Some 200 Insurance-Related Bills Introduced in California Legislature

About 200 insurance-related bills have been introduced in the California Legislature this session, according to The Association of California Insurance Companies.

“We expect during the upcoming months that the issues of workers’ compensation, homeowners insurance, auto insurance and insurer investments will occupy a lot of our time,” said ACIC President Sam Sorich in a conference call to the media. “Our intent is to help the Legislature make good public policy on these issues.”

There are three different kinds of proposed workers’ comp legislation, according to Theo Pahos, an ACIC lobbyist. Pahos said that there are bills that try to regulate insurer pricing of workers’ comp policy in one way or another, including SB 46 (Alarcon). Another bill, also sponsored by Alarcon, would change how insurers classify employers and what rating plans they use to rate employers.

Another set of workers’ comp bills attempt to amend the section of the Insurance Code related to medical provider networks. There is also legislation that would change the reforms of SB 899, which was signed into law last April.

“This reform was thorough enough both on the medical side and on the disability side such that if these reforms are given the chance to work–and by that I mean several years without amendment–we think we’ll see a continued downward trend in rates,” Pahos said. “We are concerned with the rate of change, but we believe that with this governor, all the major changes have already happened in AB 227, SB 228 and SB 899. Absent some glaring deficiency in the law, there’s no need to do anything else major and we’d just as soon nothing be done until we see the effects of these reforms.”

There are basically no workers’ comp bills currently in the Legislature that the association’s member companies support, according to Pahos.

“What our members would like to see is no change and to allow the reforms from last year and the medical reforms from the year before to become routinized,” Pahos said.

Sorich said that the situation regarding homeowners insurance is similar. ACIC companies are concerned that bills passed last year could be jeopardized this Legislative session.

“Despite the enactments that were made last year, we do see some proposals this year that go beyond the legislation that was enacted last year and would affect insurance companies’ underwriting and claims processes,” he said. “We see the homeowners market here in California as recovering and we are concerned that some of these proposals may dampen that recovery.”

A significant proposal that ACIC is concerned about in auto insurance is the expansion of the low cost auto program, which aims to reduce the problem of uninsured drivers by offering affordable premiums to qualifying San Francisco and Los Angeles residents. SB 20, sponsored by State Senator Martha Escutia (D-Norwalk), would eliminate the January 2007 expiration date for the program in San Francisco and Los Angeles and expand the low cost auto program into six additional counties: Alameda, Fresno, Orange, Riverside, San Bernardino and San Diego.

Insurance Commissioner John Garamendi and the California Department of Insurance support SB 20, but ACIC member companies are hesitant.

“Our initial view on this is that the existing program has not really proven itself enough to justify extending it,” Sorich said.

CDI is also collecting data on the impact of alternatives to the existing auto territorial rating factors, Sorich said.

“The Department has retained an independent actuary who has set forth data that he needs to evaluate,” Sorich said. “Every month the DOI is meeting with the participating insurance companies and the actuary. There’s been quite a bit of discussion about what data is needed and how it should be submitted.”

“During the Town Hall meetings that Garamendi held around the state on territorial rating, insurers presented data that showed that territory is an important rating factor and one that is fair to the consumers of California when you’re rating their auto policies,” said Jeff Fuller, ACIC executive vice president and general counsel. “Garamendi is embark[ing] on a fairly major effort to either confirm or deny that data by undertaking his own data collection effort and actuarial review.”

Fuller said that the insurer data showed that the territorial rating system is pretty fair as implemented in California so that consumers are only paying for the insurance that they need. Sorich expects that the CDI actuary’s findings will be available by the end of 2005. Fuller said that ACIC will be watching the situation closely.

“What the Department chooses to promulgate if anything as a proposed permanent regulation remains to be seen and we’ll await the outcome of this data collection,” he said.

The final issue that ACIC member companies are concerned about is legislation that would require insurance companies to make investments in California communities.

“The bills are pretty sketchy and express an intent, but we expect that they will be much like the proposals that we’ve seen over the last two or three legislative sessions,” Sorich said. “We think such mandates are not warranted and fail to take into account the investments that insurance companies are already making throughout California.”