BILL ANALYSIS Ó
AB 447
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Date of Hearing: May 6, 2015
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
AB 447
(Maienschein) - As Amended April 29, 2015
SUBJECT: Property insurance: discrimination
SUMMARY: Prohibits discrimination in the application for,
issuance of, or pricing of insurance policies covering real
property designed for human habitation. Specifically, this
bill:
1)Prohibits an insurer from using any of the following
characteristics as the basis for different treatment of
otherwise comparable risks, for purposes of whether to accept
an application for, issue a policy of, or cancel a policy of,
insurance on property designed for human habitation:
a) The method that the property is financed;
b) The level or source of income of the individual or group
of people residing or intending to reside upon the
property; or
c) The receipt of assistance from either the federal or
state government, or from a local public entity, as
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defined, including "Section 8" vouchers, by an individual
or group of people residing or intending to reside upon the
property.
2)Prohibits an insurer from using any of these characteristics
as a condition or risk for which a higher rate, premium or
charge may be imposed by the insurer for that insurance.
3)Prohibits an application for this insurance, or a report
furnished by an insurer for use in determining insurability,
to have any identification, or requirement to provide the
identification, of these characteristics.
EXISTING LAW:
1)Prohibits an insurer from using sex, race, color, religion,
ancestry, national origin, disability, medical condition,
genetic information, marital status, or sexual orientation
under conditions less favorable to the insured than in other
comparable cases, for purposes of accepting applications for,
issuing policies of, canceling policies of property or
commercial insurance.
2)Prohibits using any of these characteristics as a condition or
risk to justify charging a policyholder a higher rate,
premium, or charge for the insurance.
FISCAL EFFECT: Undetermined
COMMENTS:
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1)Purpose. According to the author, "[s]elect insurance
providers are denying renewals of policies on a landlord
having tenants who are receiving Section 8 vouchers. This
practice is discriminatory . . . and should be remedied." The
bill, as amended, prohibits using Section 8 status, and
related characteristics associated with low-income housing, as
a basis to decide whether to accept an application for
insurance, issue or renew the policy, or price the policy.
2)Background. Unlike the highly regulated private passenger
automobile market, there are relatively few limitations on
insurer underwriting and pricing in the property insurance
market. The traditional protected classes listed in the Unruh
Civil Rights Act, for example, are prohibited bases of
property insurance discrimination, but few other specific
rules exist. Insurers use a myriad of characteristics
associated with a property to evaluate the level of risk
associated with insuring the property, including location,
structural condition, age, design, height, management,
ownership, maintenance, hazards to tenants and guests on the
property, occupancy rate, rent, tenants and tenant mix,
presence of safety devices such as fire and smoke alarms,
lighting, sports facilities or swimming pools, among other
risk factors. As an element of "tenant mix" some insurers
look at the presence of subsidized tenants as one of the
factors that contribute to an evaluation of the property's
underwriting risk.
3)"Section 8". Under federal law, qualified low-income renters
can obtain a voucher to assist in paying rent. For the
landlord, a Section 8 renter provides a strong assurance that
rent will be paid in a timely manner. There are state and
local government programs that proponents point to as similar
in purpose, and these programs have been included in the bill
as well.
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4)Subsidized financing. There are programs that provide
subsidized financing for multi-unit residential property,
conditioned on the owner/borrower renting the units to
qualified tenants as below-market rent. Because these
programs serve the same purpose as Section 8 vouchers, and the
landlord-tenant relationship is similar to the Section 8
relationship, the bill includes this characteristic of a
residential property in the list of characteristics that
insurers cannot use as a basis to distinguish among otherwise
comparable risks.
5)Fairness vs. underwriting flexibility. The fundamental
question posed by the bill is whether it is fair to treat a
property owner/landlord differently from a comparably situated
property owner/landlord because the former chooses to rent to
tenants who have availed themselves of legitimate government
benefits. Proponents point to problems associated with rising
rents in California's urban areas, and have lauded the
landlords who have chosen to make the efforts to address some
of the state's most vexing housing issues. Insurers respond
that there are many companies in the property insurance
market, and that ample options are available. Some companies
specialize in small multi-unit buildings, some specialize in
large complexes, others specialize in low-income properties,
and each has expertise in the various types of properties it
has chosen to insure. Restrictions on these companies'
ability to evaluate the type of property that comes within its
respective underwriting goals can eliminate flexibility, skew
underwriting, and result in market dislocations.
REGISTERED SUPPORT / OPPOSITION:
Support
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Housing California (Co-sponsor)
California Coalition for Rural Housing (Co-sponsor)
Western Center on Law and Poverty (Co-sponsor)
California Apartment Association
Community Housing Works (CHW)
Corporation for Supportive Housing (CSH)
Downtown Women's Center (DWC)
First Place for Youth
Housing Leadership Council of San Mateo County
LINC Housing
Mutual Housing California Project Sentinel
Northern Circle Indian Housing Authority
PATH (People Assisting the Homeless)
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PATH Ventures
Rural Community Assistance Corporation (RCAC)
Sacramento Homeless Organizing Committee
SKID ROW HOUSING TRUST
Opposition
ACIC
American Insurance Association
National Association of Mutual Insurance Companies
Pacific Association of Domestic Insurance Companies
Personal Insurance Federation of California
Analysis Prepared by:Mark Rakich / INS. / (916) 319-2086
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