Technology TransactionsNew California Law Ends Insurance Abuse
Today is recall day in California, an event which has provided sustained humor for the rest of the nation. But while political activities in the state have rightfully earned much public attention, legislation passed last month should interest all homeowners who worry about insurance costs and coverage.
Imagine that you call your nearby, friendly insurance provider to ask about coverage -- do you have enough? Should you get more? Are you covered in case of this event or that one? And what about pricing?
In addition to answering your questions, some insurance companies interpret such inquiries as a "claim" to be reported to insurance rating bureaus -- and "claims" are the very things which result in higher rates, less coverage and sometimes no coverage.
"Premiums were being raised and coverage was being denied simply because consumers were being responsible enough to inquire about the specifics of their homeowner"s policy," explains California Assemblyman Ron Calderon (D-Montebello).
"According to consumers who have complained," he continued, "some of the "claims" in these databases were merely inquires that were treated as claims without the knowledge of the consumer. As a result of this practice, it has become more difficult, and in some cases, prohibitive for current and prospective homeowners to purchase homeowners" insurance."
This is not a minor issue for homeowners. If you have a mortgage your lender requires that you have adequate insurance coverage for the property. Why? Because the property is the lender"s security if you fail to repay the loan.
You will notice that the questions raised by curious consumers did not cost the insurance companies a dime. No money was sought and no damage was reported. There was no loss, no injury, or harm of any type. Instead, what we have are consumers doing what consumers are told to do: See if their insurance coverage is adequate and up-to-date, and perhaps compare coverage and prices with other insurance carriers.
Comparison shopping is a useful exercise and questions such as the ones posed above should be encouraged. It"s hard to imagine any circumstances under which more information regarding insurance coverage is or should be an underwriting minus -- all of which brings us back to California.
In late September, California passed AB 1049, a law sponsored by Calderon which generally prohibits any insurance institution or agent from making an "adverse underwriting decision in whole or in part" simply because "an individual has previously inquired and received information about the scope or nature of coverage under a residential fire or property insurance policy" and the "inquiry did not result in the filing of a claim."
In other words, an insurance company -- at least in California -- cannot see you as more risky merely because you ask about coverage.
The bill in its final form had no formal opposition. Official supporters included the California Department of Insurance, the Foundation for Taxpayer and Consumers" Rights, California Consumers" Union, Coalition of California Insurance Professionals, Nationwide Insurance Enterprise, Liberty Mutual Group, Western Insurance Agents Association, and the California Association of Realtors.
You have to wonder why other states have not adopted similar legislation. Exactly who objects? What is unfair or unreasonable about the new California law? The Calderon legislation is the kind of consumer protection that ought to be enacted in every state because no homeowner should be penalized for asking about their insurance policy or coverage.
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