California’s 2002 legislative session came to a close recently without passage of bills aiming to restrict insurers’ use of personal financial information and investments in auto repair shops. Both measures were vehemently opposed by the National Association of Independent Insurers (NAII).
“Both proposals would have blocked insurance companies’ efforts to try to do a better job of improving customer service, holding down costs, and increasing consumer choice,” Sam Sorich, NAII vice president and western regional manager, said. “The privacy bill would have increased costs, threatened jobs and created more confusion—disrupting California’s economy. It would have forced companies to establish costly systems to track customer information within individual businesses, and prevented consumers’ from being offered opportunities with other financial products.
“The auto shop bill would have stifled competition and hindered investment in California business,” Sorich added. “SB 1648’s focus was all wrong. Instead of protecting consumers, the bill protected existing repair shops from competition, which insurers’ investments help to foster. Repair shops, which today are characterized by a 43 percent fraud rate, are not entitled to statutory protections.”
Senate Bill 773 would have required insurers and other financial institutions to give an “opt-out” option before sharing nonpublic financial information with affiliated companies and an “opt-in” option before sharing information with nonaffiliated companies. The bill, one of the most hotly debated issues during the last two weeks of the session, failed to pass in the last hours of the session. Another consumer privacy bill, AB 1775, died earlier in the session. It would have imposed unjustified restrictions and on the sharing of information with affiliated companies, and created confusing, unnecessary, and expensive notice requirements. This was California’s third failed attempt to pass privacy legislation in three years.
SB 1648 would have prohibited an insurance company from having an ownership interest in an auto body repair shop. The bill passed the Senate and the Assembly Insurance Committee, but was rejected on the Assembly floor. Attempts to garner another Assembly vote on the bill before adjournment failed.
Restrictions on mold policy exclusions and insurers’ use of credit-based insurance scores also were successfully sArialed earlier in the session.
SB 1763 would have mandated that any property or liability insurance policy issued, amended, or renewed on or after Jan. 1 must cover mold as an ensuing loss.
“Enactment of SB 1763 would have created serious disruptions for homeowners and property insurers,” Sorich said. “The bill would have created impossible claims handling requirements and prevented insurers from taking action to keep insurance coverage costs down and available. Before disclosure requirements are imposed and before any coverages for mold are mandated, the study of mold exposure and remediation, called for in last year’s SB 732, should be completed.”
NAII suggested that homeowners take preventative measure to help avoid mold problems through routine maintenance, quick response to water leaks and moisture control.
AB 5 called for a ban on auto and homeowners insurers use of credit-based insurance scores in underwriting or rating policies—a significant change from current law, especially for homeowners insurance.
“NAII opposed the bill because insurance scores, when combined with other rating factors, are an excellent predictor of future claims. Their use makes pricing more accurate and lowers costs for a majority of consumers,” Sorich said.
Property/casualty insurance bills that Gov. Gray Davis has until Sept. 30 to sign or veto include:
SB 688, which would extend the statute of limitations for filing a personal injury lawsuit from one to two years. The bill would also extend the time the respondents have to react to summary judgment motions from the existing 28 days to 75 days.
SB 689, which would direct the insurance commissioner to allow an optional private passenger auto insurance rating factor of persistency, which would be based upon persistent purchase of insurance from any insurance company.
SB 800, which would give a builder an opportunity to repair defects before the plaintiff is allowed to proceed with a construction defect lawsuit.
SB 1427, which would liberalize the eligibility criteria for a driver’s participation in the low-cost automobile insurance in Los Angeles and San Francisco. The bill also would mandate a reduction in the annual premium of a low-cost policy from $450 to $347 in Los Angeles and from $410 to $314 in San Francisco. It would prematurely expand coverage, while not enough information on the results of the pilot programs exists to determine if the program should be modified or extended. It also could encourage many drivers to “buy down” from financial responsibility coverage they now purchase—driving up the number of uninsured motorists.
SB 1590, which would increase the threshold of reporting accidents to the California Department of Motor Vehicles from $500 to $750 of property damage. Nearly 30 states have a property damage reporting threshold of $500 or less.
AB 1985, which would revise the existing workers’ compensation insurance rating law. Under AB 1985, rates could be disapproved if they are inadequate to cover an insurer’s losses and expenses or would impair or threaten the solvency of the insurer.
AB 2007, which would maintain the 2 percent maximum surcharge on insurance premiums payable to the California Insurance Guarantee Association through 2007. The bill would also increase the number of CIGA board members from nine to 13. The new members would include a business representative and a labor representative who would be appointed by the insurance commissioner.
AB 2996, which would allow the DMV to assess a fee for providing vehicle and driver records that “at least” covers the DMV’s costs. The bill could help DMV’s attempt to increase the fees it imposes on insurance companies.
If the measures are enacted, they take effect Jan. 1, 2003.
Topics California Carriers Auto Property Homeowners
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