BILL ANALYSIS Ó
AB 447
Page 1
ASSEMBLY THIRD READING
AB
447 (Maienschein)
As Amended April 29, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+---------------------+---------------------|
|Insurance |11-1 |Daly, Travis Allen, |Gatto |
| | |Calderon, Cooley, | |
| | |Cooper, Dababneh, | |
| | |Frazier, Gonzalez, | |
| | |Grove, Mayes, | |
| | |Rodriguez | |
| | | | |
| | | | |
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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,
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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 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.
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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: Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS:
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." This 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
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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 this bill as
well.
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, this 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 this 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
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eliminate flexibility, skew underwriting, and result in market
dislocations.
Analysis Prepared by:
Mark Rakich / INS. / (916) 319-2086 FN: 0000359