Insurance Commissioner Ricardo Lara’s automobile insurance rate moratorium and 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 lines automobile insurance marketplace in California, and foreseeably caused insurance companies to make difficult business decisions that are crushing California consumers. If the California insurance marketplace is to recover, the California Department of Insurance (CDI) needs regulatory reform and an expedited and fast-track rate approval process to accelerate the return to a competitive insurance marketplace for consumers. Never before have I worked with consumers desperate for automobile and home insurance, but been unable to obtain it because insurance companies are unable or unwilling to provide it. Consumers are losing access to insurance markets as insurers terminate agency appointments and restrict the submission of business. While the CDI did resume processing rate increases recently, 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. Inflation is driving up the cost of home reconstruction, particularly building materials. Complicating matters, it takes six months to two years or more to increase rates through the state approval process, placing insurers further behind the cost curve when they finally do receive a rate increase. Also not helpful, reinsurance premiums have skyrocketed and home insurers cannot afford to pay more. California is the only state in the country that prohibits insurers’ rates from being based upon their actual reinsurance costs. California regulations allow earthquake insurers to include reinsurance costs in their rate calculations, but not wildfire insurers. California regulations should be changed to allow insurers to base their rates on all legitimate expenses, including reinsurance. Unlike every other state, California regulations prohibit the use of forward-looking climate models to project future losses. With forward-looking loss projection models, an insurer can tell regulators that they are willing to go into higher risk areas, use the models to demonstrate the anticipated increased losses, and obtain the higher rate necessary to fund the losses in the higher-risk area. Existing regulations punish the very behavior everyone wants, which is for insurers to voluntarily enter high risk areas. If these models are such a problem, why are earthquake insurers currently allowed to develop their loss projections using them? 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 CDI staff and, for large insurers, 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 insurance rate filings for 31 months—instead of making blanket assertions that insurers made “excess” profits due to reduced driving during the depths of the COVID pandemic. 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, with regulatory reform and the establishment of an expedited and fast-track rate approval process to accelerate the return to a competitive marketplace for agents and consumers.

The automobile insurance rate moratorium enacted by Insurance Commissioner Ricardo Lara, and his decision to reject rate submissions from March 2020 to October 2022—encompassing 31 months—has substantially restricted insurance options for consumers and amplified their difficulties. Ricardo Lara’s course of action has caused significant instability within California's personal lines automobile insurance sector, prompting insurance companies to navigate challenging business decisions that are placing a heavy burden on California consumers. For the California insurance market to regain its footing, the California Department of Insurance (CDI) must adopt regulatory reforms and a streamlined rate approval process, expediting the rejuvenation of a competitive insurance arena to serve consumers. I've never before encountered such a situation, where I've interacted with consumers in desperate need of both automobile and home insurance, yet are unable to obtain it due to insurance companies being either unable or unwilling to offer coverage. Consumers are gradually losing their foothold in insurance markets as insurers terminate agency appointments and tighten the reins on business submissions. Although the CDI did resume processing rate increases recently, the consequences of not approving rate hikes over the past couple of years has become evident. If insurance companies believed they had the authority to set appropriate rates, they would be operating without hesitation. However, that's not the reality. We believe that the California law compelling auto insurers to sell to all "good drivers"—even when their approved rates are inadequate—is the driving force behind this new market behavior. The surge in inflation is causing a noticeable rise in the costs tied to home reconstruction, particularly in relation to building materials. Adding to the complexity, the state's approval process for rate increases requires a period of at least six months or more, often two or three years, placing insurers in a difficult position as they strive to catch up with rising costs by the time the rate adjustments are ultimately granted. Moreover, the substantial increase in reinsurance premiums is presenting financial challenges for home insurers. Significantly, California is the only state in the nation that restricts insurers from determining their rates based on actual reinsurance costs. While California's regulations do permit earthquake insurers to factor in reinsurance costs for rate calculations, this allowance is not extended to wildfire insurers. To address this inconsistency, a modification of California's regulations is necessary to permit insurers to base their rates on all legitimate costs, including reinsurance. Unlike every other state, California's regulations explicitly forbid the usage of forward-looking climate models to anticipate future losses. Employing forward-looking loss projection models empowers insurers to exhibit their willingness to operate in areas of elevated risk. These models validate the projected increase in losses, aiding insurers in securing the rates essential to offset losses in these riskier regions. Interestingly, the existing regulations paradoxically penalize the exact behavior that is universally supported—insurers voluntarily expanding into high-risk areas. This raises the question: why do earthquake insurers presently possess the permission to utilize these models for developing loss projections? While a comprehensive process for rate approval is valuable, the current focus should pivot towards prioritizing urgency to expedite the recovery of this unsettled market. Insurers are continually inundated with inquiries from CDI staff, and for major insurers, they encounter questions from "intervenors," fostering an environment where the urgency of time seems somewhat diminished. Our present critical situation could have been circumvented if the CDI had competently managed auto insurance rate submissions for an unbroken 31-month period—rather than resorting to sweeping assertions suggesting that insurers gained "excessive" profits due to reduced driving during the peak of the COVID pandemic. The CDI must depart from its conventional approach, processing rate filings as if all is well, when in reality, it is not. The backlog of personal automobile rate filings is also resulting in delays in the essential review of homeowners and commercial insurance rate submissions. State Farm's recent announcement that it will no longer engage new customers appears to be a decisive indicator that more unfavorable developments are looming for California consumers. The CDI should address this crisis with the seriousness it warrants, initiating regulatory changes and establishing a prompt, streamlined rate approval process to expedite the restoration of a competitive marketplace for both agents and consumers.

