By Lyle Adriano, INSURANCE BUSINESS MAGAZINE
June 8, 2021
Consumer Watchdog has called out California insurance commissioner Ricardo Lara and the working group he convened to address the state’s wildfire problem in insurance terms, accusing the regulator of allowing insurers to meddle in rate adjustments.
The “Climate Insurance Working Group” released a 67-page draft report last week which gives recommendations to expand insurance protection and “strengthen the insurance sector’s role in reducing mounting climate risks.”
But in a response statement, Consumer Watchdog pointed out that the working group excluded discussion of the major issues Californians currently face in the insurance marketplace. These major issues include claims handling following recent wildfires; insurers refusing to reduce premiums or restore coverage when homeowners take steps to protect their homes from wildfire risk; and insurers having nearly exclusive power to choose who can and cannot purchase home insurance coverage after a wildfire.
Consumer Watchdog also claimed that the working group’s draft report deliberately ignores the insurance industry’s role in exacerbating climate change-induced severe weather by underwriting and investing in fossil fuel projects. The group additionally pointed out that Lara’s working group has two insurance industry executives and an industry lobbyist, but not a single consumer representative.
“It’s no surprise that a panel seeded with insurance industry representatives would come up with recommendations for ways that insurance companies can raise homeowners’ rates and withdraw from communities, rather than investigate and address the insurance industry’s role in creating climate change by continuing to insure fossil fuel projects, but it is surprising that the insurance commissioner would countenance those recommendations,” said Consumer Watchdog executive director Carmen Balber.
Balber added that the draft report places responsibility for addressing the insurance marketplace’s problems on consumers, policyholders, taxpayers, and local/state government – “everywhere but on the insurance industry.”
“It only raises climate solutions that the insurance industry can love,” the executive director stated.
Balber also cautioned that insurers are looking to replace decades of actual loss experience with their own “catastrophe models” with algorithms that are not publicly disclosed. Such secrecy would prevent the state insurance commissioner or the public from verifying the assumptions insurers make when setting rates.
“Letting insurance companies exploit the climate crisis to get deregulation under the door would be a huge mistake,” Balber said. “Consumers need more, not less, transparency about the price of home insurance in California.”