The Department of Insurance’s proposed homeowners regulations exceed the agency’s authority to adopt standards that involve underwriting practices, according to the Association of California Insurance Companies’ President Sam Sorich.
“The regulations, which are the subject of a department hearing today in San Francisco, fail to meet the Administrative Procedure Act’s criteria for regulations. Specifically, the regulations lack the requisite authority and clarity, and the department has not demonstrated that the regulations are necessary,” said Sorich.
The ACIC president, who will testify at today’s hearing, noted that the regulations also are unfriendly to consumers because the proposed regulations would slow down the normal process of issuing insurance policies.
Existing laws require homeowners insurance companies to provide specific disclosures when policies are cancelled or not renewed. The Legislature chose not to mandate disclosure of all circumstances that may result in cancellation or nonrenewal before those actions are taken, according to Sorich.
“As a result, the Department of Insurance does not have the authority to expand, through regulations, the statutory disclosure plan that the Legislature has established,” he added.
The California Court of Appeal earlier this year ruled that the insurance commissioner has no express or implied statutory authority to regulate how homeowners insurers use claim history information for underwriting.
“Provisions in the proposed regulations that seek to restrict insurers’ use of claims information run counter to the Court of Appeal’s ruling” said Sorich.
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