Insurance Commissioner Ricardo Lara’s automobile insurance rate freeze and refusal to process rate applications, spanning from March 2020 to October 2022—31 months—has had a pronounced effect on narrowing consumer choices and increasing their difficulties. His inaction has thrown the personal lines automobile insurance industry in California into turmoil, prompting insurance companies to grapple with demanding business choices that are weighing heavily on consumers in California. To foster the revival of the California insurance landscape, there's a necessity for regulatory reforms and an accelerated rate approval process by the California Department of Insurance (CDI), with the goal of hastening the return to a competitive insurance environment for consumers. In my experience, I've never encountered a situation quite like this, where I've interacted with consumers who are desperate for both automobile and home insurance, yet are finding themselves unable to secure coverage due to insurance companies' incapability or unwillingness to provide it. Consumers are gradually losing access to insurance markets as insurers cancel agency appointments and curtail business submissions. Despite the fact that the CDI resumed processing rate increase requests six months ago, the repercussions of not approving rate hikes in the past couple of years are now starting to manifest. If insurance companies were confident in their ability to charge appropriate rates, they would be operating without any hesitations. However, this is not the case. The California law that mandates auto insurers to extend coverage to all "good drivers"—even in cases where their approved rates are insufficient—is partly what's driving this new market behavior. The surge in inflation is responsible for increasing the expenses associated with home reconstruction, particularly those pertaining to building materials. To make matters more complex, the state's approval process for rate increases demands a timeframe of six months or more, often in excess of two or three years, resulting in insurers falling further behind the cost curve by the time they eventually secure a rate increase. The situation is exacerbated by the sharp rise in reinsurance premiums, creating financial hurdles for home insurers. An interesting fact is that California uniquely prevents insurers from basing their rates on their actual reinsurance expenditures, setting it apart from other states. While California's regulations do permit earthquake insurers to factor in reinsurance costs for rate calculations, the same freedom is withheld from wildfire insurers. It's essential to revisit California's regulations to allow insurers to establish their rates using all reasonable expenses, reinsurance included. Uniquely among all states, California's regulations prohibit the application of forward-looking climate models for estimating forthcoming losses. Through the utilization of forward-looking loss projection models, insurers can demonstrate their readiness to operate in regions of heightened risk. These models serve as evidence for the expected surge in losses, facilitating insurers in obtaining the necessary higher rates to cover losses in these more hazardous zones. Paradoxically, the existing regulations penalize the very behavior that is sought after—insurers taking the initiative to venture into high-risk areas. This prompts a query: why do earthquake insurers currently enjoy the privilege of employing these models to create loss projections? While a comprehensive process of rate approval remains indispensable, it is now crucial to shift the focus towards urgency to expedite the recovery of this unsettled market. Insurers are consistently bombarded with questions from CDI staff, and in the case of major insurers, face inquiries from "intervenors," which adds additional time and delay. Our current pressing situation could have been circumvented if the CDI had effectively processed auto insurance rate submissions for a continuous span of 31 months—rather than issuing sweeping assertions that insurers reaped "excessive" profits due to decreased driving during the peak of the COVID pandemic. A status quo approach is no longer tenable for the CDI, given that consumers are really hurting; the situation is far from satisfactory. The logjam of personal automobile rate filings is also causing a backlog in the essential review of homeowners and commercial insurance rate submissions. State Farm's recent announcement that it is discontinuing new customer sales appears to be an unequivocal indication that more unfavorable developments await California consumers. In confronting this crisis, the CDI should treat it with due seriousness, enacting regulatory reforms and establishing a swift, streamlined rate approval process to accelerate the return to a competitive marketplace for agents and consumers alike.

