that line of insurance. According to data from the National Association of Insurance Commissioners (NAIC), insurance companies with less than $10 million in premiums account for only 6. 5 percent of the homeowners market and only 5.1 percent of the private passenger auto liability market.

“Such miniscule market shares do not provide any credible data to judge how well an insurance company is serving underserved communities in comparison to other communities in California,” Sorich testified in San Francisco.

“Requiring insurers with very small market shares to compile, maintain and file reports would also impose an unfair burden on these companies.

“The administrative cost of the reporting requirements would be out of balance with the small amount of premiums that are being written-making it even more difficult for smaller insurers to compete with insurers that have greater market shares.”

Under the changes, insurers must request race, national origin and gender information from policyholders instead of insurance applicants.

“Intrusive questions about race, national origin and gender is an invasion of privacy and has absolutely no relevance to insurers,” Sorich commented. “These haphazard responses from applicants-or from policyholders- produce only spurious statistics that provide no basis for any sound judgments.”

According to Sorich, repealing existing sections that direct insurers to undertake efforts to improve services to underserved communities as an alternative to filing annual reports would impede the process of improving the availability of insurance products and services in these areas.

“NAII hopes that the DOI views its underserved communities program as more than just a data-gathering exercise,” Sorich said. “It should be a program that encourages insurers to strive to improve their services to communities rather than just directing insurers to report data. Efforts to write more insurance, make investments and undertake loss prevention and consumer education plans in underserved communities would become less attractive to insurers if these requirements were removed.”

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