California’s Insurance Commissioner, Ricardo Lara, has unveiled a set of proposed insurance regulations that have sparked significant criticism from consumer advocacy groups. The proposals, aimed at modifying the insurance rate-review process, are intended to facilitate the writing of new policies and prevent cancellations, particularly in areas prone to wildfires. However, critics, including the advocacy organization Consumer Watchdog, have labeled the changes as retaliatory and potentially detrimental to consumers.
The proposed alterations, announced last week, seek to streamline the review process for insurance rates. Lara emphasized that the goal is to enhance efficiency and productivity within the insurance sector. Yet, opponents argue that the changes are a direct response to ongoing disputes with Consumer Watchdog, which has been a vocal critic of the insurance department.
Jamie Court, president of Consumer Watchdog and a key architect of Proposition 103, expressed strong disapproval, stating, “This is Trumpian.” He accused Lara of using regulatory power to target dissenters rather than focusing on consumer protection. Consumer Watchdog has been an active participant in challenging insurance rate increases, often intervening in rate requests to advocate for fair pricing.
Under the proposed changes, there would be new timelines and guidelines for intervenors—individuals or organizations that challenge insurer rate requests—and administrative law judges. Additionally, the requirements for what constitutes a “substantial contribution” for compensating intervenors would be tightened. Critics assert that these adjustments will hinder the ability of consumer advocates to effectively challenge rate increases, potentially leading to unjustified premium hikes.
The timing of Lara’s proposal, with his term set to expire next year, has led to allegations of personal vendetta. Court indicated that Consumer Watchdog is contemplating legal action to contest the proposed regulations, asserting that they will undermine the organization’s efforts to protect consumers from excessive insurance costs.
Michael Soller, spokesperson for the California Department of Insurance, refrained from addressing Court’s accusations directly but affirmed that Consumer Watchdog will have the opportunity to voice its concerns during the public comment period, which begins on October 3, 2023. A formal hearing on the proposal is scheduled for November 20, 2023.
The proposals have garnered support from the insurance industry, notably from the American Property Casualty Insurance Association. Denni Ritter, the association’s vice president for state government relations, argued that the current intervenor process is unique in the nation and contributes to delays in rate approvals, ultimately raising costs for consumers. Ritter contended that improving this process is essential to addressing California’s ongoing insurance crisis.
Despite the support from some industry representatives, Consumer Watchdog maintains that it has saved Californians over $6 billion in home and auto insurance premiums since 2002. The organization has received $14.2 million in compensation for its work during that period, which is approximately 25 cents for every $100 saved for consumers. Court emphasized that these funds are critical for hiring experts who can effectively challenge the powerful insurance sector.
California’s housing costs are among the highest in the nation, and while it ranks in the middle for average annual homeowners’ insurance rates, the state is grappling with increasing risks associated with climate change. Robert Herrell, executive director of the Consumer Federation of California, acknowledged the importance of intervenors in keeping premiums in check. He expressed concern that stricter requirements would discourage participation, leading to higher costs for consumers.
In response to claims of delays caused by intervenors, Consumer Watchdog defended its track record. The organization stated that the timelines for rate approvals are nearly identical whether or not intervenors participate.
As discussions surrounding these proposed regulations continue, the outcome may significantly impact California’s insurance landscape, affecting both consumers and insurers alike.