Consumer Watchdog to Testify that Five Loopholes in Lara Rule Will Stand in the Way of New Coverage in Fire Areas

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Sacramento, CA – Loopholes in the latest regulation proposed by Insurance Commissioner Ricardo Lara will enable continued insurance redlining and non-renewals in fire zones, not spur the coverage expansion Lara promises, Consumer Watchdog will testify this afternoon at a Department of Insurance workshop. 

The regulation is supposed to link new coverage in fire areas to allowing insurers’ use of catastrophe models’ secret algorithms to increase rates. But the rule’s lack of teeth will leave consumers paying huge rate hikes and get nothing in return, the group will testify. Prices will go up for every Californian, not just those in fire areas.

Sign up to watch the 2:30 PM workshop online here

Read Consumer Watchdog’s testimony here.

“The massive loopholes in the text of the Commissioner’s regulation won’t get insurance companies selling again in the hardest-hit areas of California,” said Carmen Balber, executive director of Consumer Watchdog. 

Consumer Watchdog’s testimony identifies the top five loopholes in the regulation, most of which contradict how it has been presented to the public by the insurance commissioner. 

The proposal: 

  1. Imposes price hikes from unverifiable catastrophe models on Day 1, but insurance companies’ supposed commitment to sell in fire areas again won’t start for two years.
  2. Insurance companies will not have to offer comprehensive coverage. They may meet commitments with a bare-bones policy equivalent to what is offered today by the FAIR Plan. 
  3. Does not require insurance companies to expand sales in fire areas to 85% of what they sell elsewhere. All companies, not just small companies as the commissioner previously said, could opt instead to only increase their market share in high fire zones by 5%. Insurers could also make up any other “alternative commitment” they choose.
  4. Contains no hard deadline for implementation. As long as an insurer says it is making a “reasonable effort” toward meeting a goal, they may defer actually meeting it indefinitely.
  5. There are no penalties if a company fails.

“This rule has no 85% commitment, no timelines, no penalties, and no guarantee a single homeowner who has been abandoned by the insurance industry will be covered again. In two years when insurance companies come back to the Department and say we didn’t make it, but we promise we’re trying, where will that leave homeowners? Uninsured and wishing the commissioner had written a regulation with teeth,” said Balber.

In prior testimony Consumer Watchdog has urged the insurance commissioner to push forward the creation of a transparent public wildfire model to enable regulators and the public to confirm models’ impact on homeowners’ insurance rates is fair.  The easiest way to guarantee homeowners access to coverage is legislation mandating that home insurers cover Californians if they meet state guidelines for protecting their homes from wildfire, said the group.

Read Consumer Watchdog’s Testimony on the Commissioner’s regulation proposing to continue the secrecy of black box models here.

Read Consumer Watchdog’s testimony on the bias and inaccuracy of black box catastrophe models here.

And here.

Carmen Balber
Carmen Balber
Consumer Watchdog executive director Carmen Balber has been with the organization for nearly two decades. She spent four years directing the group’s Washington, D.C. office where she advocated for key health insurance market reforms that were ultimately enacted into law as part of the Affordable Care Act.

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