BILL ANALYSIS                                                                                                                                                                                                    



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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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