INSURANCE COMMISSIONER JOHN GARAMENDI TAKES STRONG REGULATORY ACTION TO STOP INSURERS’ “USE IT AND LOSE IT” PRACTICES IN HOMEOWNERS INSURANCE MARKET

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INSURANCE COMMISSIONER JOHN GARAMENDI TAKES STRONG REGULATORY ACTION TO STOP INSURERS’ “USE IT AND LOSE IT” PRACTICES IN HOMEOWNERS INSURANCE MARKET
By California Department of Insurance
Apr 15, 2005, 06:01

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 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 are subject to public review and comment prior to submission to the state’s Office of Administrative Law for approval.

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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.