Ricardo Lara proposes insurance rule that critics call ‘revenge’

By Levi Sumagaysay, CalMatters

This story was originally published by CalMatters. Sign up for their newsletters.

California Insurance Commissioner Ricardo Lara is proposing more new insurance rules that critics are calling “vindictive,” and which they say will only make it easier for insurers to raise rates.

Home insurance costs in California are certain to rise in the near future because of Lara’s recent changes to the state’s insurance rules. Those changes are meant to encourage insurance companies to keep writing new policies and discourage them from canceling policies, especially in areas of high wildfire risk. 

Last week, Lara proposed altering the insurance rate-review process in what he said is an effort to make it more efficient. But others say the changes Lara wants to make amount to retaliation against one of his biggest and toughest critics, Consumer Watchdog.

“This is Trumpian,” said Jamie Court, president of Consumer Watchdog, the nonprofit organization that wrote the state’s Proposition 103 insurance law. Consumer Watchdog is California’s most prolific intervenor; an intervenor is a member of the public who can challenge an insurer’s rate request. 

The organization has repeatedly questioned Lara’s ties to the insurance industry, from which he has received and returned campaign contributions. Consumer Watchdog has sued the insurance department over several different issues, including its rule allowing the FAIR Plan — the fire insurance provider of last resort — to recoup some of its claims payouts from policyholders in the state. 

Lara’s proposed changes would do the following: 

• Impose new timelines and guidelines for intervenors and administrative law judges.
• Tighten requirements for what’s considered a “substantial contribution” for intervenors to get compensated for their work.
• Limit administrative law judges’ authority in rate reviews.

Consumer Watchdog and other consumer advocacy organizations say those changes would make it harder for intervenors — who need to pay experts to challenge the rate requests — to be compensated. That could result in fewer intervenors, not more, as Lara’s proposal intends. They also say the changes could lead to unjustified premium increases more quickly.

Lara’s term expires next year and “he’s exacting his revenge,” Court told CalMatters, adding that his group is considering suing over the matter. 

Michael Soller, a spokesperson for the insurance department, would not respond to Court’s comments but said Consumer Watchdog “will have a chance to say what they have to say” during the public comment period on Lara’s proposal, which starts Oct. 3. A hearing on the proposal is scheduled for Nov. 20. 

An insurance industry representative, the American Property Casualty Insurance Association, supports Lara’s proposal to fix the “broken intervenor process.”

“The only one of its kind in the nation, this process has contributed to the insurance crisis by delaying rate approvals, duplicating the (insurance department’s) work, and ultimately driving up costs for consumers,” said Denni Ritter, the association’s vice president for state government relations, in a statement.