Commissioner Ricardo Lara's decision to halt automobile insurance rate adjustments and reject rate submissions between March 2020 and October 2022—spanning 31 months—has considerably limited consumer alternatives and imposed greater challenges on their daily lives. This move has caused significant instability in California's personal lines automobile insurance market and has consequently pushed insurance companies to make tough business calls that are negatively impacting consumers in the state. For the California insurance sector to rebound, the California Department of Insurance (CDI) must embrace regulatory restructuring and an expedited rate approval procedure to speed up the recovery of a competitive insurance market that serves consumers. I have never encountered a situation like this before, where I've engaged with consumers who are desperate for both automobile and home insurance, yet are finding it impossible to acquire coverage due to insurance companies' inability or unwillingness to provide it. Consumers are gradually losing access to insurance markets due to insurers discontinuing agency appointments and restricting business submissions. Although the CDI resumed the processing of rate increase requests six months ago, the consequences of not approving rate hikes in the preceding years are now becoming evident. If insurers believed they had the liberty to charge appropriate rates, they would be operating without reservations. However, this is not the reality. We believe the California law that compels auto insurers to offer coverage to all "good drivers"—even when their approved rates fall short—is partly responsible for driving this new market behavior. The rising tide of inflation is causing a significant upswing in the expenses linked with home reconstruction, notably in terms of building materials. Complicating matters further, the state approval process mandates a minimum of six months, and it often takes over two or three years, for rate increases to take effect, thereby putting insurance companies at a disadvantage as they struggle to catch up with the escalating costs when the rate hikes are eventually approved. Adding to the challenge, the costs of reinsurance has surged astronomically, placing home insurers in a tight financial spot. What's notable is that California stands alone among states in preventing insurers from determining their rates based on actual reinsurance expenses. While California's regulations allow earthquake insurers to factor reinsurance costs into their rate calculations, the same privilege is denied to wildfire insurers. A necessary alteration to California regulations is needed, enabling insurers to establish their rates using all legitimate costs, including reinsurance. California stands apart from all other states due to its regulations that prohibit the utilization of forward-looking climate models for forecasting future losses. Employing forward-looking loss projection models enables insurers to communicate their readiness to operate in higher risk areas. These models substantiate the projected increased losses, allowing insurers to obtain the elevated rates essential for mitigating losses in these riskier regions. Oddly enough, existing regulations counterintuitively penalize the very action that is universally desired—insurers venturing voluntarily into high-risk regions. In light of this, a question arises: why are earthquake insurers presently allowed to utilize these models to formulate loss projections? Despite the undeniable necessity for a comprehensive rate approval procedure, the present focus should shift towards prioritizing urgency to accelerate the recuperation of this destabilized market. Insurers are persistently confronted with inquiries from CDI staff that extend for months, and in the case of larger insurers, face questions from "intervenors," almost as if time is not a critical factor. Our current challenging situation might have been avoided if the CDI had efficiently handled auto insurance rate applications for a continuous period of 31 months—rather than resorting to broad statements asserting that insurers gained "surplus" profits due to reduced driving during the height of the COVID pandemic. The CDI cannot persist in carrying on as usual, handling rate filings as though everything is proceeding smoothly, for the reality is quite the opposite. The backlog of personal automobile rate filings is also causing hold-ups in the much-needed review of homeowners and commercial insurance rate submissions. State Farm's recent declaration that it will no longer accept new customers seems to be a clear signal that more unfavorable news is on the horizon for consumers in California. The CDI should recognize the gravity of this crisis, undertaking regulatory changes and implementing an accelerated, fast-track rate approval system to expedite the restoration of a competitive marketplace for both agents and consumers.

