Consumer Watchdog Urges Attorney General Bonta to Investigate Industry Collusion on Homeowner Insurance Shortages

"Insurers collected more than $150 billion in premiums from California homeowners over the last 25 years and enjoyed profits at four times the average rate nationwide. Now they're demanding an unprecedented bailout from the California Legislature in the last few days of session as the price of continuing to do business here in the wake of wildfire losses. They've colluded to create conditions that will get them big rate hikes; in the same way, Attorney General Van De Kamp found they colluded to pull out of the market to keep charging too much in the wake of Proposition 103. The Attorney General needs to investigate."   Harvey Rosenfield, author of Proposition 103 and founder of Consumer Watchdog.

Last Week's Secret Recording That Caught a 17-Year Veteran Insurance Lobbyist Boasting of an Industry Plan for a Late-Session 'Jam' May Have Exposed a Scheme to End 30 Years of Consumer Protections

"This midnight smash and grab in Sacramento is part of an orchestrated campaign by the industry to pressure the legislature by creating artificial shortages in insurance. It must not be allowed to succeed on the backs of California policyholders."  Jamie Court, President of Consumer Watchdog

RELATED LINKS: AG letter
Secret lobbyist recording caught by Jamie Court on Southwest flight from LA to Sacramento YouTube 
Photograph of Lobbyist and release
Photograph/Bio Harvey Rosenfield 
Photograph Bio Jamie Court 

SACRAMENTO, Calif., Sept. 5, 2023 /PRNewswire/ -- Citing growing shortages of homeowners, renters, and condo insurance in California, which the industry is using to pressure Sacramento leaders into a last-minute bailout that would lead to skyrocketing insurance premiums, Consumer Watchdog this morning asked CA Attorney General Rob Bonta to initiate an immediate investigation into whether insurance companies are colluding with each other to force higher prices, in violation of California law. 

"Insurance companies doing business in California are orchestrating shortages to pressure state officials to boost insurance premiums and authorize a massive bailout of the insurance industry that will likely cost Californians billions," the letter to the Attorney General states. "Industry insiders have confirmed the companies' deliberate, ongoing destabilization of the marketplace and have described to Consumer Watchdog how insurance companies and their lobbyists coordinate their actions to create shortages."

"We have also learned from industry insiders how the insurance companies coordinate their activity," the letter continues. "They convene weekly meetings at the offices of their lobbyists and lawyers – Personal Insurance Federation of California and American Property Casualty Insurance Association. These meetings are ostensibly for the purpose of discussing public policy issues. But Consumer Watchdog is informed that the conversations include the sharing of confidential corporate information about planned market withdrawals, proposed rate requests, and other activity not publicly available. Consumer Watchdog can produce a confidential witness with decades of experience in the industry who participated in these meetings to validate these claims."

In its letter to Bonta, Consumer Watchdog detailed how a growing number of insurance companies – including State Farm, Allstate, and Farmers – have destabilized California's $12 billion homeowner market by refusing to sell new homeowners policies to applicants or to renew existing policies. Auto insurance companies are taking similar actions, Consumer Watchdog said. Industry lobbyists are using the threat of further withdrawals to demand that state elected officials allow companies to charge excessive rates by undermining the anti-price gouging protections of Proposition 103 and by requiring all policyholders in the state to pay additional surcharges to reimburse insurance companies for unexpected wildfire losses in the FAIR Plan, the state's "insurer of last resort."

A lobbyist flying to Sacramento two weeks ago confirmed the industry's Sacramento strategy, noting that State Farm and Allstate had withdrawn from selling homeowner insurance and boasting that "we are trying to jam a bill in the last three weeks of the year…." He joked it would be a "surprise." The implication of his comments is that the companies staged the pullouts as a way of pressuring an eleventh-hour deal.

Insurance Companies Previously Caught Colluding to Create Shortages in California

This is not the first time insurance companies have conspired to create shortages in California, Consumer Watchdog told AG Bonta. Insurance companies conspired to stop doing business in California on the day after insurance reform Proposition 103 passed on November 8, 1988, according to Bonta's predecessor, Attorney General John Van de Kamp. The purpose of the unlawful boycott was to pressure the California Supreme Court into overturning the initiative. "The success of their lawsuit [challenging Proposition 103] would be aided by a mass withdrawal, creating a crisis in which insurance would become unavailable," Van de Kamp concluded, finding collusion after a two-year investigation. 

Consumer Watchdog urged Bonta to act immediately to protect Californians' pocketbooks and the integrity of the democratic process. The non-profit said Bonta should immediately issue subpoenas to insurance company lobbyists, executives, and state elected officials and regulators who have been working with the insurance industry to obtain the bailout. "These individuals will have the documents and knowledge that will confirm exactly what the insurance companies have been doing and why."

SOURCE Consumer Watchdog