Here’s the first step in California’s quest to fix its home insurance crisis

Lara last fall announced sweeping changes to the state’s insurance regulations as homeowners in wildfire-stricken California struggled with skyrocketing premiums and canceled policies. The commissioner’s office is seeking public comment on the proposed regulatory changes ahead of a planned public hearing March 26.

“By updating submission procedures and clarifying requirements for insurance companies, we aim to eliminate confusion, reduce delays, and enhance public participation in the rate-making process,” Lara said in a statement. “This will help our department’s experts make sure that no policyholder is paying more than is required.”

Insurers have cited lengthening delays in getting approvals for rate increases as among three key needed reforms in a state where companies have to limit their coverage offerings as they recover from losses after a wave of claims that followed recent wildfires. They also are calling on the state to allow computerized catastrophe models to set rates and to bill consumers for the costs of reinsurance, insurance for insurers.

The commissioner’s office said the state’s rate filing rules, established by voter-approved Proposition 103 in 1988, “lack clarity and fail to specify the exact materials and information required in a complete rate filing application given the change in times and increased complexity of filings.”

“This ambiguity can lead to confusion among insurance companies and delays in the review process, ultimately impacting consumers’ access to fair and appropriate insurance rates and insurers’ level of certainty on their filings and the review process,” the department said in a Feb. 9 news statement.

Consumer advocates, who sometimes intervene and challenge requested rate hikes on behalf of consumers to argue they’re excessive, said insurers themselves often are to blame for delays, a concern they raised years ago. The regulations call for rate approval within 60 days, or 180 days if a consumer intervenes, but insurers often agree to department requests for more time.

Consumer Watchdog, whose founder wrote Prop 103, said in a report this month defending the regulations and arguing they saved consumers $5.5 billion, that eight of the 35 rate requests the group challenged since 2019 “were significantly delayed by the insurance company applicant, by up to 19 months.”

The report said insurers would “fail to file all the initial data required” for their application, “refuse to cooperate with requests for additional information” and “update their filings to provide new information, which typically resets the process” for review.

“They profit enormously from playing a shell game with the department,” said Consumer Watchdog founder Harvey Rosenfield. The group’s report also said the state Department of Insurance adds months of delay in scheduling conferences on rate review.

The proposed rule changes would provide insurers clearer instructions about what must be submitted with a complete rate application, so the Insurance Commissioner may assess whether requested rates are appropriate and not excessive, inadequate, or unfairly discriminatory.

The department is accepting comments by mail or online until the March 26 public hearing.

Insurers are also unhappy with the proposed rules. Jeffrey L. Brewer, a spokesperson for the American Property Casualty Insurance Association, representing the industry, said the proposed regulations “fall short of providing meaningful solutions to the insurance crisis and would actually make matters worse.”

“Rather than streamlining the rate approval process — which is critical to restoring balance to the market — the proposed regulations will cause further delays by adding more bureaucracy, red tape, uncertainty and open-ended requirements to an already complex process,” Brewer said. “We urge the Department of Insurance to focus on real reforms that will truly start to fix our broken market, like speeding up regulatory reviews, allowing catastrophic modeling and authorizing the use of reinsurance.”

Lara said in testimony to the Senate Insurance Committee last month that insurance providers must be part of the solution in streamlining the process for setting new rates.

“We don’t have the luxury of time for a lengthy back and forth about incomplete applications,” Lara said. “We expect insurance companies to provide the department with the complete information up front needed for us to make a determination on the requested rate.”

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