SACRAMENTO, CALIFORNIA, UNITED STATES, May 31, 2023
Dear Commissioner Lara:
Since 1962, we have represented thousands of independent insurance agents in California, and today our members serve hundreds of thousands of California consumers. As insurance agents, we work directly with consumers every day to find the best combination of coverage and cost, and many of these consumers are struggling economically. We are well-situated to speak on the current state of the industry and the impact of your decisions on California consumers.
The automobile insurance market is in turmoil. Our agents and the consumers we serve are losing access to insurance markets as insurers terminate agency appointments and restrict the submission of business. While the California Department of Insurance (CDI) did resume processing rate increase requests six months ago, the damage done by not approving rate increases over the past couple of years is now being felt. If insurers believed they are permitted to charge adequate rates, they would be fully open. However, that is not the case. We believe the California law that forces auto insurers to sell to all “good drivers” -even if their approved rates are inadequate–is forcing this new market behavior.
While a thorough rate approval process is necessary, urgency should now be a priority to accelerate recovery from this destabilized market. Insurers are continuing to receive months of questions from CD staff and, for large carriers, questions from “intervenors,” as if time is not of the essence. We would not be in this dire situation if the CDI had processed auto rate filings during 2022- instead of making blanket assertions that insurers made “excess” profits due to reduced driving during the depths of the COVID pandemic, while not even providing individual insurers that disagreed a method of disproving the assertion.
“The CDI cannot continue with a business-as-usual approach, processing rate filings as if everything is fine, because it is not.” — Michael D’Arelli
The CDI cannot continue with a business-as-usual approach, processing rate filings as if everything is fine because it is not. The logjam of personal automobile rate filings is also delaying much needed homeowners and commercial insurance rate filing review. State Farm’s recent announcement that it will no longer sell to new customers seems like a clear sign that more bad news is coming for California consumers.
The CDI should treat this crisis with the seriousness it deserves by establishing an expedited and fast-track rate approval process to accelerate the return to a competitive marketplace for agents and consumers.
We would be happy to discuss this further at your convenience.
cc: California Governor Gavin Newsom, State Senate & Assembly Insurance Committee Members
About the American Agents Alliance:
Since 1962, the American Agents Alliance has been a member-driven association of insurance professionals and their industry partners. Headquartered in Sacramento, California, the Alliance provides its members with advocacy, education, networking, and a variety of business and professional development tools.