ACIC Opposes Proposed California Department of Insurance Regulations

The Association of California Insurance Companies (ACIC) recently testified on proposed Department of Insurance regulations. According to Jeff Fuller, executive vice president and general counsel of ACIC, if passed, the regulations would increase the cost of insurance for Californians while preventing insurers from accurately pricing the repair and replacement of damaged property.

“Not only are these regulations detrimental to consumers and insurers, the department lacks the authority to impose some of the key provisions,” Fuller said.

In one section, the proposed regulations would impose restrictions on insurers’ use of databases that contain extensive information that help to establish the value of insurance claims. The regulations would allow insurers to use the databases only if the owners of those databases provide the Department of Insurance full access to this information, according to Fuller. He noted that some of the information may be proprietary, and insurers are not able to assure that this information will be made available to the department.

Therefore, the regulations would jeopardize insurers’ use of databases that help achieve fair settlement of claims, he says.

In another section, Fuller explained that the regulations would prevent insurers from depreciating labor for actual cash value claims. The Department of Insurance is proposing that insurers, in determining the cost of a loss, separate the materials from labors costs. The materials could be depreciated, but the labor would not. Actual cash value means just that, the value of an item — such as a damaged wall – today, Fuller said.

“This would raise the cost of premiums for policyholders. In addition, the department lacks the authority to impose this provision. Only the Legislature can mandate policy coverages, not the commissioner,” he said. “Insurers are opposed to these regulations because we want to do everything possible to keep costs down and to accurately and efficiently evaluate the cost of claims. These regulations would prevent us from achieving both of these goals.”

The Association of California Insurance Companies is an affiliate of the Property Casualty Insurers Association of America and represents more than 300 property/casualty insurance companies doing business in California. ACIC member companies write 41.6 percent of the property/casualty insurance in California, including 57.2 percent of personal auto insurance, 45.1 percent of commercial automobile insurance, 39.6 percent of homeowners insurance, 32.4 percent of business insurance and 44.8 percent of the private workers’ compensation insurance. PCI is composed of more than 1,000 member companies.