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Consumer Group Proposes Two Insurance Ballot Measures in California  - (Fall 2009)

CONSUMER GROUP PROPOSES TWO INSURANCE BALLOT MEASURES IN CALIFORNIA
 
            Consumer Watchdog (CW) is an organization headed by Harvey Rosenfield, the author of California's Prop 103 insurance price control law.  CW has proposed two insurance-related measures which could end up on the California ballot next year.  The first of these is called the "Stop Insurance Overcharges Act".  It was submitted to the California Attorney General on September 4.  This measure has six principle provisions.   

It prohibits any insurance producer who receives a broker fee from a customer from also receiving a commission from an insurer for that policy. It requires broker fees to be "fair, reasonable, and not unfairly discriminatory" and allows the Department of Insurance to establish rules regulating permissible broker fees. It provides that an insurance company may not charge a fee for installment payments of premium exceeding the direct cost of collecting the installment payments and allows the Department of Insurance to regulate these fees.   

It provides that any payment from a customer to an insurer or its agent is "premium" which is subject to regulation by the Department of Insurance. It prohibits the insurers from considering lack of prior insurance in setting rates or determining eligibility for coverage in auto or homeowners insurance.  
It prohibits any use of claims history in auto insurance except for the use of driving safety record as specifically provided in Prop 103.  

The text of this measure is available at http://ag.ca.gov/cms_attachments/initiatives/pdfs/i826_initiative_09-0029.pdf

           Consumer Watchdog submitted a second measure to the Attorney General on October 8, which they call the "Fair Insurance Premiums and Practices Act". This measure deals primarily with homeowners insurance.  It would severely restrict an insurer's ability to use an applicant's claims history when rating or underwriting homeowners insurance.

It would require insurers to publicly disclose their homeowners insurance underwriting guidelines. 
It would generally prohibit an insurer from considering whether an applicant was previously insured when underwriting or pricing auto or homeowners insurance.  It would require an insurer to provide a refund with interest of any premium "or other financial benefit" that the insurer "obtained as a direct or indirect result of its violation" of this measure.  The text of the "Fair Insurance Premiums and Practices Act" is available at http://ag.ca.gov/cms_attachments/initiatives/pdfs/i847_initiative_09-0050.pdf 
 
            The fact that these measures have been submitted to the Attorney General does not mean that they will appear on the ballot next year.  Submission to the Attorney General is the easy and inexpensive part of the process.  Once the AG has written a title and summary the next step is to collect enough voter signatures to qualify these for the ballot, which is a very expensive process.  It typically costs between $1 million and $2 million to qualify an initiative for the ballot in California.  It is questionable whether CW has adequate resources to qualify these measures.  If CW is able to qualify these measures, they would most likely appear on November ballot in 2010.  

For more information about these proposed ballot measures, please contact William Gausewitz at 916.447.4044 or by emailing him at WGausewitz@mrllp.com.