Six consumer organizations warned state Senate and Assembly leaders that a budget trailer bill proposed by the governor would cut the public out of insurance rate review and cost consumers billions.
In a letter sent last night, the groups said the governor’s proposal would gut the consumer intervention process and tie the insurance commissioner’s hands, sacrificing transparent public scrutiny of insurance rate increases for speedy approvals.
“Consumer interventions by Consumer Watchdog over the last 22 years have produced $6 billion in savings, and Consumer Federation of California Education Foundation’s interventions over the past 10 years have resulted in over $400 million in savings for California policyholders. These savings are in jeopardy under this proposal,” wrote the groups.
Consumer organizations signing the letter include: Consumer Watchdog, Consumer Federation of California, Consumers for Auto Reliability and Safety, Consumer Federation of America, Consumer Protection Policy Center, and The Children’s Advocacy Institute.
The governor’s trailer bill goes far beyond timelines, said Consumer Watchdog. It would:
– – Exclude consumers’ voice in rate increases below 7%
– – Force the insurance commissioner to make rate decisions on partial information
– – Speed rate hikes so the public cannot meaningfully participate before a rate increase is approved
– – Change the rules even in cases – a rate hike above 7% – where public challengers have a right to a public hearing by law
– – Encourage insurers to apply for three 7% rate hikes a year to avoid public hearings
Nothing in the proposal would stop the clock if insurance companies refuse to provide information the department or a public participant needs to determine if a rate is justified. And nothing in the proposal would ensure the department of insurance has enough staff to complete rate reviews quickly.
The plan mirrors a proposal that Insurance Commissioner Ricardo Lara and the insurance industry unsuccessfully tried to jam through the legislature during the final days of session in 2023.
“Giving insurers the right to raise rates more quickly will only leave Californians paying higher rates, not get more insurance companies back in the market. The largest insurance companies in California have received double digit rate hikes recently ” 20% for State Farm that took effect in March on top of an additional 6.9% last year, three rate hikes adding up to 37% for Farmers in the last year – and the companies still refuse to write new business,” said the groups.
Insurance companies fear greater liability under the FAIR Plan, the letter continues. The best way to get Californians out of the high-cost, low-benefit FAIR Plan and covered by real home insurance again is to make insurance companies sell to Californians who protect their homes from wildfire. The groups called on lawmakers to require insurers to cover people who meet state home hardening and brush clearance guidelines.