By Megan Fan Munce, SAN FRANCISCO CHRONICLE

https://www.sfchronicle.com/california/article/newsom-home-insurance-19484197.php#

Gov. Gavin Newsom has provided new details this week on his proposal to bolster California’s insurance market by speeding state approval for insurers’ rate increase requests.

The Department of Insurance is required to review all rate increases. Industry experts say the slow approval times are a key reason why many insurers have limited their business in the state, such as not writing new policies or dropping thousands of customers at a time. The pullbacks have pushed policymakers toward a hard choice: let more of their constituents lose coverage, or create reforms that will allow insurance companies to raise rates faster. 

Newsom first teased his proposal at a news conference earlier this month, where he pitched it as a “short-term step” toward solving the insurance crisis.

“We need to stabilize this market. We need to send the right signals. We need to move,” Newsom said.

Insurance Commissioner Ricardo Lara said in a statement Tuesday that the legislation — known as a trailer bill because it will get attached to the state budget being voted on this summer — would help “meet the urgency of the moment.”

Lara has been working on his own set of reforms, known as the Sustainable Insurance Strategy, since last September. He’s promised that the reforms will be done by December 2024. But Newsom’s trailer bill could allow rate filing changes to take effect as soon as July 1. A spokesperson for the governor said the bill, if approved, would “almost certainly” be implemented faster than the Sustainable Insurance Strategy reforms.

Under Proposition 103 — a voter initiative passed in 1988 — the department is required to review insurers’ rate requests before they can be implemented. The review process is supposed to be done within 60 days, but often takes much longer based on department delays, the submission of incomplete information by companies or public intervention by consumer groups, which can challenge rate increases. In some cases, it’s taken more than a year for a company’s filing to be approved.

The bill would require the department to create a data reconciliation tool “as soon as administratively feasible” to help companies avoid gaps in their filings. It would also give the department a maximum of two 30-day extensions after the initial 60-day period to come up with its own estimated acceptable rate change, which may be the same or different than the insurer’s initial request. If the company rejects the department’s proposed rate, or a consumer advocacy group objects to it, the company would be allowed to negotiate with the department “on different terms” — the meaning of which is unclear.

Lara said in a statement that the proposal “strengthens my department’s ability to hold all parties to a rate filing accountable, including insurance companies and intervenors. We will continue to thoroughly review each and every rate application filed to make sure they are compliant with our laws and justified under Prop. 103, and that consumers are protected.”

Industry groups reacted favorably to the release. 

“Streamlining the rate review process will help increase consumer access to coverage by ensuring rates adequately reflect risk and consumer claims — especially in the wake of rapidly changing conditions,” said Denni Ritter, vice president for state government relations for the American Property Casualty Insurance Association, who noted that her group was still evaluating the trailer bill language. She added: “Streamlining approvals is key to modernizing our regulatory system and fixing the California market.”

But Consumer Watchdog, the consumer advocacy group responsible for the vast majority of public interventions under Prop 103, said the proposal would undermine the public invention process, which allows consumer advocacy groups to challenge a company’s requested rate increase if they feel it’s too high.

Harvey Rosenfield, founder of Consumer Watchdog and author of Prop 103, questioned whether the language allowing the department to negotiate “on different terms” with insurers would mean that consumer advocates are excluded from the negotiation process. If passed as written, Rosenfield predicted the trailer bill would get challenged in court. (Rosenfield has been involved with several similar challenges in the past.) Prop 103 contained a provision that outlawed any amendments by the legislature unless they were “to further its purposes.” Rosenfield called it “obvious” that the current language does not meet that condition. A spokesperson for the governor did not immediately comment on the prospect of such a challenge.

Last September, state legislators tried to strike a deal with insurance companies that would have allowed them to raise rates as long as they expanded coverage in the state. That deal died after it failed to meet a key deadline. But Rosenfield noted legislators are under even more pressure now to find a solution. 

Since September, major insurers such as State Farm, CSAA and Travelers have raised their rates and not renewed thousands of policies in California. Nearly all of them cite increased construction costs and the risk of deadly wildfires in the state.

“Nothing in this bill is gonna get a homeowner in California an insurance policy that they need. Nothing about this will require an insurance company to sell one additional policy,” Rosenfield said. “Nothing here addresses the shortages the companies have created, much less climate change.”