The automobile insurance rate moratorium enforced by Insurance Commissioner Ricardo Lara, spanning from March 2020 to October 2022 (31 months), has significantly curtailed consumer choices and imposed hardships on their lives. His actions have disrupted the personal lines automobile insurance sector in California, leading to challenging strategic choices for insurance companies that are adversely affecting California consumers. In order to restore the health of the California insurance market, the California Department of Insurance (CDI) must implement regulatory changes and a streamlined rate approval process to hasten the resurgence of a competitive insurance landscape for consumers. I have never encountered a situation where I've dealt with consumers who are in dire need of automobile and home insurance, yet find themselves unable to secure it due to insurance companies being either incapable or unwilling to offer coverage. Access to insurance markets is slipping away as insurers terminate agency partnerships and impose limitations on business submissions. Although the CDI resumed processing requests for rate increases half a year ago, the repercussions of not approving rate hikes in the past few years are now becoming evident. If insurance companies believed they had the authority to set appropriate rates, they would be operating without hesitation. However, this is not the case. I believe that the California law that mandates auto insurers to extend coverage to all "good drivers"—even when their approved rates are insufficient—is partly responsible for prompting this new market behavior. Escalating inflation is causing a surge in expenses associated with home reconstruction, especially concerning building materials. Adding to the complexity, the state approval process requires a minimum of six months and often over two or three years to implement rate increases, leaving insurance providers further behind the cost curve when these rate adjustments are eventually approved. Additionally, the soaring reinsurance premiums are far from advantageous, and home insurers are finding it financially challenging to accommodate these increased costs. It's noteworthy that California stands alone in the nation by prohibiting insurers from basing their rates on their actual reinsurance expenses. Although California regulations permit earthquake insurers to factor in reinsurance costs for their rate calculations, the same privilege is not extended to wildfire insurers. There is a need for a change in California regulations to enable insurers to establish their rates based on all legitimate expenditures, including reinsurance costs. In stark contrast to every other state, California's regulations explicitly forbid the utilization of forward-looking climate models to predict forthcoming losses. When employing forward-looking loss projection models, an insurer can present regulators with their willingness to operate in more precarious regions. These models serve to illustrate the expected elevated losses and subsequently secure the higher rates needed to cover losses in these high-risk zones. The current regulations inadvertently penalize the very conduct that everyone desires: insurers voluntarily extending their reach into high-risk areas. The question arises—why are earthquake insurers currently granted the permission to employ these models for developing loss projections? A business-as-usual approach is no longer viable for the CDI, given that things are far from being alright. The backlog of personal automobile rate filings is also causing delays in reviewing essential homeowners and commercial insurance rate submissions. State Farm's recent announcement about discontinuing sales to new customers appears to be an unmistakable indicator that more negative developments are looming for California consumers. In addressing this crisis, the CDI should take it seriously, instituting regulatory reforms and establishing a streamlined, expedited rate approval process to hasten the return to a competitive market for both agents and consumers.

The automobile insurance rate moratorium and the denial of rate filings, which persisted from March 2020 until October 2022—a span of 31 months—due to the actions of Insurance Commissioner Ricardo Lara, have substantially limited choices available to consumers and exacerbated the challenges they face. This course of action has disrupted the personal lines automobile insurance market in California, resulting in insurance companies having to grapple with difficult business decisions that are proving detrimental to consumers in the state. To restore the vibrancy of the California insurance sector, the California Department of Insurance (CDI) must embrace regulatory reformation and an accelerated rate approval process, with the aim of hastening the return to a competitive insurance arena for the benefit of consumers. In my experience, I've never encountered a scenario like this before, where I've engaged with consumers who are desperate for both automobile and home insurance, yet are finding it increasingly difficult to obtain coverage due to insurance companies' lack of appetite or reluctance to provide it. Consumers are gradually losing their entry points to insurance markets as insurers terminate agency appointments and tighten the reins on business submissions. Despite the CDI's resumption of processing rate filings recently, the consequences of not approving rate hikes in the past couple of years are now starting to make an impact. If insurance companies believed they were authorized to set appropriate rates, they would be fully operational. However, this is not the case. The California law mandating auto insurers to offer coverage to all "good drivers"—even when their approved rates are insufficient—is in part what's propelling this new market behavior. The surge in inflation is directly impacting the cost of home reconstruction, particularly when it comes to building materials. Complicating this situation, the state's approval process for home insurance rate increases takes six months or more, and often two or three years, leaving insurers in a challenging position as they attempt to catch up with the escalating costs once the rate adjustments are finally approved. Furthermore, the steep rise in reinsurance premiums is creating financial strains for home insurers. Notably, California stands alone as the only state in the nation that restricts insurers from determining their rates based on actual reinsurance expenses. While California's regulations allow earthquake insurers to factor in reinsurance costs for their rate calculations, wildfire insurers are not afforded the same privilege. To address this disparity, a revision to California's regulations is necessary to permit insurers to set their rates based on all valid expenses, which includes reinsurance. California's regulations deviate from those of all other states by disallowing the use of forward-looking climate