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The following regulatory information may be of interest to attorneys practicing insurance law.  This information is current as of July 19, 2022.  

Changes to HIV Underwriting

On June 20, 2022, Commissioner Lara issued a notice regarding changes to existing law governing underwriting life and disability income insurance for individuals with HIV.  Currently, insurers are permitted to decline an application for life of disability income insurance on the basis of a positive HIV test requested by the insurer.  As a result of the Equal Insurance HIV Act, which was signed into law in 2020 and subsequent amendments adopted in 2021, such declinations will be prohibited effective January 1, 2023.  However, insurers will be permitted to use HIV status in determining applicable rates, coverage, and the underwriting process, provided that certain requirements are met.  Insurers should familiarize themselves with the new requirements and take steps to ensure their underwriting is compliant by January 1, 2023.

Wildfire Moratorium

On July 12, 2022, The CDI issued Bulletin 2022-6 “Mandatory Moratorium on Cancellations and Non-Renewals of Policies of Residential Property Insurance After the Declaration of a State of Emergency” outlining the ZIP codes to which a moratorium on cancellations and nonrenewals applies under California Insurance Code section 675.1 as a result of a the Allsal and Colorado fires.  As a reminder, section 675.1 provides as follows:

An insurer shall not cancel or refuse to renew a policy of residential property insurance for a property located in any ZIP Code within or adjacent to the fire perimeter, for one year after the declaration of a state of emergency as defined in Section 8558 of the Government Code, based solely on the fact that the insured structure is located in an area in which a wildfire has occurred. This prohibition applies to all policies of residential property insurance in effect at the time of the declared emergency.

Insurers should note the affected ZIP codes to ensure compliance.

Export List

On June 24, 2022, the CDI issued Bulletin 2022-4, reporting the results of the most recent hearing regarding the surplus lines Export List.  The Export List, which is authorized under California Insurance Code section 1763.1 is a list of coverages found to be unavailable in the admitted market or that the type of coverage is for new, innovative products for which a reasonable or adequate flea market among admitted insurers has not had time to develop and therefore eligible for placement in the surplus lines market.  Based on the hearing and public comments, the CDI did not make any changes to the Export List.  

Racial Bias and Unfair Discrimination

On June 30, 2022, the CDI issued Bulletin 2022-5 titled “Allegations of Racial Bias and Unfair Discrimination in Marketing, Rating, Underwriting, and Claims Practices by the Insurance Industry.”  The Bulletin states that it is a reminder to insurers of non-discrimination requirements under California law.  It also notes that the CDI is investigating allegations of potential bias, including: 

  • Allegations that insurers are unfairly flagging claims from certain inner-city ZIP Codes and referring these claims to their Special Investigative Unit (or SIU). Many of these claims are then denied or the claimant is offered unreasonably low settlements, which may intentionally or unintentionally result in a disproportionate number of unfair claims delays and denials to claimants from socioeconomically disadvantaged communities.
  • Allegations that insurers are using biometric data obtained through facial recognition technology to influence whether to pay or deny claims.
  • Allegations that insurers, licensees, and insurance marketing institutions are collecting biometric and other personal information unrelated to risk in the marketing and underwriting of insurance policies. The use of these technologies and reliance on algorithms to decide whether to market and underwrite insurance products for a particular population creates a risk that eligibility could be denied based on race, gender, disability, or other protected classes.

The Bulletin articulates the position that “Big Data” has the potential to reduce transparency and result in bias or unfair discrimination.  The Bulletin advises insurers to conduct their own due diligence to ensure that data tools they use comply with applicable law and train their staff with respect to compliance with law.

This e-Bulletin was prepared by Nicole Zayac, Of Counsel in the San Francisco office of Willkie Farr & Gallagher LLP. Ms. Zayac is the Chair of the Insurance Law Standing Committee of the Business Law Section of the California Lawyers Association.

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