Consumer Watchdog has criticized recent amendments to California Insurance Commissioner Ricardo Lara’s proposed regulations, arguing that they fail to address coverage issues for policyholders who have been non-renewed.
The amendments permit insurance companies to use climate model algorithms to justify rate increases but lack requirements for transparency and accountability, according to the organization.
The revised draft does not close loopholes that allow insurers to claim they will increase coverage in fire-prone areas by only 5%, which falls short of the 85% coverage repeatedly promised by Commissioner Lara.
Additionally, the regulations enable insurers to adjust coverage standards if they cannot meet the proposed requirements.
Consumer Watchdog expressed concern that the amendments overlooked public input regarding the transparency of the “PRID” model process.
They highlighted the absence of minimum disclosure standards or technical guidelines for the models and algorithms that could influence insurance rates. The new rules, they argue, create further barriers to public participation in the process.
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Carmen Balber, executive director of Consumer Watchdog, stated that Lara missed an opportunity to enforce commitments from insurance companies, penalize non-compliance, and require transparency for the models used to justify rate hikes.
“Today’s amendments just continue the lie,” she said. “This regulation still doesn’t get people insured or hold the secret algorithms insurance companies will use to raise rates publicly accountable.”
Exploiting Loopholes
Consumer Watchdog and other advocacy groups raised similar concerns during a public hearing by the California Department of Insurance last month, which they reiterated in comments submitted on September 17. Their concerns included provisions that allow insurers to avoid returning to abandoned areas and other regulatory loopholes.
According to Consumer Watchdog, the new regulations will enable insurers to offer minimal coverage akin to the FAIR Plan while allowing rate increases to take effect immediately.
Insurers will not have to report their progress toward meeting coverage commitments until 2027, and there are no penalties for failing to meet these commitments.
They can also delay compliance indefinitely by claiming “reasonable effort.”
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The organization also criticized the regulations’ approach to public review of the models’ insurers will use to determine rate increases.
The rules permit insurers to keep their models private, circumventing the public disclosure requirements of Proposition 103, Consumer Watchdog noted.
The regulations do not require that wildfire models be proven reliable or unbiased, and they offer no standard guidelines for the information that must be made public.
Moreover, the process for public participation and expert review is voluntary, and models currently in use are exempt from review for up to four years.