models to predict future losses. The utilization of forward-looking loss projection models empowers insurers to showcase their readiness to operate in regions of heightened risk. These models serve as evidence for the expected rise in losses, enabling insurers to secure the elevated rates required to cover losses in these higher risk areas. Remarkably, the existing regulations paradoxically penalize the very action that is universally desired—insurers voluntarily expanding into high-risk regions. This raises a pertinent question: if these models are such a predicament, why are earthquake insurers currently authorized to employ them for crafting loss projections? While a thorough process for rate approval undoubtedly has its place, the present focus needs to shift towards emphasizing triage and urgency to expedite the recovery of this disrupted market. Insurers are consistently barraged with inquiries from CDI staff, and for larger insurers, questions from "intervenors," creating a scenario where time appears less crucial. Our current challenging situation might have been prevented if the CDI had effectively managed auto insurance rate submissions for a continuous period of 31 months—rather than relying on sweeping statements claiming that insurers gained "exorbitant" profits due to decreased driving during the peak of the COVID pandemic. The CDI must refrain from proceeding with a routine approach, managing rate filings as if everything is proceeding smoothly, because the reality is quite different. The backlog of personal automobile rate filings is also causing disruptions in the much-needed review of homeowners and commercial insurance rate submissions. State Farm's recent statement that it will cease catering to new customers appears to be a distinct indication that more undesirable developments are impending for California consumers. In addressing this crisis, the CDI should acknowledge its seriousness, initiating regulatory changes and instituting a rapid, streamlined rate approval mechanism to expedite the return to a competitive marketplace for agents and consumers.

Commissioner Ricardo Lara's directive to freeze automobile insurance rates and reject rate submissions from March 2020 to October 2022—spanning a 31-month period—has significantly restricted options for consumers and imposed greater challenges in their lives. His actions have resulted in considerable upheaval within California's personal lines automobile insurance market, prompting insurance companies to navigate difficult strategic decisions that are burdening California consumers. For the California insurance market to regain stability, the California Department of Insurance (CDI) must undertake regulatory reforms and a fast-track rate approval process, thereby expediting the resurgence of a competitive insurance marketplace to benefit consumers. I have never before encountered a situation where I've worked with consumers who are desperate for both automobile and home insurance, yet are finding it impossible to secure coverage because insurance companies are either unable or unwilling to provide it. Consumers are gradually losing access to insurance markets due to insurers terminating agency appointments and imposing limitations on business submissions. Although the CDI did restart the processing of rate increase requests six months ago, the consequences of not approving rate hikes over the last few years are now starting to be felt. If insurance companies were confident in their ability to set adequate rates, they would truly be open to accepting new business. However, this is not the case. The California law that obliges auto insurers to offer coverage to all "good drivers"—even if their approved rates are inadequate—is in part what's driving this new market behavior. Further, mounting inflation is causing a noticeable increase in the costs tied to home reconstruction, with building materials being particularly affected. Adding a layer of complexity, the state's approval process for rate hikes necessitates a minimum period of six months or more, often times two or three years, putting insurers at a disadvantage by the time they eventually receive approval for their rate adjustments. In addition, the sharp escalation of reinsurance premiums is putting significant financial pressure on home insurers. It's worth noting that California is the only state in the country that restricts insurers from setting their rates based on their actual reinsurance costs. Although California's regulations permit earthquake insurers to incorporate reinsurance expenses into their rate calculations, this privilege is denied to wildfire insurers. To address this, California's regulations should be revised to allow insurers to set their rates using all legitimate costs, including reinsurance. Also setting it apart from every other state, California enforces regulations that bar the use of forward-looking climate models to anticipate future losses. Employing forward-looking loss projection models provides insurers with a means to showcase their willingness to operate in areas of elevated risk. These models substantiate the predicted surge in losses, enabling insurers to secure the elevated rates needed to offset losses in these more precarious regions. Peculiarly, the current regulations inadvertently penalize the exact conduct that is widely advocated—insurers voluntarily embracing high-risk areas. This prompts the question: if these models pose such a challenge, why are earthquake insurers presently allowed to rely on them for loss projections? While a thorough process for rate approval undoubtedly holds merit, the emphasis now needs to shift towards prioritizing urgency to expedite the revival of this destabilized market. Insurers are continuously subjected to months of questioning by CDI personnel, and in the case of major insurers, face inquiries from "intervenors," a situation that seems to undermine the urgency of time. Our current dire predicament could have been averted had the CDI efficiently handled auto insurance rate submissions for a continuous period of 31 months—rather than resorting to sweeping declarations suggesting that insurers garnered "excessive" profits due to decreased driving during the peak of the COVID pandemic. The CDI cannot afford to persist with a business-as-usual stance, handling rate filings as though all is well, when in fact, it is not. The bottleneck of personal automobile rate filings is also leading to delays in the necessary assessment of homeowners and commercial insurance rate submissions. State Farm's recent announcement of discontinuing sales to new customers seems to serve as a clear warning sign that further negative news is in store for California consumers. The CDI should approach this crisis with the gravity it warrants, implementing regulatory adjustments and introducing an expedited, efficient rate approval process to hasten the revival of a competitive marketplace for agents and consumers.

