NAMIC Opposes Calif. Commissioner’s Proposed ‘Use it and Lose it’ Regulations

April 21, 2005

The National Association of Mutual Insurance Companies (NAMIC) said it opposes California Insurance Commissioner John Garamendi’s proposed “Use it and Lose it” regulations.

Garamendi alleged that homeowner’s insurers are denying coverage based on prior claims and not renewing policies because of legitimate consumer claims, according to a news release issued Tuesday. Garamendi called this a “use it and lose it” insurance underwriting practice.

NAMIC opposes these new regulations, because: 1) they require insurers to disclose proprietary underwriting information; 2) the information to be disclosed is more likely to confuse than illuminate
the consumer, and 3) the administrative costs associated with these regulations will needlessly increase the cost of insurance rates for all consumers.

“These regulations are just another example of the commissioner’s misplaced belief that regulation need not be based upon the actual facts of the situation,” stated NAMIC’s State Affairs Manager, Christian John Rataj.

NAMIC’s state advocacy partner, the Personal Insurance Federation of California (PIFC), recently sponsored a telephone poll of representatives of insurance companies that write more than 90 percent of all the homeowners’ insurance policies in California and found that only ½ of one percent of policyholders are nonrenewed in a typical year.

“An insurer’s number one obligation after providing an insurance policy is to pay every legitimate claim,” said PIFC President, Dan Dunmoyer. “Commissioner Garamendi must stop the political scare-tactic rhetoric and fairly regulate the insurance industry under the laws he was elected to uphold.”

“The facts speak for themselves,” Dunmoyer said after reviewing the list of justified complaints on nonrenewals and cancellations filed with the CDI. Garamendi’s contention that there are “thousands” of justified complaints alleging that homeowners’ insurers arbitrarily nonrenew consumers is without merit.

The proposed regulations require that:

• Insurers provide details on any information from a C.L.U.E. or A-Plus database report that has been used to reject an application for insurance;

• Insurers inform potential policyholders of any and all excluded coverages;

• Insurers provide notification of any changes to rating or underwriting guidelines- before such changes takes effect-that may have a negative impact on the policyholder should the policyholder make a claim;

• Insurers take reasonable steps to verify claims history database information used to rate policies;

• Insurers file with the Commissioner, on an annual basis, a report detailing the “who, what, and where” of occasions when insurers apply use it and lose underwriting or deny eligibility where the potential insured has made a claim in the past.

“The Commissioner’s repeated disregard for the facts, even statistics the department collects, and the continued attempt to vilify the insurance industry is harmful to the consumer and a waste of taxpayer dollars,” concluded Rataj.

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