SB 336, as introduced, Roth. Earthquake insurance: rates.
Existing law establishes the California Earthquake Authority and authorizes the authority to transact insurance in this state as necessary to sell policies of basic residential earthquake insurance. Existing law requires that the rates established by the authority be actuarially sound so as to not be excessive, inadequate, or unfairly discriminatory. Existing law provides that policyholders who have retrofitted their homes to withstand earthquake shake damage according to standards and to the extent set by the governing board of the authority shall enjoy a premium discount or credit of 5 percent on the authority-issued policy of residential earthquake coverage. Existing law authorizes the board to approve a premium discount or credit above 5 percent if the discount or credit is determined by the authority to be actuarially sound.
This bill would instead provide that those policyholders shall enjoy a premium discount or credit of at least 5 percent on the authority-issued policy of residential earthquake coverage. The bill would also make nonsubstantive, technical changes.
Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 10089.40 of the Insurance Code is
2amended to read:
(a) Rates established by the authority shall be
4actuarially sound so as to not be excessive, inadequate, or unfairly
5discriminatory. Rates shall be established based on the best
6available scientific information for assessing the risk of earthquake
7frequency, severity, and loss. Rates shall be equivalent for
8equivalent risks. Factors the board shall consider in adopting rates
9include, but are not limited to, the following:
10(1) Location of the insured property and its proximity to
11earthquake faults and to other geological factors that affect the
12risk of earthquake or damage from earthquake.
13(2) The soil type on which the insured dwelling is built.
14(3) Construction type and features of the insured dwelling.
15(4) Age of the insured dwelling.
16(5) The presence of earthquake hazard reduction factors,
17including those set forth in subdivision (a) of Section 10089.2.
18(b) (1) If scientific information from geologists, seismologists,
19or similar experts that assesses the frequency or severity of risk of
20earthquake is considered in setting rates or in arriving at the
21modeling assumptions upon which those rates are based, the
22information may be used to establish differentials among risks
23only if the information, assumptions, and methodology used are
24consistent with the available geophysical data and the state of the
25art of scientific knowledge within the scientific community.
26(2) Scientific information from geologists, seismologists, or
27similar experts shall not be conclusive to support the establishment
28of different rates between the most populous rating territories in
29the northern and southern regions of the state unless that
30information, as analyzed by experts such as the United States
31Geological Survey, the Californiabegin delete Division of Mines and Geology,end delete
32begin insert Geological Survey,end insert and experts in the scientific or academic
33community, clearly shows a higher risk of earthquake frequency,
34severity, or loss between those most populous rating territories to
35support those differences.
36(3) It is not the intent of the Legislature in adopting this
37subdivision to mandate a uniform
statewide flat rate for California
38Earthquake Authority policies.
P3 1(c) The classification system established by the board shall not
2be adjusted or tempered in any way to provide rates lower than
3are justified for classifications that present a high risk of loss or
4higher than are justified for classifications that present a low risk
5of loss.
6(d) Policyholders who have retrofitted their homes to withstand
7earthquake shake damage according to standards and to the extent
8set by the board shall enjoy a premium discount or credit ofbegin insert at
9leastend insert 5 percent on the authority-issued policy of residential
10earthquake coverage. For residential dwellings, thebegin delete 5-percentend delete
11 discount shall be applicable if the
dwelling, at a minimum, meets
12the following requirements: the dwelling was built prior to 1979,
13is tied to the foundation, has cripple walls braced with plywood
14or its equivalent, and the water heater is secured to the building
15frame. For mobilehomes, thebegin delete 5-percentend delete discount shall be applicable
16if the mobilehome, at a minimum, is reinforced by an earthquake
17resistant bracing system certified by the Department of Housing
18and Community Development. The board may approve a premium
19discount or credit above 5begin delete percent, as long asend deletebegin insert percent ifend insert the discount
20or credit is determinedbegin insert by the authority to beend insert actuariallybegin delete sound by begin insert
sound.end insert
21the authority.end delete
22(e) All rates shall be approved by the commissioner prior to
23their use.
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