Insurance Commissioner Ricardo Lara’s automobile insurance rate freeze and refusal to process rate applications, spanning from March 2020 to October 2022—31 months—has had a pronounced effect on narrowing consumer choices and increasing their difficulties. His inaction has thrown the personal lines automobile insurance industry in California into turmoil, prompting insurance companies to grapple with demanding business choices that are weighing heavily on consumers in California. To foster the revival of the California insurance landscape, there's a necessity for regulatory reforms and an accelerated rate approval process by the California Department of Insurance (CDI), with the goal of hastening the return to a competitive insurance environment for consumers. In my experience, I've never encountered a situation quite like this, where I've interacted with consumers who are desperate for both automobile and home insurance, yet are finding themselves unable to secure coverage due to insurance companies' incapability or unwillingness to provide it. Consumers are gradually losing access to insurance markets as insurers cancel agency appointments and curtail business submissions. Despite the fact that the CDI resumed processing rate increase requests six months ago, the repercussions of not approving rate hikes in the past couple of years are now starting to manifest. If insurance companies were confident in their ability to charge appropriate rates, they would be operating without any hesitations. However, this is not the case. The California law that mandates auto insurers to extend coverage to all "good drivers"—even in cases where their approved rates are insufficient—is partly what's driving this new market behavior. The surge in inflation is responsible for increasing the expenses associated with home reconstruction, particularly those pertaining to building materials. To make matters more complex, the state's approval process for rate increases demands a timeframe of six months or more, often in excess of two or three years, resulting in insurers falling further behind the cost curve by the time they eventually secure a rate increase. The situation is exacerbated by the sharp rise in reinsurance premiums, creating financial hurdles for home insurers. An interesting fact is that California uniquely prevents insurers from basing their rates on their actual reinsurance expenditures, setting it apart from other states. While California's regulations do permit earthquake insurers to factor in reinsurance costs for rate calculations, the same freedom is withheld from wildfire insurers. It's essential to revisit California's regulations to allow insurers to establish their rates using all reasonable expenses, reinsurance included. Uniquely among all states, California's regulations prohibit the application of forward-looking climate models for estimating forthcoming losses. Through the utilization of forward-looking loss projection models, insurers can demonstrate their readiness to operate in regions of heightened risk. These models serve as evidence for the expected surge in losses, facilitating insurers in obtaining the necessary higher rates to cover losses in these more hazardous zones. Paradoxically, the existing regulations penalize the very behavior that is sought after—insurers taking the initiative to venture into high-risk areas. This prompts a query: why do earthquake insurers currently enjoy the privilege of employing these models to create loss projections? While a comprehensive process of rate approval remains indispensable, it is now crucial to shift the focus towards urgency to expedite the recovery of this unsettled market. Insurers are consistently bombarded with questions from CDI staff, and in the case of major insurers, face inquiries from "intervenors," which adds additional time and delay. Our current pressing situation could have been circumvented if the CDI had effectively processed auto insurance rate submissions for a continuous span of 31 months—rather than issuing sweeping assertions that insurers reaped "excessive" profits due to decreased driving during the peak of the COVID pandemic. A status quo approach is no longer tenable for the CDI, given that consumers are really hurting; the situation is far from satisfactory. The logjam of personal automobile rate filings is also causing a backlog in the essential review of homeowners and commercial insurance rate submissions. State Farm's recent announcement that it is discontinuing new customer sales appears to be an unequivocal indication that more unfavorable developments await California consumers. In confronting this crisis, the CDI should treat it with due seriousness, enacting regulatory reforms and establishing a swift, streamlined rate approval process to accelerate the return to a competitive marketplace for agents and consumers alike.

