CLAIM CAN CANCEL POLICY CONSUMER GROUP BACKS GARAMENDI'S DISCLOSURE RULES.

Byline: Brent Hopkins Staff Writer

SANTA MONICA - Using your homeowners insurance shouldn't set you up for future hardship, consumer advocates charged Wednesday, as they spoke out in support of proposed changes to state insurance regulations.

Insurance Commissioner John Garamendi has been stumping for months to raise opposition to insurers' practice of not renewing homeowners' policies after one claim, something he calls ``use it and lose it.'' After losing a bid to ban the practice outright, he's now pushing regulations that will require companies to notify policyholders up front about whether a claim could cost them their future coverage.

In advance of a public hearing in San Francisco today, the Foundation for Taxpayer and Consumer Rights came out in support of Garamendi's efforts, saying it would shed light on a little known aspect of the insurance industry.

``It's amazing - policy holders are shocked, just shocked,'' said Greg Good, a consumer advocate for the Santa Monica-based nonprofit group. ``It's outright deception and it's wrong and unfair. At the very least, consumers should be aware of what they're buying.''

Under the proposed rules, insurers would have to inform customers how filing a claim will affect future coverage, keep records of how and why policies are not renewed and prove that they've disclosed the information in advance. Garamendi says the intent is to raise awareness of the practice so consumers can seek out insurers who are less likely to drop them, using the free market to draw business away from companies that engage in the practice.

The insurance industry's various trade groups have strictly opposed such efforts in the past, saying they're unnecessary and go beyond the insurance commissioner's jurisdiction. Additionally, they claim that the added cost of such regulations would increase costs on companies, resulting in higher premiums for all homeowners.

``Unfortunately, every time Insurance Commissioner Garamendi proposes any kind of reform, whether it's by regulation or through the Legislature, you hear the same complaints,'' said Gary Gartner, a spokesman for the Department of Insurance. ``You can only cry wolf so many times that companies are going to be forced out of state and people can't afford insurance. They always say the same thing.''

The two sides sharply disagree on the breadth of the practice. The Insurance Information Network of California says it only happens when homeowners file unnecessary claims, resulting in a cancellation of less than 1 percent of all policies annually. Garamendi notes that while that's only a small percentage, the figure works out to about 50,000 policyholders losing coverage each year.

``There isn't a clear formation of one claim in three years or two in four years and you won't get renewed,'' said Pete Moraga, a spokesman for IINC. ``They look at every claim to see what to do.''

Brent Hopkins, [phone]

brent.hopkins(at)dailynews.com