ACIC Opposes Coverage Mandate Bill

June 28, 2005

The Association of California Insurance Companies (ACIC) said it is opposed to legislation that would require homeowners to purchase contents coverage that they may not need or want in the event their homes are destroyed in declared disasters.

The bill, SB 2 by Sen. Jackie Speier (D-Hillsborough), is scheduled to be heard by the Assembly Insurance Committee on Wednesday (June 29).

Kate Diehl, ACIC’s legislative advocate, said the mandatory contents coverage would require insurers to pay no less than 85 percent of a destroyed home’s personal property coverage without an inventory of the items lost.

“In addition to violating the principle that there must be proof of a loss, this bill would merely invite more fraud in the claims process. When fraud occurs, it hurts all policyholders who end up paying higher premiums to compensate for the non-existent losses,” said Diehl.

Among other things, SB 2 also would require insurers to provide policyholders with reports prior to their distribution to claims databases.

“The intent of this provision is to allow policyholders to verify the information, however, the provision is unnecessary because existing law already gives consumers adversely affected by information a free copy of the report,” Diehl said.

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