New Language in California Budget Seeks to Expedite Insurance Rate Filing Approvals

Insurers are praising new trailer bill language in the California budget that promises to expedite the home and auto insurance rate filing approval process.

California Gov. Gavin Newsom first made the proposal to speed up the rate filing process while discussing the state’s budget during a press conference in May.

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

Home insurance rates are on the rise, and availability has also become a concern, as many insurers are pulling back from the wildfire prone state. Proposed solutions to the crisis have included finding ways to expedite rate filings, enabling insurers to use reinsurance rates in filings, as well as enabling them to use catastrophe modeling to set rates.

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/casualty insurance rates.

The American Property Casualty Insurance Association has favored changing Prop 103 for years, and the group believes that streamlining approvals is key to modernizing addressing the California insurance crisis.

“Streamlining the rate review process will help increase consumer access to coverage by ensuring rates adequately reflect risk and consumer claims – especially in the wake of rapidly changing conditions,” stated Denni Ritter, department vice president for state government relations for the APCIA. “Year-long delays in the rate approval process have created a significant market imbalance – forcing more than half of the state’s top 15 insurers to restrict new policies or exit out of the market entirely.”

Consumer Watchdog said the changes “would undercut independent public scrutiny of insurance rate increases,” and put at risk a process the group says has saved Californians a record $6 billion on their insurance.

“The governor’s plan invites insurance companies to set their own prices and will kill public participation in rate review,” stated Carmen Balber, executive director of Consumer Watchdog. “It takes away the Insurance Commissioner’s ability to make insurance companies justify their charges and turns the Department of Insurance into a rubber-stamp for rate increases. It guts the public intervenor process and will cost insurance consumers billions in savings from future public rate challenges. It’s up to the legislature to fix it.”

The calls to make changes to Prop. 103 have grown louder as insurers pull back from writing homeowners insurance in the state.

Last May, State Farm announced it had stopped accepting new policy applications for property/casualty insurance in California due to increased risks from wildfires and inflation. Last month, State Farm said it would non-renew 30,000 California homeowners, rental dwelling, and other property insurance policies.