Calling insurers “dead wrong” for canceling or non-renewing homeowners who file a legitimate insurance claim, California Insurance Commissioner John Garamendi announced new regulations to protect homeowners from unfair “use it and lose it” practices. The new regulations will require that insurers clearly expose to consumers the conditions under which a policy may be non-renewed.
The regulation requires that insurers provide details on any information from a CLUE or A-Plus database report that has been used reject an application for insurance; that insurers inform potential policyholders of any and all excluded coverages; that insurers provide notification of any changes to rating or underwriting guidelines—before such changes takes effect—that may have a negative impact on the policyholder should the policyholder make a claim; that insurers take reasonable steps to verify claims history database information used to rate policies; and that insurers file with the Commissioner, on an annual basis, a report detailing the “who, what, and where” of occasions when insurers apply use it and lose underwriting or deny eligibility where the potential insured has made a claim in the past.
The proposed regulations are subject to public review and comment prior to submission to the state’s Office of Administrative Law for approval.
Sam Sorich, president of the Association of California Insurance Companies, commented on the proposed regulations.
“Insurance Commissioner John Garamendi is proposing a solution to a problem that doesn’t exist,” Sorich said.
“It is difficult to determine precisely what the commissioner has in mind because he has not made public the actual regulations,” he continued. “But from his statements in the media, he seems to be proposing an ill-advised concept that ultimately could be detrimental to consumers.
“His latest proposal, like some of his other ill-fated attempts, threatens to needlessly force higher costs on most Californians by mandating underwriting practices,” Sorich said. “If his plan ultimately distorts the practice of basing rates on risk, many policyholders could end up paying more for their coverages so others can pay less.
“By offering this proposal, Commissioner Garamendi also is perpetrating a myth that if consumers file claims, they will lose their homeowners insurance coverage,” Sorich said. “The fact is, more than 98 percent of homeowners policies are renewed in California.
“The commissioner’s proposal also seems to make the mistaken assumption that past claims is the only factor considered by insurance companies in deciding whether to renew policies,” he continued. “In fact, insurance companies do their best to provide appropriate coverages and consider other risk factors, such as the condition of the dwellings and the length of time policyholders have been covered by the insurer.
“ACIC is anxious to look at the specifics of the commissioner’s proposed regulations and looks forward to participating in a full hearing,” Sorich said.
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