Consumer groups blast plan to limit review of future California rate requests

California Insurance Commissioner Ricardo Lara has a plan to streamline rate reviews in light of State Farm's experience following the devastating wildfires earlier this year.

Critics claim the commissioner is just exploiting the situation to silence consumer groups.

Lara's proposed changes, announced last month, have to do with Proposition 103, approved by the voters in 1988. Among other things, Prop 103 permits the public to review insurer rate hike requests and to receive reimbursement from those same insurers for the costs of doing so.

Needless to say, the insurance industry is not a fan of the measure. Lara claims his proposed reforms will "protect consumers from hidden fees, establish clear guidelines for intervenor participation, and strengthen oversight of the administrative hearing system to prevent unnecessary delays."

The current intervenor system has not been updated since 2006, Lara noted in a news release. The commissioner claimed that the process is "dominated by a small number of recurring participants, and can lead to unnecessary delays and costs for consumers and taxpayers."

The news release links to a document showing that Consumer Watchdog, a frequent critic of Lara's office, as the recipient in 24 of 26 recent rate reviews, with CW receiving all but $47,500 of the $1.47 million in payments.

The release stated that the reforms will clarify "how intervenor participation is objectively evaluated and compensated, ensuring that consumers, policyholders, and taxpayers only fund substantial contributions to the public interest. Additionally, the regulations will make the process more open and accessible, preventing any single group from monopolizing the intervenor process."

Consumer groups were quick to denounce the proposal.

“Lara has no reason to change the intervenor compensation standard except to get insurance companies unjustified rate hikes quicker and as revenge against his critics,” countered Jamie Court, president of Consumer Watchdog.

Participation by consumer advocates has produced "tangible benefits," the group claimed. When Consumer Watchdog challenged State Farm General’s emergency 22% rate hike request following January wildfires, the insurer reduced its request to 17%, saving consumers $166 million.

Between January 2022 and October 2023, consumer interventions helped ensure insurers only received 62% of requested home insurance rate increases and 71% of auto insurance rate increases, protecting millions of Californians from unjustified costs, the group claimed.

California continues to battle to stabilize its property insurance market.

Key reform details

Prop 103 gives Lara authority over rate hike requests. His plan contains these elements:

• Clarifies the “substantial contribution” standard for intervenor compensation to promote meaningful participation.
• Requires public reporting on intervenor activity and compensation to increase transparency.
• Establishes firm timelines and responsibilities for administrative law judges, including mandatory 30-day status updates on pending cases to the public, so the public is informed of progress being made on these cases.
• Requires the insurance department to post public documents online – including hearing calendars and decisions – making them accessible to all Californians and replacing outdated physical viewing rooms.

“Consumers are frustrated with hidden fees, especially when insurance costs are already exorbitant and unaffordable for many. California’s insurance crisis demands tough decisions and accountability from everyone involved – insurance companies, intervenors, and the Department itself,” Lara said.

The latest proposed reforms are part of Lara’s broader Sustainable Insurance Strategy. Since launching the strategy in September 2023, the department proposed new regulations that require insurance companies to write and maintain policies in wildfire-affected areas if they incorporate catastrophe modeling and reinsurance costs in their rate filings.

Several major insurance companies – including Mercury, CSAA, Pacific Specialty, Allstate, and Farmers – have announced plans to expand or resume writing new policies in California.

'Weaken public oversight'

Advocates warned that the changes would "weaken public oversight, giving insurers more leeway to raise rates without accountability and reducing protections" for Californians.

"Californians need stronger protections, not fewer opportunities to hold insurers accountable," said Lizzy Price, spokesperson for the Insurance Fairness Project. "Consumer groups play a critical role in public oversight, preventing corruption, and advocating for homeowners against predatory practices. Everyday homeowners deserve a say in the process. Insurance is already an opaque industry, and this proposal would shroud even more of the decision-making process in secrecy.”

A public hearing on the proposed regulations will be held on Nov. 20.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.