By Camille Von Kaenel, POLITICO
SACRAMENTO, California — Insurance and business groups are pushing back on ratepayer advocacy group Consumer Watchdog’s participation in rate-setting proceedings — at the encouragement of Insurance Commissioner Ricardo Lara.
Why it matters: The move comes as state regulators are weighing faster rate increases to keep insurers from fleeing fire-prone areas. Consumer Watchdog, a firebrand group that sponsored Prop. 103, the 1988 ballot initiative requiring state approval of property and casualty insurance rates, is often the only advocacy group (opens in new tab) participating in the proceedings.
Property insurers fleeing the rising costs of climate change have grown increasingly frustrated with Consumer Watchdog because of the group’s opposition to Lara’s proposed reforms to entice companies back to California, including faster rate hikes and the use of proprietary forward-looking climate models. The insurers asked the Insurance Department to require Consumer Watchdog to provide more information about the consumers it claims to represent and to hold a public hearing on the group’s role.
If the Insurance Department were to determine Consumer Watchdog ineligible as an intervenor, it would effectively neuter the group. It received 96 percent of the fees the Insurance Department paid to intervenors last year, adding up to over $21 million for the group since 1988.
Consumer Watchdog says it has saved consumers $5.5 billion (opens in new tab) by advocating for lower rates.
Background: The renewal of groups’ intervenor status has been mostly pro forma (opens in new tab) — until now. In the past, Lara and other insurance commissioners have approved Consumer Watchdog’s eligibility to intervene in rate setting and collect fees every time it comes up for renewal every two years without any public back-and-forth.
Most property insurers didn’t know the process even existed, said Rex Frazier, the president and CEO of the insurance trade group Personal Insurance Federation of California. He learned about it from Lara’s June 4 public notice (opens in new tab) and decided to file an objection June 12 (opens in new tab).
“I hope that we start to have expectations placed on them to be responsible participants in the system, rather than just bomb-throwers who ignore the downsides of their bad behavior,” Frazier said.
Insurance Department spokesperson Michael Soller said the notice was part of a new policy to “encourage public participation for the first time” and increase transparency. He described the changes as “long-overdue and necessary” and said they also include a proposal to require insurance companies to provide more information in their rate requests.
“This is the Department holding all parties to the rate filing process accountable, including intervenors,” Soller said in an email. “We don’t want the intervenor process to continue to be a black box.”
More details: In addition to PIFC, the National Association of Mutual Insurance Companies (opens in new tab), the Western Insurance Agents (opens in new tab), the American Property Casualty Insurance Association (opens in new tab) and the California Building Industry Association have all submitted letters challenging Consumer Watchdog’s claims that it represents consumer interests.
The American Agents Alliance, the California Association of Winegrape Growers and insurance agency owner Karl Susman have written that they intend to submit more thorough letters soon.
State lawmakers are also getting involved. Assemblymember Jim Wood and Sens. Steven Glazer and Shannon Grove have written in (opens in new tab) to reserve the right to comment in more detail later.
Cathy Mudge, a spokesperson for Wood, said he submitted the letter as a placeholder and has not yet decided whether to comment. Both Wood and Glazer represent fire-prone districts in the North Coast and the East Bay, respectively, and their constituents have struggled to get insurance. Wood also sits on the Assembly Insurance Committee.
Glazer and Grove, a Bakersfield Republican, did not respond to a requests for comment by publication time.
Reaction: Jamie Court, president and CEO of Consumer Watchdog, accused Lara of inviting the insurers’ challenges by issuing the public notice of CW’s renewal of its intervenor status.
“He’s willing to turn the helm of the insurance commissioner’s office over to the companies to muddy us up,” said Court. “That tells me everything about the fact that we need to be involved in these proceedings, because otherwise, the companies are gonna get rubber stamps on their rates.”
Soller, responding to Court’s allegation, said consumers have a right to know who is intervening on their behalf.
“The California Department of Insurance is not a rubber stamp for any regulatory process,” Soller said. “We ask all parties involved in the regulatory process to provide data we can verify. This is no different.”
What’s next: The Insurance Department is accepting comments on Consumer Watchdog’s petition of eligibility until June 28, according to an order issued Tuesday (opens in new tab). Consumer Watchdog then has until July 12 to respond. Lara is planning to decide on the group’s status by Aug. 2, unless he decides a hearing is needed.
Consumer Watchdog’s current eligibility expires July 12.
