A recently-filed initiative seeks to further regulate broker’s fees and certain insurer expenses in California. The initiative, assuming it surmounts certain legal hurdles, could qualify for California’s November 2010 ballot. If so, industry might want to be making plans to educate the voting public on the sufficiency of the current regulatory framework, the redundancy of the proposed changes, and potential adverse impact on consumers.
The initiative would amend California’s Insurance Code to limit insurers to recouping their direct cost of collecting installment payments. It would also prohibit many brokers from collecting any commissioner in certain transactions in which they serve as a broker, and specifically state that broker fees must be fair, reasonable, and not unfairly discriminatory. The initiative would define as premium any amount paid by a policyholder, thereby subjecting all such charges to the review and approval of the Department to the extent, if any, they are not already subject to such review. It would also prohibit using the absence of prior insurance as a criterion for insurance rates or insurability. Finally, for determining automobile insurance rates, premiums, or insurability, or for calculating a discount or surcharge, an insurer would be prohibited from including an applicant’s claims experience except as expressly permitted with respect to a motorist’s prior driving safety record.
To qualify the statutory initiative, the proponent would need to gather 433,971 valid signatures from registered California voters. Before that process begins, however, the Attorney General must first review the initiative and prepare a title and summary within a series of specified time periods. Once the Attorney General sends the finalized title and summary to the proponents, the proponent would have up to 150 days to collect the necessary signatures. As a practical matter, this process could be completed in time to put the initiative on California's November 2010 ballot.