July 10, 2003
A proposed bill severely restricting insurers' ability to manage exposure and
calculate risk would give homeowners insurers no option but to limit writing new
coverage in California, the American Insurance Association (AIA) said. Senate
Bill 64, authored by Sen. Jackie Speier (D), requires insurers to seek prior
approval of underwriting criteria from the Department of Insurance. SB 64 also
limits an insurers' ability to non-renew policies and prohibits the use of
information obtained from consumer reporting agencies.
"SB 64 essentially creates a state-run insurance program because all aspects of
underwriting and pricing would be controlled by state regulation," said Bill
Gausewitz, AIA assistant vice president, western region. "California's
homeowners insurance market is undergoing a natural adjustment period. While
mounting mold claims and litigation expenses are driving up the cost of
insurance, California is not facing a homeowners insurance crisis. The market
has tightened, but many companies are actually increasing their market share.
Legislation like SB 64 is an overreaction to a tight market and is likely to
backfire and disrupt the availability of coverage."
"SB 64 damages the ability of insurance companies to evaluate, underwrite and
appropriately price potential insurance risks," said Gausewitz. "Under SB 64
insurers would have little ability to control the risks they cover. Insurers
must have adequate underwriting tools to manage their exposure and balance their
books of business. Without the tools necessary to measure risks, insurers'
credit ratings and solvency could be jeopardized. Policymakers should proceed
carefully and not eliminate the ability of insurers' to operate in the state or
California will become a nearly impossible place to offer homeowners insurance."
Editor's Note: SB 64 was scheduled to be heard in the Assembly Insurance
Committee July 9. Insurance Journal will update its status as soon as it is
known.
URL:
www.insurancejournal.com/news/newswire/west/2003/07/10/30513.htm