Garamendi Responds to Trade Assoc.’s Lawsuit on Homeowners Advisory Notice

June 9, 2003

California Insurance Commissioner John Garamendi released the following statement in response to the lawsuit filed June 4 by the Personal Insurance Federation of California; the Association of California Insurance Companies and the American Insurance Association.

“I will do everything possible within the law to protect California’s homeowners from abusive industry practices. The growing volume of consumer complaints filed against this industry clearly indicates that more must be done to ensure each and every law and regulation is observed.

“In April,” Garamendi continued, “I launched my Homeowner’s Bill of Rights for just this reason. Today’s insurance market is filled with fear for homeowners. Fear that filing a claim, or even making a simple inquiry about coverage, will result in a significant hike in premium rates or the loss of insurance altogether. Fear that past claims will make it impossible to get affordable insurance in the future. These fears, unfortunately, are justified.

“Some insurers are improperly using electronic databases to underwrite policies, taking future risk out of the equation. Some are using credit scoring, which has great potential to discriminate against minorities and women. And the industry’s practices in some cases have prompted the phenomenon of “use it and lose it,” when a consumer who files a claim is not renewed when the policy is up for renewal. Let me make it clear, these practices will not be allowed to continue.

“The insurance industry in California will not be allowed to engage in tactics that lead to homeowners losing their insurance coverage simply for filing a claim. Insurers will not be allowed to rely solely on electronic databases to make decisions on what to charge consumers, or whether they get insurance. The industry will look to the future in assessing risk, taking into account all relevant factors. If they do not follow the appropriate laws and regulations, my Department will assess penalties and take all other appropriate action.”

John Garamendi
Insurance Commissioner

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