Two Industry Opposed Bills Die in California Legislature

California’s SB 46 and SB 603 both died in the Legislature in late June, allowing insurers to breathe a little easy–for now.

SB 46, authored by Sen. Richard Alarcon (D — San Fernando Valley), would have established a rate-making mechanism for workers’ compensation insurers by establishing a commission composed of the governor, the attorney general, the insurance commissioner, and several other desig-nees. The bill died in the Senate insurance committee June 29 with a vote of 0 to 4. The bill was granted reconsideration for next year.

“The bill would revise the workers’ compensation rate regulation procedures by establishing the Commission on Workers’ Compensation Rate Regulation, which would be responsible for setting pure premium rates, for adopting a uniform experience rating plan, for issuing minimum and maximum expense multipliers to be used by insurers, and for hearing appeals of rate decisions, as specified.”

Insurers and trade associations opposed the bill, saying that there has not been enough time allowed to see how SB 899 and other reforms are progressing.

“Certainly the threat is gone for this year,” said Nicole Mahrt, public affairs director, western region, for the American Insurance Association, “but members said if rates don’t go down, they might consider it next year.”

If the bill had passed, Mahrt said, “It would send a message that California is just not a good place to do business. Insurers need stability and predictability and rate regulation makes it unpredictable.

“The rate making mechanism in that bill is just very convoluted and it’s not something that a carrier can depend on to make good decisions,” Mahrt said.

Mahrt emphasized the importance of looking at the long-term situation in California’s workers’ comp market. “Let the reforms work. You don’t need to set some arbitrary political pricing scheme. Insurers are going to lower rates because they want to compete in the marketplace. We’re turning to a healthy marketplace, and that was the goal of the whole reforms to begin with.”

SB 603, authored by Senator Deborah Ortiz (D — Sacramento), which would have banned insurers’ use of credit-based information, died in the Assembly Insurance Committee June 29 with a vote of 3 to 2. Reconsideration, however, was also granted for this bill.

“This bill would prohibit an insurer from using credit ratings, credit reports, credit scoring models, or credit information to underwrite, classify, or rate certain insurance policies that provide coverage for loss or damage relating to automobiles; real or personal property, including loss or damage caused by fire; and residential property where the loss or damage is caused by earthquake. The bill would also prohibit an insurer from refusing to issue those policies, and from nonrenewing or canceling those policies, based upon credit grounds.”

“We certainly did not want to see a credit ban bill pass in California,” Mahrt said. “Credit is an important tool that allows insurers to accurately assess risk and to accurately price a product.”

Mahrt said that the AIA is supporting reforms that would allow the use of credit based on the NCOIL models. “It deals with people that have thin credit or no credit or extraordinary life circumstances,” she said. “There’s a lot of flexibility in consumer protection in the model that the industry is pushing.”

While many states have already implemented the NCOIL model in their legislation, California, at this time, is not considering the model.