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California insurance commissioner opposes bill to make it easier for home insurers to raise prices

State Insurance Commissioner Ricardo Lara is joining with consumer activists to try to kill legislation the Assembly on Monday approved 56-3 that would give homeowner insurers a faster track to get state approvals to increase policyholder premiums.

Opponents contend that the bill, AB 2167 sponsored by Assemblyman Tom Daly, D-Anaheim, would set the stage for large premium spikes for homeowners in areas of California hit with wildfire damage in recent years, including areas of Northern California.

“(The bill) is an insurance industry wish list with nothing to help consumers. It does nothing to further the purposes of Prop. 103 passed in 1998 to stop discriminatory insurer practices and provide oversight for insurance rates,” Lara said in a conference call earlier Monday with reporters.

The legislation now will be referred to the Senate Insurance Committee, a panel that includes Sen. Bill Dodd, D-Napa. Dodd’s viewpoint on this bill was unknown Monday, but he has been a critic of the industry in past legislative sessions since the 2017 North Bay wildfires.

The measure would set up a new, expedited process for insurers to apply for an increase in homeowner premiums they contend would reflect the current market conditions and risks, in the aftermath of the spate of recent wildfires in California that have cost the insurance industry at least $20 billion. Also, insurers would be eligible to include their costs to buy reinsurance coverage in the state’s ratemaking process.

Now under state law, home insurers only can boost annual premiums up to 6.9% without the state insurance department allowing challenges through a hearing process that can take more than a year. Under the new bill, the insurance commissioner would have to act on an insurer’s rate hike request within 120 days.

In exchange for getting approval for a rate request reflecting marketing conditions, insurers would have to agree to write more policies in areas of the state at high risk for natural disasters. Supporters contend this would ease pressure on the state’s home insurer of last resort, the FAIR plan, which has seen an uptick in certain fire-ravaged places like Lake County. They contend the home insurance prices under the bill would be much lower than premiums under the FAIR plan.

The measure was approved by the Assembly Appropriations Committee last week. Marc Levine, D-San Rafael, voted against the bill during Monday’s Assembly floor vote.

“It’s an opportunity for them (insurers) to try and sneak something through,” said Richard Holober, president of the Consumer Federation of California.

Insurance industry advocates contend Lara’s fears are overblown since consumer groups still could challenge a home insurer’s rate filing and the state insurance commissioner still could deny rate increase requests from insurers.

“(It) doesn’t force the insurance commissioner to do anything he doesn’t want,” said Rex Frazier, president of the Personal Insurance Federation of California, which represents large insurers. “It just says a company may make a filing.”

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