Insurance Agent Group Has Issues with California Commissioner’s Briefing

A webinar briefing hosted by California Insurance Commissioner Ricardo Lara this week to ease concerns about deteriorating market conditions left insurance agents with more questions than answers, according to a group that represents agents.

Agents are experiencing difficulty placing automobile and home insurance for consumers as insurer appetite for the state is disappearing, according to the American Agents Alliance.

The group sent Lara a letter with questions they believe did not receive attention during the webinar.

“The issue of why insurers only file for 6.9% increases deserves further explanation. Why do insurers file for lower amounts when Commissioner Lara said he is urging them to file for amounts much higher, amounts that CDI regulations permit? This seems illogical. There must be some underlying reason for this behavior,” said Michael D’Arelli, executive director of the American Agents Alliance.

One of the group’s main beefs is with the state’s Proposition 103, a law that governs property/casualty rates in the state and allows intervenors to argue against rate hikes. It also establishes an intervenor process.

The risks of filing above 6.9% are severe because the California Department of Insurance loses control over the rate review process when a Prop 103 rate “intervenor” becomes involved, which is usually the case for larger, market-leading insurers, according to the group.

When filing a 6.9% request or less, an insurer can reach agreement with the CDI and even if an intervenor objects to the agreement, the CDI can approve the rate increase. However, for rate increases of 7% and above—even if the CDI and the insurer reach agreement—the intervenor can demand and receive a rate hearing if the carrier does not agree to a lesser rate increase and payment of large legal fees to the intervenor, according to the group.

“Adding insult to injury, in the best of times this leads to nine months or more of trial proceedings and delay. If the CDI would develop reasonable rules for intervenor participation that allow the CDI to ensure intervenors could not hold a justified rate request hostage for many months or more, it would undoubtedly remove insurer reluctance to file above 6.9%,” D’Arelli said.

Another question agents have relates to the CDI failing to adhere to the time limits for rate approval in Prop 103. In the original language of Prop 103, insurers were guaranteed approval of rate applications within 60 days unless the insurance commissioner decided to hold an administrative hearing on the matter. Instead of sticking with that 60-day rule, the CDI requires insurers to waive their Prop 103 right to a 60-day answer, otherwise the CDI will send the matter to rate litigation, the group says.

A CDI spokesman was reached out to for comment.

Topics California Agencies