Election-Year Politics Dominate California, Association Says

Ending a moderately quiet year for insurers and without any major battles, legislators adjourned the 2005-06 session last week, said the American Insurance Association (AIA). Chipping away at the workers’ compensation reforms and mandatory community-oriented investment reporting were among the issues insurers faced.

“Insurers had more regulatory than legislative battles in 2006,” said Steve Suchil, AIA assistant vice president, Western Region. “Election year politics likely prompted many controversial issues to be set aside and tabled this year.”

“After several contentious years, personal lines issues were not a major focus of legislation this year,” said Janine Gibford, AIA assistant vice president, Western Region. “A last ditch effort to approve a package of flood protection bills was pushed by the Senate, but rejected by the Assembly. We anticipate that legislators will consider flood liability and land use issues again during the 2007 session.”

“As expected, the California Applicant Attorneys Association jammed through a last minute bill (SB 815) to unwind the historic workers’ compensation reforms enacted in 2004,” said Suchil. “Gutting and amending a bill in the final week of the session did not allow for thoughtful analysis or consideration of actual system costs.”

SB 815 would increase permanent disability benefits by increasing the number of benefit weeks for each level of disability for injuries occurring on or after Jan. 1, 2007. This bill would be phased-in over three years.

“It is premature to make changes to the permanent disability system,” said Suchil. “The Division of Workers’ Compensation is working on a large survey of ratings made under the new system. This review also will analyze return-to-work rates so we will have an accurate and complete understanding of how the reforms have impacted the system. It is short sighted to make changes before that study is complete,” Suchil stated. “AIA will join the business community, along with cities and counties to urge Gov. Schwarzenegger to veto this bill.”

“Legislators also approved a measure requiring insurers to report community-oriented investments,” said Suchil. “AB 925 is unnecessary because the California Department of Insurance can already obtain this information. AB 925 creates new reporting burdens for companies, and its reporting provisions don’t reflect the full panoply of beneficial investments insurers make in California, including the $23 billion the industry invests in municipal bonds.”

“Highway safety advocates struck a victory with the passage of legislation to mandate hands-free cell phone use for California drivers,” said Gibford. “AB 1613 will fine first-time offenders $20 for using a hand-held phone while driving and $50 for subsequent offenses.”

Source: AIA