The Real Deal – State lawmakers, commissioner in talks to boost home insurance coverage

Consumer advocate alleges the “the biggest insurance industry bailout in modern history”

By Dana Bartholomew, THE REAL DEAL

There’s a secret deal between California lawmakers and Insurance Commissioner Ricardo Lara to allow more coverage for homeowners across the Golden State.

That’s the allegation by consumer advocates, who say the deal would come at the cost of caving to insurers’ demands to relax regulations and allow them charge higher rates, the San Jose Mercury News reported.

“This would constitute the biggest insurance industry bailout in modern history, rushed through without the public deliberation that placing a burden of this magnitude on policyholders demands,” Consumer Watchdog founder Harvey Rosenfield told the newspaper.

Big insurers such as Allstate, State Farm and Farmers have put the brakes on new policies in California, leaving many homeowners scrambling for coverage and digging deeper to pay for it.

The companies say that pricing models, based on actual past losses and not on projections of future climate-driven disasters, haven’t kept up with the growing cost to fix or replace homes.

Insurance industry representatives have been tight-lipped about the rumored dealings, reported in an Aug. 21 Politico report.

“Everything’s on the table, and I don’t rule out something being done,” Sen. Susan Rubio, D-Baldwin Park, who chairs the Senate’s Insurance Committee, told Politico last month.

Rosenfield said lawmakers are trying to force a backroom deal favorable to insurers with minimal public review as they wrap up their term over the next couple weeks.

As the author of the 1988 Proposition 103 voter revolt that rolled insurance rates back 20 percent and required the elected insurance commissioner to approve rate increases, Rosenfield claimed insurance companies have been gunning for the law for decades.

He said insurers are limiting new coverage to pressure lawmakers into loosening regulations, which he said will spur higher rates while making it harder to assess their need.

In 1991, an antitrust investigation by then-Attorney General John Van de Kamp found “the simultaneous withdrawal of scores of insurance companies from California following the passage of Proposition 103 was the result of collusion among insurance companies.”

“The insurance industries put a gun to the people of California, and the threat is if we don’t let them charge whatever they want and do whatever they want in the state, they will leave the state altogether,” Rosenfield said. “There are some people in Sacramento who think the public should pay the ransom.”

Insurance Commissioner Ricardo Lara’s office wouldn’t comment on the pending deal.

It said the state’s insurance market “faces challenges” brought on by wildfire and storm losses, inflation, prolonged rebuilding, supply chain disruptions and high material costs, while “entrenched interests on all sides” are defending “a system that is clearly not working.”

“There is no quick fix,” Michael Soller, a spokesman for the commissioner, told the Mercury News. “We will continue moving on regulatory changes intended to address the problems we have seen.”

— Dana Bartholomew

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