https://www.piawest.com/news-releases-and-bulletins/around-the-pia-western-alliance-states-week-of-march-11-2024/

The California Legislature is looking at Senate Bill 1209. Introduced in February, the bill gives the California Department of Insurance the authority to order insurers to make changes after a regulatory examination finds a problem. Current law says when issues are found a separate enforcement action has to take place.

The bill will require the insurance company to comply with Report of Examination decisions. If the insurer fails to do so in a certain amount of time, the insurance department can issue fines and other penalties.

Out front on the controversy are insurance groups like American Property Casualty Insurance Association (APCIA), the National Association of Mutual Insurance Companies (NAMIC) and the Insurance Information Institute (Triple-I). They sent a letter to California Sen. Bill Allen who sponsored the bill.

Their worry — the letter states — is a system that bypasses the state’s regulatory system and procedures. It notes most examination recommendations are advisory and are more the thoughts of the examiner than the law.

PIA Western Alliance Executive Vice President Kim Legato told Weekly Industry News that California is experiencing major problems with the insurance industry. She suggests instead of putting more, or new, enforcement regulations in place, a more positive approach would be focus gathering insurers, regulators and consumer advocates together to work together to solve these problems.

“SB 1209 will allow the Department of Insurance sweeping authority to compel compliance with examination reports-documents that are often subjective, highly technical, and open to interpretation,” she told Weekly Industry News. “And it fails to establish clear limits or safeguards against overreach.”

Legato said the penalties for “non-compliance” without a hearing is pressure to comply without a challenge.

“According to the National Association of Insurance Commissioners, regulatory burdens are a key driver of premium increases and reduced market participation,” Legato said. “In California, where insurance availability is already shrinking, this bill will only accelerate the trend. It’s possible you’ll wind up with fewer insurers, higher premiums, and more limited coverage options.”

Hardest hit will be the smaller insurers and those who work a region. They don’t have the resources to do battle with the California Department of Insurance. Worse, Legato said the bill harms the very consumers the Department of Insurance and Commissioner Ricardo Lara say they want to protect.

“More Californians are being pushed to the insurer of last resort, the almost overloaded, California FAIR Plan,” Legato said. “It is already bursting at the seams with close to too many insureds to insure. The FAIR Plan is also more expensive and the coverage isn’t as good.”

The bottom line?

“Rather than passing a law like this, I hope the commissioner and the Legislature remember California needs balanced, transparent policies that encourage conversation between the Department of Insurance and insurers while protecting consumers and addressing the real drivers of market instability,” she said.

Source link: PropertyCasualty360.com — https://bit.ly/4vDg1il