Consumer Watchdog Calls for Open Debate and Disclosure of Secret Proposals As Insurer Focus Shifts to Insurance Commissioner Lara
Sacramento, CA — The insurance industry’s attempt to pass a secret, last-minute bailout deal failed when a legislative deadline passed Monday night with no bill in print. Consumer advocates condemned the backroom process and called for a public, transparent debate to address insurers’ pullouts from the home insurance market. The industry’s focus now shifts to Insurance Commissioner Ricardo Lara, who documents show was at the center of negotiations shaping the bailout. Consumer Watchdog sent a formal records request to Lara today seeking the text of the proposal and his communications with insurers.
Consumer Watchdog recorded a lobbyist bragging about the secret deal that was initially denied by the insurance industry and finally acknowledged by State Senator Bill Dodd, who told the Sacramento Bee the recording “spooked” legislators out of supporting the bailout.
A memo circulated by an insurance industry lobbyist last week sought support for “the plan” endorsed by Insurance Commissioner Lara.
A push for Commissioner Lara to take unilateral action and issue emergency regulations that evade public scrutiny, much as the “gut-and-amend” process does for legislation, was also on the table according to sources.
News reports on the proposal, which was never disclosed publicly, outlined provisions to: put consumers on the hook for insurers’ responsibilities to the FAIR Plan; give insurance companies, in violation of Proposition 103’s strongest-in-the-nation rate regulation, rushed, unjustified rate hikes; pass through to policyholders the unregulated costs of reinsurance; and allow the use of black box algorithms to set insurance rates – pushing homeowners’ rates ever higher.
Each of these elements has been tried and failed in Florida’s insurance market where home insurance rates are 2-3 times as high as in California and five times as many consumers are forced to get insurance from the state’s version of the FAIR Plan, said Consumer Watchdog.
“Despite the widespread shortages of home and auto insurance orchestrated by insurance companies in recent months, California lawmakers wisely chose not to burn their constituents by passing a half-baked bailout that would make insurance even more unaffordable and unavailable, and do nothing to guarantee that any Californian who needs to buy a policy could do so,” said Harvey Rosenfield, author of Proposition 103 and founder of Consumer Watchdog.
“These negotiations were marked by secrecy and public interest advocates were barred from the room. Working in the dark from the insurance industry’s playbook to impose Florida-style deregulation in California isn’t how we’re going to solve this crisis and keep homeowners insured,” said Carmen Balber, executive director of Consumer Watchdog.
Despite insurers claims of financial crisis, insurance companies made four times the profit on home insurance in California than the national average. Insurance companies are also getting the rate increases they need in California. The Insurance Commissioner has approved 95% of the premium increase amounts that home insurance companies applied for between 2021 and August 2023; the average requested increase was 13.2% and the average increase approved by the Commissioner was 12.5%.
Organization Demands Lara Turn Over Secret Proposals and Communications with Industry
Consumer Watchdog today filed formal records requests with Insurance Commissioner Ricardo Lara seeking the text of the bailout and deregulation proposals under discussion, as well as records of his communications with insurance executives concerning the proposals.
“The goal of the transparency and disclosure requirements of Proposition 103, the California Public Records Act, and the California Constitution is to allow the public to scrutinize your communications with the industry concerning Proposition 103 in order to assess the exercise of the powers the voters gave you to enforce and administer California insurance laws,” Consumer Watchdog said in the letter.
Consumer Watchdog noted that CDI records show that the Insurance Commissioner met repeatedly with insurance companies over recent months, but not consumer groups, just as public interest groups were excluded from the secret negotiations over the proposals under consideration in the Capitol.
Last week, Consumer Watchdog asked California Attorney General Rob Bonta to investigate collusion among insurance companies in refusing to sell insurance to new and existing customers in order to leverage higher prices and achieve the industry’s long-sought goal of derailing Proposition 103’s requirements that insurance companies open their books, and, subject to public scrutiny, prove they need rate increases. Consumer Watchdog noted that Bonta’s predecessor, California Attorney General John Van de Kamp, found that insurance companies had colluded to create mass shortages after Proposition 103 passed in order to pressure the California Supreme Court to overturn Proposition 103. That boycott failed.