Sen. Speiers bill “poses a dangerous threat” to the California homeowners insurance market, the Washington-based American Insurance Association said in an announcement prior to the hearing.

The measure would require insurers to seek prior approval of underwriting criteria from the insurance department, would set limits on insurers ability to non-renew policies, and would prohibit the use of information obtained from consumer reporting agencies.

Bill Gausewitz, AIA assistant vice president for the Western region, said the measure would essentially create “a state-run insurance program, because all aspects of underwriting and pricing would be controlled by state regulation.”

He suggested that “policymakers should proceed carefully and not eliminate the ability of insurers to operate in the state,” warning that California will become a nearly impossible place to offer homeowners insurance.”

Sen. Escutias bill, which seeks to ban insurers from using credit-based insurance scores to underwrite and rate homeowners insurance policies, came under fire from Sam Sorich, president of the Association of California Insurance Companies and Western regional vice president of the National Association of Independent Insurers.

A statement from the groups said ACIC believes that a ban on the use of insurance scores will mean homeowners will have to pay more for their policies and that it will restrict insurance availability, “further damaging an already sagging economy.”

NAII cited a California Chamber of Commerce study that found a 10 percent reduction in homeowner policy availability would lead to a $6.1 billion decline in the states annual gross product, a drop of $517 million in indirect business taxes and 10,000 jobs lost.

Both bills are strongly supported by Democratic State Insurance Commissioner John Garamendi. In a prehearing announcement, he called the bills “much needed consumer protection measures for homeowners.”

Early last month, he was sued by insurer groups for putting out a lengthy advisory notice saying, in part, that ratings for potential home insurance clients should have a substantial relationship to an insureds loss exposure.

Earlier this month, Mr. Garamendi also sent emergency homeowners regulations to the state Office of Adminstrative Law. The proposed regulations seek to restrict the insurers use of the Comprehensive Loss Underwriting Exchange data bank.

Reproduced from National Underwriter Edition, July 14, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.