Garamendi says disclosure regulations could protect people from ‘use-it-and-lose-it’ home policies.

Los Angeles Times

Insurance Commissioner John Garamendi on Thursday pressed ahead with his campaign to help homeowners who may face rejection when they seek to renew insurance policies after filing damage claims.

Garamendi filed a new set of proposed regulations that would require insurers to provide detailed information to customers and state regulators about the accuracy of their claims histories and the circumstances that could lead to coverages not being renewed.

Over the last two years, the commissioner had attempted through regulation to ban such “use-it-and-lose-it” underwriting practices. However, a state appeals court, ruling on a lawsuit brought by insurers, threw out the regulations on the grounds that Garamendi lacked the legal authority to make such a sweeping prohibition.

“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,” Garamendi said at a news event staged in a Los Angeles couple’s home in Faircrest Heights. The couple, he said, were told that their policy would not be renewed, even though they filed just two claims over a 15-year period.

Consumer groups, which have been pushing unsuccessfully for the Legislature to ban allegedly unfair underwriting by insurers, said they backed Garamendi’s latest move as at least a step in the right direction.

“It gives the consumer who wants to fight back some information,” said Amy Bach, director of the San Francisco-based United Policyholders. “And it gives people a chance to correct incorrect information.”

Douglas Heller of the Foundation for Taxpayer and Consumer Rights in Santa Monica said his group would support Garamendi in efforts to stop insurers from “punishing customers who have the audacity to use the insurance policy they pay for.”

Insurers, however, countered that Garamendi and the consumer groups were railing against a problem that did not exist. Policy non-renewals affect fewer than 2% of all policyholders, said Sam Sorich of the Assn. of California Insurance Companies. “There is little evidence of widespread non-renewals,” he said.

Jerry Davies, a spokesman for the Personal Insurance Federation of California, said industry lawyers would be vetting the Garamendi proposals.

The proposed regulations must undergo a lengthy process of public notice, hearings and review over at least the next six months.