The automobile insurance rate moratorium instituted by Insurance Commissioner Ricardo Lara, along with his refusal to process rate submissions from March 2020 to October 2022—a period spanning 31 months—has significantly curtailed consumer options and added to the challenges consumers face. These actions have led to substantial turbulence within California's personal lines automobile insurance market, forcing insurance companies to navigate complex business decisions that are adversely impacting consumers in California. To facilitate the recovery of the California insurance landscape, the California Department of Insurance (CDI) must implement regulatory adjustments and an expedited rate approval process, expediting the return to a competitive insurance environment for consumers. I've never encountered a situation quite like this before, where I've worked with consumers who are desperately in need of both automobile and home insurance, yet find themselves unable to obtain it due to insurance companies being incapable or unwilling to provide coverage. Consumers are gradually losing access to insurance markets as insurers terminate agency appointments and impose restrictions on business submissions. Although the CDI did recently resume processing rate increase requests, the consequences of not approving rate hikes over the past couple of years are now becoming evident. If insurers believed they had the authority to charge adequate rates, they would be operating openly. However, this is not the case. The California law compelling auto insurers to sell to all "good drivers"—even when their approved rates are inadequate—is partly driving this new market behavior. Inflation is causing a marked increase in the expenses linked to home reconstruction, with building materials being particularly affected. This is further compounded by the state's rate approval process, which takes at least six months or longer, leaving insurers in a position of playing catch-up with rising costs once the rate increases are eventually granted. Additionally, the substantial surge in reinsurance premiums is posing financial challenges for home insurers. It's noteworthy that California stands as the sole state in the country that restricts insurers from establishing their rates based on actual reinsurance expenses. While California's regulations permit earthquake insurers to factor in reinsurance costs for rate calculations, wildfire insurers are excluded from this provision. To rectify this discrepancy, an adjustment to California's regulations is essential to allow insurers to base their rates on all legitimate expenses, including reinsurance costs. Unlike any other state, California's regulations explicitly prevent the application of forward-looking climate models to forecast future losses. Through the use of forward-looking loss projection models, insurers can demonstrate their willingness to engage in areas of greater risk. These models validate the projected surge in losses, empowering insurers to obtain the higher rates necessary to offset losses in these high-risk regions. Ironically, the existing regulations inadvertently penalize the very behavior that is universally encouraged—insurers voluntarily entering high-risk areas. This leads to the question: why do earthquake insurers currently possess the privilege to utilize these models for constructing loss projections? Despite the unquestionable importance of a comprehensive rate approval process, the focus now needs to pivot towards prioritizing urgency to hasten the recovery of this destabilized market. Insurers are continually bombarded with questions from CDI personnel, and for significant insurers, face inquiries from "intervenors," creating an atmosphere where the value of time is somewhat diluted. Our current dire situation could have been averted if the CDI had effectively handled auto insurance rate submissions for a continuous period of 31 months—rather than relying on sweeping assertions that insurers amassed "excessive" profits due to reduced driving during the height of the COVID pandemic. The CDI cannot continue to operate in a customary manner, processing rate filings as if the status quo is satisfactory, because it is not. The pile-up of personal automobile rate filings is also causing delays in the crucial examination of homeowners and commercial insurance rate submissions. State Farm's recent announcement of ceasing sales to new customers appears to be a definitive signal that more unfavorable news is in the pipeline for California consumers. The CDI should handle this crisis with the requisite gravity, enacting regulatory modifications and implementing an accelerated, efficient rate approval process to hasten the reestablishment of a competitive marketplace for agents and consumers.

