Garamendi Proposes New Regulations for Homeowners Insurance Market

California Insurance Commissioner John Garamendi on April 14 announced new regulations to protect homeowners from unfair “use it and lose it” practices in the homeowners insurance market.

“We all pay insurance companies to cover losses in case our homes are damaged or destroyed,” Commissioner Garamendi said. “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.”

Commissioner Garamendi’s new regulations will require that insurers clearly expose to consumers the conditions under which a policy may be non-renewed.

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