'Backroom deal' to reform CA insurance industry could harm consumers, advocates say

Wednesday, September 13, 2023
'Backroom deal' to reform insurance industry could harm consumers
Consumer groups are fighting to the end, saying the California insurance industry is trying to sneak legislation through without a public airing.

SACRAMENTO, Calif. (KGO) -- Consumer groups are fighting to the end, saying the insurance industry is trying to sneak legislation through without a public airing.

"This is no way to run a country," says Robert Herrell from The Consumer Federation of California. "This is no way for the state of California to conduct its business."

Former insurance commissioner and current Congressman John Garamendi warned a backroom deal would be bad news for consumers. "If they succeed, guaranteed, California policy holders are going to once again be screwed by the insurance industry," he says.

7 On Your Side asked industry group The Personal Insurance Federation of California for comment, but did not hear back. However, for a previous report, the Federation told us: "We do not and have not had a legislative proposal."

MORE: How can insurance in California be reformed? Industry experts and consumer advocates weigh in

Consumer Watchdog's Jamie Court disagrees.

"Yeah, I mean, it's amazing how these guys basically lie," says Court. "There was a deal on the table. There was a plan on the table. They may not have consummated the deal, but they were clearly talking about a legislative plan."

Court says the proposed plan was stopped, but that doesn't mean it was stopped forever.

"I think the light, the sun, sunshine, was the best disinfectant here, and I think it kept this deal from happening," Court says. "That doesn't mean there's not going to be attempts to do it again in the future. But hopefully they'll be with the regular legislative process."

MORE: Consumer groups ask CA governor to halt insurance industry discussions, say they've been left out

7 On Your Side was told the industry wants three main changes:

  • Rate increases without divulging data.
  • Shifting high-risk insurance costs from insurance companies to policyholders
  • Charging consumers for what is now considered normal business expenses.

Karl Susman is an insurance broker and expert based in West Los Angeles. He says the lack of movement is going to make getting property insurance harder.

"When the announcement came down the pipeline that it looked like there was not going to be any type of arrangement, any type of agreement, between everyone trying to get this done, we immediately started getting notes from other insurance companies that said, 'OK, since it looks like nothing's going to happen in this session we're going to be stopping new business,'" says Susman.

Take a look at more stories and videos by Michael Finney and 7 On Your Side.

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