California Legislative Committee Takes Action on Homeowners Bills

The Assembly Insurance Committee took action on several pending homeowners insurance bills in late June. According to the Association of California Insurance Companies (ACIC), consumers will benefit from the recent actions.

The Insurance Committee approved SB 1855 and amended and passed SB 1323. Both bills have hearings scheduled for Aug. 4 in the Assembly Appropriations Committee.

SB 1855, introduced after the October 2003 California wildfires and one of the bills included in Insurance Commissioner John Garamendi’s Homeowners’ Bill of Rights package, requires insurers to fully disclose all coverages and costs to consumers. According to the Personal Insurance Federation of California (PIFC), SB 1855 passed the committee with unanimous bipartisan support and all committee members were added as coauthors.

Both PIFC and ACIC were opposed to SB 1323, sponsored by Deborah Ortiz (D-Sacramento), which would have initially banned insurers’ use of credit information for underwriting and rating purposes. As amended by the committee, however, the bill would allow insurers to use credit scores with certain consumer protections that are part of the National Council of Insurance Legislators (NCOIL) model law.

“We think the changes to SB 1323 are good,” said Sam Sorich, president of ACIC. “The bill went from a complete prohibition on the use of credit to creating a system for regulating its use, the use of that information by insurers. We think that the bill in its current form provides a responsible way to regulate the use of credit while preserving its use so companies can use that information to write more business.”

Sorich said that the bill, as amended, would benefit consumers because credit scoring can give policyholders a chance to qualify for discounts and lower premiums.

The legislative committee also rejected two bills. SB 1315, sponsored by Ortiz, was considered unconstitutional by many critics. It would have required insurers to submit policy forms to Commissioner Garamendi for approval. SB 1315 will not be brought back for consideration in the Legislature, according to PIFC.

The other bill rejected by the Committee was SB 1474, but there are reports that the bill may resurface before the legislative session ends on Aug. 31. The legislation would have limited an insurer’s ability to consider past claims history. Insurance carriers would not have been allowed to refuse to issue, non-renew or surcharge a policy that had a history of claims resulting from natural causes, weather-related events and fire losses.

“The consideration of past claims is fundamental to insurers’ underwriting and rating decisions,” Sorich said. “The significant restrictions that the bill would have tolled on insurers would have made it very difficult to make good, fair decisions. So I’m afraid what the result of the bill would have been is that homeowners with good claim experience would have been forced to pay more than they should have been paying for homeowners insurance. We think that it was a good thing that the committee thought about the bill and decided not to pass it in the form that was before the committee.”