California to fast track rate review process in bid to improve insurance crisis

California Insurance Commissioner Ricardo Lara released a statement Friday on his latest administrative action addressing the state’s insurance crisis.

Why this matters: Commissioner Lara today issued a Bulletin implementing rate review reforms aimed at stabilizing the state’s insurance marketplace. This accomplishes reforms that were included in budget trailer language that Governor Newsom introduced in May, and which were first proposed by Commissioner Lara last year as part of his Sustainable Insurance Strategy.

Commissioner Lara issued today’s Bulletin under his existing Proposition 103 authority to help the Department conduct a rigorous and transparent review of rate change applications within the current 60-day timeline prescribed under Prop. 103 more than 30 years ago.

At the core of the Bulletin, the Department seeks to increase the transparency and speed of rate change application review and approval times in ways that are beneficial to consumers, the Department, and the insurance market. Also, as part of this reform, the Department will create a “data reconciliation tool” as a check that insurance companies must complete upon submitting their rate applications to the Department for review.

The Commissioner’s action helps create certainty in the insurance marketplace and holds all parties accountable for meeting the requirements of Prop. 103. Those parties include insurance companies who are responsible for requesting the rates they need to pay future claims and providing complete data in support of their rate requests, the Department of Insurance which conducts a thorough rate review of each filing to protect consumers and ensure a competitive insurance marketplace, and intervenor groups who want to participate in the review of rate filings.

What Commissioner Lara is saying:

“Consumers benefit from a thorough and transparent rate review with more insurance products and greater availability of coverage. Today, I am strengthening my Department’s ability to enforce timelines set more than 30 years ago under Proposition 103. Reducing unnecessary delays is critical to getting our state’s insurance marketplace back on track.

“Consumers are hurting, businesses continue to lose coverage, wildfires are ravaging our state -- and we do not have the luxury of time. I am ultimately responsible for fixing this crisis, and I am moving forward to meet my commitment to complete long-needed reforms this year.

“I expect more from insurance companies in the form of complete rate filings. I expect intervenors to abide by the rules and not duplicate the work of my Department’s experts. And I am putting the same expectations on my Department to do a transparent and thorough review within the timelines laid out for decades in Prop. 103. I am holding everyone in the process accountable.

“My action gives insurance companies greater certainty on their pending filings so we can restore a competitive insurance marketplace and close protection gaps. Above all, my action strengthens our review process, which is integral to my ongoing reforms. Let me be clear: The Department of Insurance is the public’s check on rates and market solvency.

“I appreciate Governor Newsom’s on-going partnership and the Legislature’s continued commitment to providing the support and resources my Department needs to implement this transformational, lasting change.”

What Gov. Gavin Newsom is saying:

“We’ve been working closely with the Insurance Commissioner and fully support these actions to modernize the rate application processes, consistent with the timelines outlined in Prop 103. It’s part of the state’s larger package of solutions to ensure Californians have adequate access to insurance and combat market exodus that hurts consumers. These are the actions necessary to address California’s insurance crisis.”