BILL ANALYSIS                                                                                                                                                                                                    



                                                                       AB 447


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          ASSEMBLY THIRD READING


          AB  
          447 (Maienschein)


          As Amended  June 2, 2015


          Majority vote


           ------------------------------------------------------------------- 
          |Committee       |Votes |Ayes                |Noes                  |
          |                |      |                    |                      |
          |                |      |                    |                      |
          |----------------+------+--------------------+----------------------|
          |Insurance       |11-1  |Daly, Travis Allen, |Gatto                 |
          |                |      |Calderon, Cooley,   |                      |
          |                |      |Cooper, Dababneh,   |                      |
          |                |      |Frazier, Gonzalez,  |                      |
          |                |      |Grove, Mayes,       |                      |
          |                |      |Rodriguez           |                      |
          |                |      |                    |                      |
          |                |      |                    |                      |
           ------------------------------------------------------------------- 


          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 level or source of income of the individual or group  
               of tenants residing or intending to reside upon the property;  
               or


             b)   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


          4)Provides that, with respect to mixed use commercial/residential  
            property, the restrictions, above, do not apply to commercial  
            tenants.


          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  








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            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:  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,  








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            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 this bill as  
            well.


          4)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  
            eliminate flexibility, skew underwriting, and result in market  
            dislocations.












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          Analysis Prepared by:                                               
          Mark Rakich / INS. / (916) 319-2086  FN: 0000856