Insurance Commissioner John Garamendi Takes Strong Regulatory Action To Stop Insurers’ “USE IT AND LOSE IT” Practices In Homeowners Insurance Market
The Commissioner proposes new regulations in his two-year battle to protect policyholders from unfair and discriminatory practices by insurers
LOS ANGELES – Calling insurers “dead wrong” for canceling or non-renewing homeowners who file a legitimate insurance claim, Commissioner John Garamendi on Thursday announced new regulations to protect homeowners from unfair “use it and lose it” practices.
“We all pay insurance companies to cover losses in case our homes are damaged or destroyed,” said Commissioner Garamendi. “So why are insurers penalizing us for using the very coverage we bought? It is a reprehensible practice, and I will see that these costly and discriminatory claims games are stopped.”
The Commissioner made his announcement at the home of Marguerite and
William Strain in Faircrest Heights. The Strain’s, 15-year
Allstate policyholders,
filed just two claims during that time – for a burst bathroom water pipe in
2002, and for a theft of tools from the couple’s truck in 2003. Despite that
record, Allstate has
informed them that their policy will not be renewed when it expires.
To address problems such as that faced by the Strains, Commissioner
Garamendi’s new regulations will require that insurers clearly expose to
consumers the conditions under which a policy may be non-renewed. “Knowledge
is a consumer’s best weapon in this fight for fairness,” said Commissioner
Garamendi. “I will require insurers to inform potential policyholders, up
front, under what circumstances they will lose it if they use it.”
The regulation requires:
- That insurers provide details on any information from a
CLUE or A-Plus database report that has been used to reject an application
for insurance.
- That insurers inform potential policyholders of any and
all excluded coverages.
- That 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.
- That insurers take reasonable steps to verify claims
history database information used to rate policies.
- That 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 insurance industry has challenged the
Department on whether it can regulate an insurer’s use of use it and lose it
practices,” said Commissioner Garamendi. “We may not be able to issue an
outright ban, but I will make sure that homeowners know what the risks are
before they become victims of a use it and lose it insurer.”
The proposed regulations will be opened to public review and comment
after submission to the state’s Office of Administrative Law for approval.
Please visit the Department of Insurance Web site at
www.insurance.ca.gov.
Non media inquiries should be directed to the Consumer Hotline at 800.927.HELP. Callers from out of state, please dial 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.
Discussion Forum
