California Commissioner Moves to Implement Insurance Rate Review Reforms

California Insurance Commissioner Ricardo Lara released a statement Friday on his latest administrative action to address the state’s homeowner insurance crisis.

Lara today released a bulletin implementing rate review reforms he says will help stabilize the state’s insurance market, which includes reforms included in the budget trailer language that Gov. Gavin Newsom introduced in May.

Newsom first made the proposal to speed up the rate filing process while discussing the state budget during a news conference in May.

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The new proposal requires the California Department of Insurance to respond to rate requests from insurers within 120 days. If an insurer requests a rate increase of more than 7% on average, CDI must provide insurers with a suggested rate within 120 days.

Home insurance rates are on the rise and affordability has also become a concern as many insurers withdraw from the fire-prone state. Proposed solutions to the crisis included finding ways to speed up rate filing, allowing insurers to use reinsurance rates in filings, as well as allowing them to use catastrophe modeling to set rates.

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Many of these proposals indicate a growing interest in making a change to Proposition 103, the 1988 voter-approved law that requires prior approval from the California Department of Insurance before implementing property/property insurance rates. accidents.

Lara’s Bulletin under current Prop 103 authority to help CDI conduct a rigorous and transparent review of rate change requests within the current 60-day deadline prescribed under Prop. 103. CDI seeks to increase the transparency and speed of rate change request review and approval times in ways that are beneficial to consumers, the Department, and the insurance market. Also, as part of this reform, CDI plans to create a “data reconciliation tool” as a check that insurance companies must complete when submitting rate applications to the department for review.

“Consumers benefit from a thorough and transparent review of rates with more insurance products and greater availability of coverage,” Lara said in a statement. “Today, I am strengthening my Department’s ability to enforce the timelines established more than 30 years ago under Proposition 103. Reducing unnecessary delays is critical to restoring our state’s insurance market.”

He added, “Consumers are suffering, businesses continue to lose coverage, wildfires are ravaging our state — and we don’t have the luxury of time. Ultimately, I am responsible for fixing this crisis and I am moving forward to fulfill my commitment to complete long-needed reforms this year.”

Top photo: Park Fire in California. Source: CalFire.

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