California data reporting rules currently incorporate several exemptions that, the Alliance says, "recognize the reality of the marketplace and the diminishing cost-benefit of imposing disproportionate costs on smaller insurers to produce a very small amount of data."

Some of the proposals would repeal a regulatory provision exempting insurers from reporting information for a line of insurance where the carrier writes less than $10 million, according to Samuel Sorich.

Mr. Sorich is vice president and western regional manager for the Des Plaines, Ill.-based National Association of Independent Insurers.

The Alliance noted that the proposed regulations would require each of the more than 300 property-casualty insurers operating in the state to collect and submit data for personal and commercial lines. This would apply regardless of how much of the market the insurer might represent, the group said.

"While understanding the desire to track underserved communities, the Alliance is disappointed that the department is proposing to throw out 10 years of industry rulemaking participation by returning to the original flawed regulations first proposed in 1992," said Peter Gorman, vice president of the Alliance's western region office.

Both he and Mr. Sorich testified last week at a department hearing preceding the possible adoption of the regulations.

According to the department's "Initial Statement of Reasons," California Insurance Commissioner Harry W. Low has determined that the regulations need to be amended "so that the data that is provided to and analyzed by the Department is as complete as possible and maintains the highest level of statistical significance."

Mr. Gorman said that the net effect of the new regulations, if adopted, would be to increase the cost of compliance "by up to 100 times, or 1,000 percent."

He cited figures suggesting the department can capture most of the data it seeks by concentrating on only the largest writers in personal automobile, homeowners and commercial multi-peril lines.

The Alliance indicated that market share data for 1999, the most recently available, shows:

? Personal Automobile: The top 25 companies, all with more than $60 million in annual premium, represent 92 percent, or $12 billion of the $13 billion market. The remaining 275 companies with less than $60 million in premium comprise only 8 percent.

? Homeowners Insurance: The top 25 companies, all with more than $28 million in annual premium, represent 82 percent, or $2.4 billion of the market. The remaining 257 companies represent 18 percent of the market, or $300 million.

? Commercial Multi-Peril: The top 25 underwriters, all with more than $19 million in annual premium, represent 94 percent, or $3.3 billion of the market. The remaining 275 companies represent 6 percent, or $200 million.

Mr. Gorman also testified that in 1995, one carrier estimated the cost of collecting the required data under the newly adopted regulations at that time to be approximately $400,000 a year.

"Today, that cost has risen to over $1 million a year," Mr. Gorman said. "For 300 property-casualty companies, this figure would conservatively translate into a $300 million cost for all carriers to comply with these regulations," he added.

Mr. Gorman attributed the high costs "to the unique computer systems and programming needed to collect and report the required information.

Because more than two-thirds of the p-c carriers enjoy exemptions under current enforcement, restoring reporting burdens to all insurers "will have a disproportionate cost impact on smaller carriers because of economies of scale enjoyed by larger carriers," Mr. Gorman concluded.

He explained that as a consequence, smaller carriers might have to leave the California marketplace due to economic losses. This in turn "would have an adverse impact on the public by concentrating the business of insurance into the hands of a few large carriers," Mr. Gorman predicted.

Mr. Sorich also told the department that current regulations requiring insurers to request race, national origin and gender information from applicants --which has been in effect for about six years --and a proposed amendment requiring the information from policyholders instead should be dropped completely.

Mr. Sorich said that this sort of practice "just invites suspicion [from consumers] that companies are using that information in an inappropriate manner." He stressed that insurers "don't even want to be associated with this information" and that requesting it is an "insult" to insurance consumers.

Moreover, "it's totally bogus information," declared Mr. Sorich, because the responses to the questions are "completely haphazard."

He said that no statistical sample takes place and that insurers cannot know who is responding and who isn't.

The practice would be "defensible if the information being provided was of some value," Mr. Sorich said. But "as far as I can tell there's no valid information that results from this."

Another rule-making hearing is scheduled for tomorrow.