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California State Capitol building in Sacramento, United States.

The Battle for Rate Adequacy

Insurance Commissioner Ricardo Lara’s automobile insurance rate moratorium and his refusal to process rate filings from March 2020 to October 2022—31 months— has dramatically reduced options for consumers and made their lives more difficult.  He has destabilized the entire personal automobile and homeowners marketplace in California, and caused insurance companies to make difficult business decisions that are crushing insurance agents and the consumers we serve.  To protect the livelihood of our members, we have been engaged in a very aggressive, full-throated public campaign to bring attention to the destabilized marketplace and create the political pressure necessary for resolution.  We have often been alone in our public protestations, and we know some members have bristled with uneasiness as we have taken the fight to our own regulator—but, Insurance Commissioner Ricardo Lara has so weaponized the ratemaking process and poisoned the landscape where we serve consumers and feed our families, the gloves simply had to come off.

In case you missed it, as early as October 2022, we sent Commissioner Lara a series of communications expressing our concerns, and for the past 10 months we have remained fully engaged and committed to pressuring him to approve rate filings and restore companies to rate adequacy.  We don’t like to attack our regulator any more than he likes to be attacked, but shortly after we began to engage the media, he began processing rate filings.  Companies are far from rate adequate, but companies are slowly getting some rate relief.  More importantly, at this very moment Governor Newsom, lawmakers in the California Legislature, and the California Department of Insurance are negotiating a grand deal as the legislative session in Sacramento draws to a close at midnight on September 14th.

We couldn’t have planned this any better, as one or more of the panelists at our upcoming 2023 Conference & Expo is in the middle of this grand negotiation.  As you may know, we have been advocating for an expedited or fast-track rate approval process to prevent the department from slow-walking rate filings, often for years.  We have also been advocating that insurers be allowed to expense their cost of reinsurance and that they be allowed to use modeling for wildfire risks.  We have been asking for these and other regulatory changes that will induce insurers to increase their appetite for new business once again.  The terms of the legislative deal are fluid and subject to complete destruction or change between now and the end of the legislative session on September 14th, but by the morning of September 16th the ink will be dry and our panel will explore the details and answer your questions—you don’t want to miss this must-attend Keynote Address.

Until there is a deal, we will remain fully engaged and you may be called upon to provide assistance with communication to your State Assemblymember, State Senator, and Governor Newsom, so please take action if called upon.

In the meantime, agents should prepare clients for rate increases that will soon send shocks through every agency’s book of business.  With insurers’ lack of appetite not subsiding until the majority of insurers have been restored to rate adequacy, use this time to look within and account round, work hard for renewals, and demonstrate to clients the value of working with an independent agent.  Do not rest on your laurels, waiting for clients to shop their renewal, because they will; they will shop you.  Go on offense instead, give your clients information on the of the state of the market, give them some hand holding and assurance that you will be providing them with a policy review.  To help you in this process we have drafted a letter that you can personalize and tailor to your needs.  We recommend sending this letter out before your clients receive their renewals, lest they have a stroke prior to proper inoculation.

This is a real difficult time for all of us, but it will pass.  Whether things will ever be “normal” again is unlikely, but there will be a new normal.  To explore this new normal, the state of the market, and answer the many questions you may have, please don’t miss the panel of industry experts we have assembled for an interactive General Session at the upcoming 2023 American Agents Alliance Conference & Expo at the crown jewel of the desert, the JW Marriott Desert Springs Resort & Spa.  The conference is September 14th-16th and the General Session panel is 10AM Saturday, September 16th.  Please invest in your professional development and take advantage of the largest insurance conference in the west, with a tradeshow floor full of all things insurance and technology, all of the market intelligence you need to understand this market, to evolve, focus, and come out stronger on the other side.  We hope to see you there.

To view more information on how the American Agents Alliance has advocated for California insurance reform, please visit the links below:


American Agents Alliance In The Media

Newswire: Insurance Agents Request Expedited & Fast-Track Rate Review Process to Avert Personal Lines Meltdown in California

Insurance Journal: Viewpoint: California Needs Regulatory Reform and Quick Rate Review to Halt Personal Lines Meltdown

Insurance Journal: Insurer Group Reacts to California Department of Insurance Musing on Cat Modeling

Insurance Journal: Insurance Agent Group Has Issues with California Commissioner’s Briefing

Insurance News Net: California agent group says state facing a P&C insurance rate crisis

San Francisco Chronicle: It’s not just homeowners insurance, California struggles to get auto insurance too

San Francisco Chronicle: Is there a ‘war’ between California and home insurers? State insurance commissioner responds

Kelly Blue Book: It’s Getting Harder to Find Car Insurance in California

KPBS: California’s homeowners insurance crisis is growing and spreading to car insurance

Money: As Car Insurance Prices Soar, Some Drivers Struggle to Get Any Coverage at All

Fox KTVU: Auto insurers reportedly limiting new policies in California, as drivers face challenges getting coverage




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