LOS ANGELES, Nov. 14, 2024 /PRNewswire/ --
Insurance Commissioner Ricardo Lara is not being honest with
Californians about making insurance companies sell more in wildfire
areas in return for using secret algorithms to hike rates, Consumer
Watchdog said in a Consumer Alert video about Lara's regulation
released today. The final regulation was submitted to the state
Office of Administrative Law this afternoon.
The Consumer Alert video shows how 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 text of the
regulation.
"Lara said 85% of people will be covered, but his
regulation said instead companies can choose to cover only 5% more
people than they cover today. … And companies don't even have to
meet that threshold, they can opt for an alternative arrangement if
they want," says Consumer Watchdog President Jamie Court in the
video.
Watch the Consumer Alert
video: https://www.youtube.com/watch?v=FJHHC_NW9Rs
"This is a critical issue because all homeowners are going
to pay a lot more for their insurance under Lara's regulations.
Companies can use secret algorithms to correspond to black box
climate models to raise insurance rates. Even the insurance
commissioner doesn't know how much rates will go up because no one
can see in the black box. However, Lara's promises of increased
coverage are not in the print of the regulation."
"In Florida companies charge more based on this rule and
premiums are more than double what they are in California," the
video continued.
"Governor Newsom and the Legislature have stood behind
Lara's plan. Now that we know he is lying they need to challenge
the Commissioner and ask the tough questions. How can we trust
an insurance commissioner that lies to regulate the insurance
industry? It's time to require insurance companies to cover every
homeowner who makes their home safe from fires," the Consumer Alert
video concludes.
The final rule also fails to improve transparency or
accountability for these models that will determine what
Californians pay for insurance, said Consumer Watchdog. The
Commissioner ignored testimony by consumer advocates in public
workshops concerned with the secrecy of the model review process,
lack of minimum disclosures or any technical standards for models,
and the lack of accountability for how algorithms will impact
rates, said Consumer Watchdog. Instead, the final rule erects new
barriers to further limit the public's ability to review
models.
"This regulation won't get Californians insured again, but
it will keep the algorithms insurance companies use to jack up
rates secret," said Carmen Balber, executive director of Consumer
Watchdog.
Read Consumer Watchdog's testimony outlining how the
regulation guts the transparency, standards and robust oversight
that are needed to ensure consumers pay fair insurance rates and
are required under Proposition 103 here.
September 17, 2024
June 26, 2024
April 23, 2024
Among the other loopholes in the regulation's "insurer
commitment" sections:
- 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.
Among the regulation's failures to require any meaningful
oversight of black box models and their impact on rates:
- 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 review for years.
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SOURCE Consumer Watchdog