Politico – Black Box Open


With help from Jordan Wolman and Wes Venteicher


A structure burns near Bonsall, Calif., as strong Santa Ana winds pushed multiple wildfires across the region.
Newly released documents show what California regulators wanted lawmakers to do on wildfire insurance. | David McNew/Getty Images

BLACK BOX OPEN: The Insurance Department was pushing lawmakers to pass industry-friendly measures in an ultimately failed legislative bid to woo insurers back to California two months ago, according to agency documents released in response to a public records request from Consumer Watchdog.

The documents offer the most detailed picture yet of the Insurance Department’s direction as it now starts crafting new rules it has not yet shared publicly.

The emails also show the Insurance Department’s key role in the negotiations during the final days of the session at the end of August: Agency staffers accepted amendments from insurance trade groups and shared draft bill language with insurers and Legislative staff.

The gist of the reforms, as Insurance Commissioner Ricardo Lara announced publicly last month, is to allow insurers to raise their rates in exchange for a guarantee they’ll offer coverage to people in disaster-prone areas.

But the draft legislation would have also allowed insurers to saddle customers with a surcharge to cover their costs in the case of a major loss by the last-resort insurance plan in the state.

The language got a lukewarm reception among lawmakers, who were juggling several insurance proposals. The surcharge, in particular, was very contentious among lawmakers, a legislative aide told POLITICO.

Overall, the Assembly wanted more consumer protections in legislation, Speaker Robert Rivas has previously said. He will reconsider the issue in January.

Some of the other items in the Insurance Department’s draft language would have allowed insurers to meet requirements with bare-bones insurance policies and given Lara broad authority to exempt certain companies.

Carmen Balber, the executive director of Consumer Watchdog, told POLITICO those measures make her skeptical that Lara’s promise to bring insurance back to Californians will pan out.

“This bill shows that is just a facade,” she said.

It’s unclear how similar the Insurance Department’s rules will be to the draft bill language. Michael Soller, a spokesperson for the Insurance Department, referred us to the agency’s website

He said the agency worked with a broad range of groups, including the California Building Industry Association and the California Fire Safe Council, and that “Consumer Watchdog was spreading false claims and denying the serious problems in the insurance marketplace.”

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