California Panel To Consider Anti-Consumer Insurance Bills

April 27, 2005

The Senate Banking, Finance and Insurance Committee this week will consider three bills that have one thing in common – provisions that ultimately will hurt consumers if enacted, according to Sam Sorich, president of the Association of California Insurance Companies (ACIC).

The bills are SB 150 by Sen. Martha Escutia, D-Whittier; SB 518 by Sen. Christine Kehoe, D-San Diego, and SB 603 by Sen. Deborah Ortiz, D-Sacramento.

“Although these bills deal with different issues, they all would have serious and detrimental consequences for the insurance consumers of California,” said Sorich.

SB 603 would prohibit insurers from using credit information for underwriting or rating activities.

“This bill ignores the compelling evidence of the relationship between credit history and risk of insured loss. It would also prevent Californians from qualifying for discounts on their automobile and homeowners insurance premiums,” said Sorich.

“We urge the Legislature to consider more reasonable, balanced responses to the concerns that have been raised about insurers’ use of credit information. The vast majority of states, rightly so, regulate the use of credit information instead of prohibiting its use. ”

SB 518 would require insurers to submit their loss experience by ZIP Code to the Dept. of Insurance. The department has indicated this information is necessary to determine an insurer’s probable maximum loss in the event of a disaster.

“This bill is unnecessary and a waste of money for consumers. History has shown that past losses are a poor indicator of future maximum losses. Regulations already exist that require insurers to report written premium by ZIP Code. These reports provide a better means to determine probably losses in the future,” said Sorich.

“ACIC also opposes other SB 518 provisions, including extending the statute of limitations from one to two years from the inception of loss and extending additional living expenses from one to two years. Under existing case law, the statute of limitations is suspended until the claim is settled, thus providing strong protection for the policyholder and making this provision unnecessary. Extending additional living expenses to all policies would increase homeowners insurance costs.”

SB 150 would require the dissemination of private policyholder information and impose significant restrictions on sound underwriting processes that are now in place for automobile and homeowners insurance.

“This bill would conflict with the Insurance Information and Privacy Protection Act’s intent of providing individuals with greater control over the disclosure and use of their personal and privileged information,” said Sorich.

He noted the bill’s intent appears to prohibit insurers from using databases to make underwriting decisions. Such a prohibition would hurt consumers because insurers would be impeded from making prompt, informed decisions. That would negatively impact both the availability and cost of automobile and homeowners insurance.

For ACIC’s complete position papers on these and other legislative issues, visit www.acicnet.org.

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