California’s Insurance Commissioner, Ricardo Lara, has introduced a set of new insurance regulations that have sparked significant backlash from consumer advocacy groups. The proposed changes, aimed at reforming the insurance rate-review process, are being criticized as retaliatory by Consumer Watchdog, a prominent nonprofit organization known for its advocacy in the insurance sector.
The policy modifications are intended to encourage insurance companies to continue writing new policies while discouraging them from canceling existing ones, particularly in areas prone to wildfires. Lara’s approach is framed as an effort to streamline the insurance rate-review process, but critics argue that it will ultimately facilitate higher premiums for consumers.
Jamie Court, president of Consumer Watchdog, described the proposal as “Trumpian,” suggesting that it is an act of revenge against the organization for its vocal criticism of the insurance department. Court’s group has a history of intervening in rate requests, a process that allows public members to challenge insurers’ proposed rate increases.
Among the key changes proposed by Lara are new timelines and guidelines for intervenors and administrative law judges, which many believe could hinder public participation in rate reviews. Consumer Watchdog and other advocacy organizations assert that these adjustments will complicate the process for intervenors—who often require compensation for expert assistance—leading to fewer challenges against rate hikes. This could result in unjustifiable premium increases, contrary to the intentions behind Lara’s proposal.
Court accused Lara of “exacting his revenge,” as his term as commissioner is set to expire next year. He indicated that Consumer Watchdog may consider legal action in response to the proposed rules. A spokesperson for the California Department of Insurance, Michael Soller, did not engage with Court’s comments but noted that Consumer Watchdog will have the opportunity to express its concerns during the public comment period starting on October 3, 2023. A public hearing on the proposal is scheduled for November 20, 2023.
Support for Lara’s proposal comes from the insurance industry, particularly from the American Property Casualty Insurance Association. Denni Ritter, the association’s vice president for state government relations, stated that the current intervenor process is “broken” and contributes to the ongoing insurance crisis by causing delays in rate approvals and increasing costs for consumers.
Critics of Consumer Watchdog have raised questions about its motivations, alleging that the organization has used its influence to benefit its leadership financially. Nevertheless, Consumer Watchdog asserts that its efforts have saved Californians over $6 billion in home and auto insurance premiums from 2002 to 2024. The group claims to have received $14.2 million in compensation under the intervenor system, equating to approximately 25 cents for every $100 saved for consumers.
While California’s housing costs are among the highest in the United States, its average annual homeowners’ insurance rates are more moderate in comparison. Nonetheless, the state faces significant challenges related to climate change, particularly concerning the increasing frequency and severity of wildfires.
Robert Herrell, executive director of the Consumer Federation of California, emphasized the importance of intervenors in stabilizing insurance premiums. He acknowledged that, despite some differences with Consumer Watchdog, their work has been instrumental in protecting consumers from excessive rate increases. He expressed concern that stricter requirements for intervenors would discourage public participation in challenging rate requests, ultimately leading to higher premiums.
Soller contended that Lara’s proposal aims to enhance transparency and increase the number of intervenors engaged in the process, addressing crucial issues related to the availability of insurance. Insurers have previously expressed frustration over lengthy approval processes for rate requests.
In response to accusations regarding delays in rate approvals, Consumer Watchdog stated that the timeline for rate approvals with and without public participation from intervenors is nearly identical. This ongoing debate highlights the complex dynamics between regulatory efforts, consumer advocacy, and the insurance industry in California. As the public comment period approaches, the outcome of Lara’s proposal remains uncertain, with potential implications for both consumers and insurers in the state.
