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

Sunday, September 3, 2023
How can insurance in CA be reformed? Industry experts weigh in
California insurance companies are underwriting fewer policies and even leaving the state. But why are these companies pulling back?

SACRAMENTO, Calif. (KGO) -- California insurance companies are underwriting fewer policies and even leaving the state. But why are these companies pulling back? The industry says it is because they can't make money. Consumer activists say it is all a scheme to press lawmakers into deregulating the industry.

"What's happening up in Sacramento in the waning weeks of the legislative session is a time-tested tactic by big special interests and their allies in Sacramento to get something done that will really hurt consumers," says Consumer Watchdog's Harvey Rosenfield.

Rosenfield wrote Proposition 103, which regulates California's insurance industry. He said he's been excluded from the insurance talks and says consumers are having the discussion hidden from them, too.

"I would call it an insurrection by the insurance industry trying to overturn a law that the voters passed, that the industry doesn't like," he says.

MORE: Secret recording of insurance lobbyist reveals plan to 'jam' bill through before end of session

A consumer advocate overheard an insurance industry lobbyist discussing strategy on a flight from Los Angeles to Sacramento and secretly recorded it.

That is not everyone's take. Karl Susman, a West Los Angeles insurance broker and expert. "I'm happy to say, for the first time in probably three or four years that I've been jumping on shows like this and giving my two cents. I'm optimistic that things are finally taking a turn in the right direction," he says.

Susman says if we want affordable insurance in California there must be change.

"At the end of the day, again, we're just looking at math. Nobody is doing anything fancy. Nobody is doing anything underhanded. The Department of Insurance is going to look at the numbers. They're going to see what insurance companies are losing, what they need to change, what type of guidelines they need to change to be able to be profitable again, and that's what's going to get the market jump-started," Susman said.

MORE: CA couple loses homeowners' insurance after draining their swimming pool to save water

Media reports -- and those seemingly in the know -- tell 7 On Your Side the insurance industry is looking for three main things:

  • To increase rates by looking forward, rather than back, using undisclosed data that can't be challenged by regulators.
  • To add surcharges to all policies to cover cost overruns of insuring "high-Risk policy holders."
  • To charge consumers for reinsurance. That is the insurance that insurance companies buy in order to spread out their risk. Currently, reinsurance is considered simply the cost of doing business.

"The insurance companies, under the disguise of claiming they can't afford the risk of climate change, want the legislature to, number one, roll back all the protections of Proposition 103 that have kept rates low for the last 35 years," Rosenfied says.

Karl Susman sees it differently. "The timing of it is nefarious-feeling, but doesn't necessarily mean that the outcome is going to be dramatically different than it would have been had it taken, you know, a long drawn-out period of time," he says.

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

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