CA congressman calls out state's insurance boss to implement rate freeze amid crisis: 'Do your job'

SAN FRANCISCO (KGO) -- As we face the devastating effects of climate change, there's arguably only one real incentive for insurers to do business here -- California has the largest insurance market in the country and the fourth largest in the world. The question is, will insurers actually stay? And if they don't, what will the state's top boss do about it?

California's Insurance Commissioner has enacted a one-year moratorium to protect insurers from dropping policies in affected areas of Southern California. But, what about everyone else?

California's insurance crisis is not a new problem, nor is the fact that officials lack confidence in the state's ability to address it.

MORE: CA insurance commissioner responds to criticism over lack of transparency, accountability

What is new is that California is implementing an insurance reform plan this year. It's called the "Sustainable Insurance Strategy" or SIS and the state says it's now in full effect.

The new plan is taking center stage as the destruction unfolds in Los Angeles County -- in what's expected to be one of the top 20 costliest wildfires in the country's history, with estimated insured losses up to $30 billion, according to Wells Fargo and Goldman Sachs.

This makes the state's plan more significant now than ever, in part because the commissioner made this promise: "Insurance companies, for the first time, are committing to writing 85% of their business in the wildfire-distressed areas," said Commissioner Ricardo Lara.

Yet, as 7 On Your Side spent months reporting, the fine print of Commissioner Lara's regulation allows insurers to only increase policies in high-risk areas by 5%, if they choose to at all. But it's unclear what percentage of insurers are covering these high-risk areas, because the commissioner hasn't released all the data publicly.

"If you have 0% in a high-risk wildfire area... in two years after charging more... you can cover 5% more people," said Jamie Court, President of Consumer Watchdog. "It would take 34 years to get to the 85% rate at that level... that's not going to work for people."

MORE: What's next in California's insurance crisis? Commissioner Lara lays out plan, addresses criticism

Insurers have known about the changes for two years, which has raised some concerns that the commissioner's own regulation may have incentivized insurers to drop policies ahead of its implementation.

"Do you think that's true?" asked 7 On Your Side's Stephanie Sierra of former California Insurance Commissioner, Congressman John Garamendi (D - Solano County).

"Absolutely," said Rep. Garamendi. "Not only his regulations, but his unwillingness to use the power that he has to hold the insurance companies accountable, not just on claims payment, but on rating policies in all parts of the state of California."

So, what will the commissioner be doing about it?

In November, Stephanie Sierra asked Commissioner Lara this.

"Again, you have that legal authority to file suit against some of these insurers," said Sierra.

"Of course, this is a crisis," replied Commissioner Lara.

"We're all aware, commissioner... Will you do it?" asked Sierra.

His response? "Of course, we're always in litigation against insurance companies who break our laws."

But 7 On Your Side could not find any litigation the state had filed against insurers as it relates to underwriting or rate hikes. Commissioner Lara's office denied having the authority to do so, despite a ruling from the Supreme Court of California disproving that.

After the 1991 Oakland firestorm, Rep. Garamendi - who served as California's first elected Insurance Commissioner - was able to issue a record $1 million fine to Allstate forcing them to pay out claims, got insurers to provide an extra $300 million in coverage for fire victims (which was beyond the scope of coverage limits), and implemented a rate freeze for several years.

"Do you think the commissioner should implement a rate freeze?" asked Sierra.

"I think that it is a very great thing, a real possibility, but it would have to follow appropriate hearings that should be taking place immediately. And it should have actually been taking place over the last several months and a couple of years, so that we could understand the nature of the market," said Rep. Garamendi.

"If the commissioner could hear you, Congressman, what would you tell him?" asked Sierra.

"Get off your butt and do your job," Garamendi said. "I've said before, I'll say it again, he ought to resign tomorrow. And the governor should appoint somebody that has the guts to do the job."

7 On Your Side asked Commissioner Lara if he has any plans to implement a rate freeze in the wake of the devastation in Los Angeles, but we didn't get a direct answer.

We were sent the following statement from Deputy Insurance Commissioner Michael Soller: "The Commissioner's focus is on getting claims paid fairly, quickly, and completely by insurance companies. He has taken a series of actions to protect insurance coverage for those affected using his moratorium authority, guaranteeing access to health care and medications, and preventing fraud and illegal activities by public adjusters, contractors or others. Rate hikes are not part of that."

MORE: FAIR Plan coverage caps at $3 million: Here's why experts are worried about Bay Area housing market

We also asked if the LA county fires will have any impact on how the insurance reform plan is implemented & what the Commissioner's first regulatory action will be in response to the fires and any potential impact to the insurance market.

Soller told us, "Nothing changes - we are working quickly to implement reforms to get all Californians the access to coverage they deserve and were denied under outdated regulations. Along with the workshops, Commissioner has issued multiple notices to insurers."

The California Dept. of Insurance also told our team, the review of catastrophe models opened January 2, with three companies filing petitions under the new process. Catastrophe models are essentially software algorithms insurers will use to assess risk and make decisions on your coverage. Advocacy groups have raised concerns it could lead to discriminatory practices, but Lara has promised to keep the process transparent. 7OnYourSide will be closely following what happens.

MORE: Insurance: Here's what not to do if your California home was damaged, destroyed by wildfire

What should you do if you're filing a claim?

Every county in the Bay Area has ZIP codes that are considered to be "high risk," which means many residents have either been dropped or likely know a neighbor who has. Here's what you should do to prepare.

"Every consumer should take their cell phone and go through their home closet by closet, room by room, and talk about what is there," Garamendi said. "For those that have lost their homes...use that when you go to file a claim. It will short circuit the inevitable argument that the insurance companies will make."

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

7OYS's consumer hotline is a free consumer mediation service for those in the San Francisco Bay Area. We assist individuals with consumer-related issues; we cannot assist on cases between businesses, or cases involving family law, criminal matters, landlord/tenant disputes, labor issues, or medical issues. Please review our FAQ here. As a part of our process in assisting you, it is necessary that we contact the company / agency you are writing about. If you do not wish us to contact them, please let us know right away, as it will affect our ability to work on your case. Due to the high volume of emails we receive, please allow 7 to 10 business days for a response.

You may also email 7OYS@KGO-TV.COM.
Please note the address uses the letter "O", not zero. Be sure to include your full name, email, street address, and phone number.