BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 336|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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CONSENT
Bill No: SB 336
Author: Roth (D)
Introduced:2/23/15
Vote: 21
SENATE INSURANCE COMMITTEE: 7-0, 4/22/15
AYES: Roth, Gaines, Berryhill, Hernandez, Liu, Mitchell,
Wieckowski
NO VOTE RECORDED: Hall
SUBJECT: Earthquake insurance: rates
SOURCE: Author
DIGEST: This bill recasts the premium discount or credit for
seismic retrofitting on California Earthquake Authority (CEA)
policies to require that the discount or credit be at least 5%.
ANALYSIS:
Existing law:
1) Establishes the CEA, a privately financed, publicly managed
entity to sell only earthquake insurance.
2) Requires rates charged by the CEA to be actuarially sound
so as not to be excessive, inadequate or unfairly
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discriminatory.
3) Establishes factors to be included in rates, including, but
not limited to the location of the insured property and its
proximity to earthquake faults, the soil type on which the
dwelling is built, the construction type and features of the
dwelling, the age of the dwelling, and the presence of
earthquake hazard reduction factors.
4) Provides that CEA policyholders who have retrofitted their
homes to withstand earthquake shake damage according to
standards set by the CEA are entitled to a 5% premium
discount or credit.
5) Allows the CEA Board to approve a premium discount or
credit above 5% as long as it is actuarially sound.
This bill recasts the premium discount for seismic retrofitting
on CEA policies to require that the discount or credit be at
least 5%.
Background
According to data from the California Department of Insurance,
fewer than11% of homeowners in California purchase earthquake
insurance. The CEA currently writes about 73% of all
residential earthquake insurance policies in the state.
Earthquake insurance must be offered to all homeowners who
purchase homeowners' insurance but there is no requirement for
the homeowner to purchase it. Part of the reason for the low
take-up rate for earthquake insurance is its cost and high
deductibles. Providing discounted insurance to homeowners who
retrofit their homes is fiscally sound, may incentivize
homeowners to purchase earthquake insurance, and reduces the
future impact of a major earthquake.
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Existing law provides that CEA policyholders who have
retrofitted their homes according to standards established by
the CEA shall get a premium discount or credit of 5%. The CEA
Board may approve a premium or discount above 5% as long as the
discount or credit is determined to be actuarially sound. The
CEA has undertaken research to determine the actuarial impact of
retrofitting, and should offer the largest discounts available
that remain actuarially sound.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified4/22/15)
Community Associations Institute
OPPOSITION: (Verified4/22/15)
None received
ARGUMENTS IN SUPPORT: According to the author, everything
possible should be done to encourage homeowners to both retrofit
their homes and protect themselves against a major earthquake by
purchasing earthquake insurance. Those who do choose to reduce
future damage by retrofitting their homes should get the full
benefit of the reduction in risk to their homes through lower
earthquake insurance premiums.
Prepared by:Erin Ryan / INS. / (916) 651-4110
4/24/15 15:45:05
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