California Bill Would Expedite Rate Filings in Wildfire Areas

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By Timothy DarraghBESTWIRE

May 7, 2020

The California Assembly’s Committee on Insurance advanced a bill to expedite rate filings in parts of the state that are prone to wildfires.

The committee approved the bill in a 14-0 vote May 7, sending it to the Appropriations Committee.

The insurance industry says the Insurance Market Action Plan that would be allowed under the bill will give consumers options they will not have, because insurers otherwise will leave fire-prone markets.

“The whole goal here is to get insurers not writing enough policies… a reason to engage,” said Committee Chairman Tom Daly at the hearing.

But Consumer Watchdog said the process of expediting the rate filing violates Proposition 103, the 1988 ballot initiative that requires insurance companies seeking to change rates to submit a rate application to the insurance commissioner, and receive the commissioner’s approval before use. 

“AB 2167 is an impermissible attack on Proposition (103) cloaked in proclamations about climate change and wildfires,” founder Harvey Rosenfield and counsel Michael Mattoch wrote Daly. “When they passed Proposition 103, the voters barred the legislature from amending the initiative unless the amendment furthers the purposes of Proposition 103. AB 2167 does not further the purposes of Proposition 103, but rather undermines it. It must be rejected.”

In addition, they noted Proposition 103 already gives the insurance commissioner the authority to create an IMAP if one were necessary.

Michael Martinez, senior deputy commissioner for the California Insurance Department, also spoke in opposition to the bill during the hearing. No evidence exists that the existing rate approval process needs fixing, he said. Daly’s bill will “undoubtedly” raise premiums and reduce consumer protections, he said.

The department, Martinez added, has approved 210 homeowners rate increases between 2016-2019.

Insurers, on the other hand, argue homeowners rates are not high enough, given the increased risks of wildfires, and they have increased nonrenewals.

In a bill analysis, Daly, the sponsor, said IMAP is designed to give consumers better options than just the FAIR plan, the homeowners insurer of last resort.

“Currently, if nonrenewal activity continues, policyholders in high-risk regions will be relegated to the limited coverage offered by the FAIR Plan, with high rates that are generally associated with the insurer of last resort when you insure only high-risk properties, your rates are by definition likely to be high,” it said. “The IMAP proposal is intended to incentivize insurers to voluntarily write policies with better coverage, and for lower prices, than the FAIR Plan can offer.” 

Rates also are inadequate across the board in California, but especially in high-risk areas, it said. 

The bill also mandates that insurers offer more policies in high-risk regions, Daly said.

Insurers would be required to provide coverage to California residents who take steps to make their homes more fire-resistant under a bill announced by state officials and consumer advocates (Best’s News Service, Feb. 19, 2020).

(By Timothy Darragh, associate editor, BestWeek: [email protected])

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