Consumer group says insurers are already earning record profits and any changes that could raise home and auto premiums must undergo full public rulemaking
Los Angeles, CA — Consumer Watchdog today called on Insurance Commissioner Ricardo Lara to abandon any effort to quietly increase the profits insurance companies are allowed to build into the premiums Californians pay for home, auto and other property-casualty insurance.
In a letter sent today by Consumer Watchdog, the consumer group said the California Department of Insurance has raised the possibility of increasing the minimum and maximum “rates of return” used in California’s insurance ratemaking regulations. Raising those limits could increase the maximum premiums insurers are permitted to charge consumers.
“California insurance companies are reporting soaring profits, and the Department has offered no evidence that those profits are too low,” said Senior Staff Attorney Pamela Pressley. “Any effort to increase these rates of return on an expedited basis as Commissioner Lara’s term in office ends would represent an undeserved gift to insurers at consumers’ expense.”
Consumer Watchdog called on Lara to subject any proposed changes to a full public rulemaking under California’s Administrative Procedure Act, including publication of proposed regulatory language, public comment and review by the Office of Administrative Law.
“There is no urgent need to increase insurers’ allowable rates of return,” said Pressley. “If the Department believes these rules should change, it should put its proposal on the table, show the public the evidence, and let consumers and insurers alike weigh in before any decision is made.”
The current minimum and maximum rates of return were established nearly two decades ago following an extensive public process that included five rounds of public comment, three public workshops and a public hearing. Consumer Watchdog’s letter said the Department has identified no evidence demonstrating that those limits are no longer appropriate.
The Department initially contacted Consumer Watchdog in August about possible amendments to a separate regulation governing insurers’ projected investment yield. But discussion questions later circulated by the Department unexpectedly asked whether the minimum and maximum rates of return should also be changed. According to Consumer Watchdog’s letter, Department staff did not identify a specific factual basis for changing those limits when questioned by consumer representatives.
“Before the Department changes rules that can directly affect what Californians pay for insurance, consumers deserve to know what problem it is trying to solve and to see the evidence supporting the change,” said Willam Pletcher, Litigation Director at Consumer Watchdog. “That discussion should happen in public, not through an expedited process behind closed doors.”
The proposal comes as property-casualty insurers are reporting substantial profits. According to figures from the National Association of Insurance Commissioners cited in the letter, California homeowners insurers earned a 26.3% direct return on net worth in 2024, compared with 13.9% nationwide. Over the previous 20 years, California homeowners insurers averaged a 9.7% return, compared with 6.4% nationally.
More recent industry data cited in the letter show property-casualty insurers nationally earned $31.7 billion in underwriting income during the first half of 2026, before investment income. Allstate reported $3.2 billion in second-quarter net income and a 44.2% adjusted net income return on equity over the preceding 12 months.
Consumer Watchdog also pointed to the Department’s previous decision to use an exemption from normal Administrative Procedure Act requirements when adopting regulations allowing insurers to pass reinsurance costs through to California policyholders. In that proceeding, the Department did not publicly release the proposed regulatory text before adopting it.
Consumer Watchdog’s letter concludes: “We welcome continued discussion of these issues. We ask only that it happen in public, on a public record, before the Department acts.”
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Consumer Watchdog is a nonprofit, nonpartisan public interest organization that advocates for taxpayer and consumer interests, including enforcement of California’s insurance reform law Proposition 103.
