California Insurance Commissioner Moves to Expedite Rate Review Process

SACRAMENTO, California — On Friday, Insurance Commissioner Ricardo Lara issued an administrative order to accelerate the review of insurers’ rate requests, bypassing the earlier plan to implement changes through the California state Legislature and Governor Gavin Newsom.

This action comes as Lara faces increasing political pressure due to property insurers exiting the state in response to escalating wildfire losses, leaving many voters unable to find coverage. In an effort to lure these insurers back, Lara has proposed a series of reforms, with this order being a key component.

The bulletin issued on August 9 under Lara’s existing regulatory authority mandates that the California Department of Insurance must adhere to a stricter timeline for reviewing insurers’ rate applications. The new measures require that complete rate applications be reviewed within 60 days. If a decision cannot be reached within that period, regulators must provide a detailed explanation of any unresolved issues, allowing for up to two additional 30-day extensions. Should the process exceed this timeline, the department will issue an “estimated” rate, which insurers can either accept or reject, continuing with 30-day extensions if necessary.

Lara’s approach mirrors a proposal from Governor Newsom’s administration in May, which also aimed to impose stricter deadlines on the rate review process through a “trailer bill” attached to the state budget. However, this proposal faced opposition from Consumer Watchdog, a Los Angeles-based advocacy group that played a significant role in passing Proposition 103 in 1988. The proposition grants the state’s insurance commissioner the authority to deny rate hikes and allows consumer groups to intervene in the review process. Consumer Watchdog expressed concerns that expediting the review could limit consumer input and weaken regulatory oversight.

Despite these concerns, Governor Newsom has endorsed Lara’s actions, emphasizing the need to address the insurance crisis in California. The Department of Insurance has faced criticism for routinely seeking automatic waivers from insurers when it fails to meet the 60-day deadline mandated by Proposition 103, contributing to the lengthy review process.

Rex Frazier, President of the Personal Insurance Federation of California, noted that Lara’s bulletin aligns with broader efforts to make California’s insurance market more appealing to insurers. However, he cautioned that the effectiveness of these changes will depend on their implementation, particularly the new requirement for regulators to offer an “estimated” rate within 120 days of the initial rate filing.

Consumer Watchdog remains vigilant, expressing concerns about potential “rate giveaways” under the new estimated rate provision. The group has pledged to closely monitor the implementation and is prepared to pursue legal action if Proposition 103 is compromised.

In addition to the rate review changes, Lara issued another bulletin preventing insurance companies from canceling or refusing to renew policies for approximately 185,000 policyholders affected by the Park, Borel, and Gold Complex fires.