Homeowners Dropped by Insurers And Facing Massive Rate Hikes Speak Out; Consumer Watchdog Says Lara Lied About Expanding Wildfire Coverage In Exchange For Higher Rates

LOS ANGELES, Sept. 17, 2024 /PRNewswire/ -- Homeowners who were dropped by their insurance company and confronted with massive rate hikes spoke out at an Assembly Insurance Committee oversight hearing of Insurance Commissioner Lara's response to the homeowner insurance crisis. 

"My homeowners association premiums went from $175,000 four years ago to $1.7 million today," said Chatsworth resident Bruce Breslau, whose homeowners association was forced to pay a 400% increase in 2024. "It's outrageous that insurance companies can gouge us when our community has worked to protect ourselves from fire risks. There is no relief in sight for our community."

"I have been forgotten and left to the expensive and low coverage FAIR plan," said Gigi Bannister, a 64 year old veteran and former fire fighter from Crestline. "The plan on the table will mean only greater rate hikes and no better coverage for people like me. We need to be guaranteed coverage when we take precautions to protect our homes from fires."

Consumer Watchdog condemned Insurance Commissioner Lara's proposed regulation, the subject of a separate, simultaneous Department of Insurance Zoom hearing for the public Tuesday, which Lara would apparently not attend as it was at the same time as his Assembly testimony in Los Angeles.

The regulation will allow insurance companies to boost premiums based on secret algorithms related to climate models, but does not expand coverage for policyholders who have been non-renewed. Consumer Watchdog said the Commissioner lied when he promised insurance companies would have to cover 85% of homeowners in wildfire areas in exchange for that right to raise rates – no such requirement exists in the pending regulation.

"Lara promised Californians that he will require insurance companies to cover homeowners in 85% of the wildfire areas. Lara lied. His regulation will allow companies to increase coverage for only 5% of people in those areas – or not at all, if an insurance company says that it is already in compliance, or claims it is not yet ready to comply," said Harvey Rosenfield, author of insurance reform Prop 103 and founder of Consumer Watchdog. "This is an outrageous bait and switch. Every policyholder in California will be paying hundreds and potentially thousands of dollars more for their home insurance under his plan."

Lara said as recently as September 11th, "They're going to cover 85% of properties in the distressed areas while also removing policies from the FAIR Plan. Insurance companies must detail where they are writing policies in their submitted rate filings, and my department would use its enforcement authority to hold them accountable." 

But the fine print of the regulation allows companies to choose to cover a mere 5% more than they cover now in exchange for the right to charge more. Companies that do not want to increase sales even by 5% may propose an unspecified third alternative option. (See Pg. 6 Section 2644.4.8(d). of the proposed regulation.) Insurers would not be required to open their books to prove to the public that they have met their commitment.

Consumer Watchdog Objects to Proposal at Separate Agency Hearing

In addition, Consumer Watchdog presented detailed criticisms of the Commissioner's proposal at a virtual Department of Insurance hearing today on the model regulation, conducted at the same time as the Assembly Committee's oversight hearing. Lara has not been present at any of the agency hearings where the public has commented on his regulations. The so-called "commitment" underlying Lara's proposal was developed behind closed doors with the insurance companies.

"Commissioner Lara's regulation won't require expanded access to insurance for Californians, and doesn't require review or approval of the black box catastrophe models insurance companies want to use to raise rates. Instead, it's riddled with loopholes and limitations that will mean massive unjustified rate hikes on homeowners, renters and small business owners without improving access to coverage," said Carmen Balber, executive director of Consumer Watchdog.

Consumer Watchdog took issue with the regulation for not requiring insurance companies to return to areas of the state they have abandoned:

• Insurance companies won't have to expand sales to 85% of consumers in distressed areas. They may opt instead to increase their market share in distressed areas by just 5%, or choose a third, undefined, "alternative commitment".
  
  
• Insurance companies won't have to sell comprehensive coverage. They may offer a bare-bones policy equivalent to what consumers get today on the FAIR Plan.
  
  
• Rate hikes start on Day 1, but insurers won't report progress toward commitments for two years – until at least 2027.
  
  
• After two years, an insurer may put off meeting a commitment indefinitely, as long as it claims to be making a "reasonable effort."
  
  
• There are no penalties if a company fails and no timelines for completion.

The Commissioner has also falsely claimed the regulation will provide robust public review of the black box models he will allow insurance companies to use to raise rates. In fact, the regulation:

• Creates a process designed to keep models and their algorithms private, violating Prop 103's public disclosure requirements.
  
  
• Does not require wildfire models be proven reliable, predictable and unbiased
  
  
• Contains no guidelines for minimum information to be made public; required disclosures will be different for every model.
  
  
• Actively discourages public participation and expert review of models.
  
  
• Makes the whole process voluntary, and any model currently in use is exempted from a PRID entirely for up to four years.

The group called for the creation of a public wildfire model in California that would be transparent and accessible to the public so consumers can understand their own climate risk and can be confident their rates are fair. 

Read Consumer Watchdog's testimony detailing the regulation's pitfalls here. 

Read the stories of LA homeowners who face unconscionable treatment by the insurance industry:

Bruce Breslau Chatsworth

https://consumerwatchdog.org/profile/homeowners-insurance/bruce-breslau/

Gigi Bannister Crestline

https://consumerwatchdog.org/profile/gigi-bannister/

Jennifer DeNicola Calabasas

https://consumerwatchdog.org/profile/jennifer-denicola/

Evan Cervantes Sunland

https://consumerwatchdog.org/profile/evan-cervantes/

SOURCE Consumer Watchdog