Proposed Department of Insurance regulations would increase the cost of insurance for Californians while preventing insurers from accurately pricing the repair and replacement of damaged property, according to Jeff Fuller, executive vice president and general counsel of the Association of California Insurance Companies (ACIC).
Fuller was scheduled to testify Wednesday on the regulations at a Department of Insurance public hearing in San Francisco.
“Not only are these regulations detrimental to consumers and insurers, the department lacks the authority to impose some of the key provisions,” said Fuller.
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.
Specifically, the regulations would allow insurers to use the databases only if the owners of these 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.
In another section, Fuller explained that the regulations would prevent insurers from depreciating labor for actual cash value claims. Actual cash value means just that, the value of an item – such as a damaged wall – today.
The department 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. “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,” said Fuller.
“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,” added Fuller.
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