By Jeff McDonald, SAN DIEGO UNION-TRIBUNE
July 12, 2020
More than three decades ago, California voters rebelled against insurance companies and passed Proposition 103, a ballot measure that among other things created an elected insurance commissioner to approve or reject proposed increases for home and auto premiums.
Now a bill co-authored by Sen. Brian Jones, R-Santee, would rewrite the way many homeowners’ premiums are calculated and prevent Insurance Commissioner Ricardo Lara from rejecting new costs added to policies.
Assembly Bill 2167 is next headed to the Senate Insurance Committee, where Jones and a dozen other lawmakers will consider its fate, although no hearing has been scheduled because of the COVID-19 pandemic.
Sen. Toni Atkins, the powerful San Diego Democrat and California Senate president, also will play a major role in determining the bill’s passage or failure.
Critics, including Lara, say the legislation would circumvent much of the rate-making process and limit consumer influence. Despite that, a watchdog group warned, some lawmakers who have received tens of thousands in political contributions from insurers are inclined to give them what they want.
Neither Jones nor Atkins responded to questions last week about how the bill might benefit consumers — or the $250,000-plus in combined campaign contributions they accepted from insurers in recent years.
“Sen. Atkins supports the committee process and generally does not take positions on bills until they are through that process,” spokeswoman Lizelda Lopez said by email. “At this time, AB 2167 has not been set for a hearing or analyzed by the Senate but the decision on her vote will be based solely on the merits of the bill.”
Sens. Ben Hueso, D-San Diego, and Patricia Bates, an Orange County Republican whose district reaches into north San Diego County, also accepted tens of thousands of dollars each from the insurance industry. Like Jones, they both serve on the Senate insurance committee. Both declined to respond to requests for comment.
Supporters say AB 2167 would make it easier for homeowners to obtain insurance if they live in areas prone to wildfires. In the wake of many recent fires, thousands of property owners have seen rates soar or insurance plan renewals dry up altogether.
Since the devastating 2017 fires, the California Department of Insurance has received more than 220 homeowner rate-filing increases and seen non-renewals increase by the thousands, Lara wrote in a May letter to Assemblyman Tom Daly, D-Anaheim.
Specifically the bill would require the Department of Insurance to “fast track” approvals of new insurance plans where policies have become too costly or unavailable due to persistent fire threats.
It also would allow insurers to pass along to policyholders costs related to reinsurance, which is the practice of insurers buying secondary policies of their own to cover potential losses. Reinsurance fees can be manipulated because they are unregulated and are often sold by one insurance company subsidiary to another.
“The Legislature finds these measures are necessary to limit the number of insurer-initiated non-renewals that occur in response to changes in the understanding of wildfire risk,” AB 2167 states.
Daly, D-Anaheim, introduced the legislation earlier this year. He said too many homeowners in California are suffering the consequences of insufficient competition in the insurance industry.
“This bill will bring more insurers back to the market and give consumers more options to choose from,” Daly said at the time. “And it will help stop the cycle of non-renewals and ease the minds of homeowners who are afraid to open the mail.”
Sen. Susan Rubio, a Democrat from Baldwin Park who also co-authored the legislation, said the bill is needed to confront the crisis homeowners are facing when insuring their property.
“The status quo is not good enough to protect consumers,” she said. “As chair of the Senate Insurance Committee, my responsibility is to fight for consumers. I have to consider the big picture and find solutions, specifically for homeowners in areas at risk from natural disasters, like wildfires and climate change.”
But opponents say the bill would undermine Proposition 103 by taking away power from the elected insurance commissioner to make sure insurance costs are fair and reasonable.
“I have tremendous concerns that this bill unnecessarily amends the existing ratemaking process” Lara wrote to Daly. “This bill would undoubtedly increase consumer rates over time while at the same time weakening consumer participation in the process.”
Lara’s 3-page letter lays out other problems he sees with the legislation.
One provision allows insurers to file “insurance market action plans” detailing how their rates would be calculated in high-risk counties. The bill requires “expedited approval” of those action plans, thereby undermining regulators’ ability to make sure the premium costs are fair and reasonable, Lara said.
“The creation of this program would severely harm consumers by attempting to amend and circumvent a well-established rate approval process that is reasonably fair, inclusive and transparent for all parties involved,” he wrote.
Daly did not respond to the insurance commissioner’s letter.
Consumer Watchdog, the Los Angeles advocacy group that wrote and qualified Proposition 103 for the statewide ballot in 1988, opposes AB 2167.
“California homeowners have been ravaged by wildfires, insurance claims abuses and outright refusals to sell them insurance,” Executive Director Carmen Balber said. “Now the insurance industry is throwing its weight around to win the right to raise rates at will.”
Consumer Watchdog studied insurance industry campaign donations to state elected officials and identified more than $32 million in political contributions over the past decade.
More than $2.5 million was donated to key lawmakers during the two election cycles between 2017 and 2020, the analysis found, including over $530,000 in total contributed to the AB 2167 authors.
The four San Diego area legislators reported over $400,000 total in political donations from insurers over the same four-year period.
Atkins, the Senate president who collects donations from nearly every sector of the California economy, received $211,900 in insurance-related political donations between 2017 and 2020, the most insurer contributions among all lawmakers, the Consumer Watchdog analysis said.
Bates was second with $110,100; Jones reported $42,150; and Hueso collected $41,800.
“Will the Senate reject the insurance industry’s influence peddling to stop this power grab that will gut consumer protections and cost homeowners billions?” Balber said.
AB 2167 passed the Assembly last month on a vote of 61-3. The bill had been scheduled to go before the Senate committee next week but COVID-19 changed those plans.
The Senate recently joined the Assembly in announcing it would not return from recess as a result of the escalating pandemic. Legislative leaders are developing a schedule to complete their work before the Aug. 31 deadline.