The decision by Commissioner Ricardo Lara to implement a moratorium on automobile insurance rates and to decline to approve rate applications between March 2020 and October 2022—spanning a total of 31 months—has greatly limited consumer choices and exacerbated their challenges. These actions have disrupted the personal lines automobile insurance market in California, leading insurance companies to grapple with difficult business choices that are negatively affecting California consumers. To restore vitality to the California insurance marketplace, the California Department of Insurance (CDI) must adopt regulatory reforms and a fast-tracked rate approval process, aiming to accelerate the revival of a competitive insurance landscape for consumers. This is a scenario unlike any I've encountered before, where I've engaged with consumers who are urgently seeking both automobile and home insurance, yet are unable to secure coverage due to insurance companies being either incapable or unwilling to provide it. Consumers are gradually losing their access points to insurance as insurers terminate agency appointments and tighten the restrictions on business submissions. Although the CDI did resume the processing of rate increase requests recently, the repercussions of not approving rate hikes over the past couple of years are now being felt. If insurance companies were confident in their ability to charge appropriate rates, they would be operating without reservation. However, this is not the case. The California law mandating auto insurers to provide coverage to all "good drivers"—even if their approved rates are insufficient—is in part driving this new market behavior. Mounting inflation has led to a significant uptick in the expenses associated with home reconstruction, especially in terms of building materials. Making matters more cumbersome, the state's process for approving rate increases demands a span of at least six months or more, often times over two or three years, placing insurers at a disadvantage as they endeavor to keep pace with escalating costs once the rate adjustments are finally approved. Additionally, the steep increase in reinsurance premiums is creating financial hardships for home insurers. It's important to note that California is the sole state in the nation that prevents insurers from setting their rates based on their actual reinsurance expenditures. Although California's regulations do allow earthquake insurers to include reinsurance costs in their rate calculations, the same privilege is denied to wildfire insurers. To address this inequity, a revision of California's regulations is imperative to enable insurers to determine their rates based on all valid expenses, including reinsurance. Differing from all other states, California's regulations explicitly prohibit the use of forward-looking climate models to predict future losses. By employing forward-looking loss projection models, insurers can manifest their commitment to operating in areas of heightened risk. These models forecast expected escalation in losses, facilitating insurers in securing the rates required to cover losses in these more perilous zones. Interestingly, the current regulations paradoxically penalize the exact conduct that is universally desired—insurers voluntarily venturing into high-risk areas. This provokes the query: why are earthquake insurers currently afforded the latitude to utilize these models for formulating loss projections? While a thorough rate approval process undoubtedly has its merits, the immediate emphasis should now be on prioritizing triage and urgency to expedite the restoration of this disrupted market. Insurers are persistently subject to extensive questioning by CDI staff, and for larger insurers, are confronted with inquiries from "intervenors," creating an environment where the urgency of time seems to be undervalued. Our current challenging scenario could have been prevented had the CDI effectively managed auto insurance rate submissions for a continuous period of 31 months—instead of relying on sweeping statements implying that insurers reaped "excessive" profits due to reduced driving during the height of the COVID pandemic. The CDI must avoid maintaining a business-as-usual stance, treating rate filings as if everything is proceeding seamlessly, because that is far from the truth. The accumulation of personal automobile rate filings is also causing setbacks in the necessary review of homeowners and commercial insurance rate submissions. State Farm's recent declaration of discontinuing sales to new customers seems to be a clear marker that more unfavorable updates are on the horizon for California consumers. In approaching this crisis, the CDI should recognize its gravity, instituting regulatory reforms and establishing a swift, streamlined rate approval process to expedite the resurgence of a competitive marketplace for agents and consumers.

Commissioner Ricardo Lara's enforcement of an automobile insurance rate moratorium and the rejection of rate filings spanning from March 2020 to October 2022—covering a duration of 31 months—has significantly reduced consumer options and heightened their challenges. These actions have disrupted California's personal lines automobile insurance market, leading insurance companies to grapple with intricate business decisions that are proving detrimental to consumers in the state. To reinvigorate the California insurance landscape, the California Department of Insurance (CDI) must undertake regulatory overhauls and a streamlined rate approval process, expediting the resurgence of a competitive insurance marketplace for the benefit of consumers. I've never encountered a scenario quite like this, where I've worked with consumers desperate for both automobile and home insurance, yet are unable to secure it due to insurance companies being either unable or unwilling to provide coverage. Consumers are gradually losing access to insurance markets as insurers terminate agency appointments and impose limitations on business submissions. Despite the CDI resuming processing rate increase requests recently, the repercussions of not approving rate hikes over the past couple of years are now being felt. If insurers believed they had the right to charge adequate rates, they would be fully operational. However, this is not the situation. The California law that mandates auto insurers to provide coverage to all "good drivers"—even if their approved rates are inadequate—is one of the catalysts behind this new market behavior. Inflation is causing the cost of home reconstruction to rise significantly, particularly with regards to building materials. The situation is made more complex by the state's process for approving rate increases, which requires a minimum of six months or more, often times two or three years, causing insurers to lag further behind in terms of costs by the time rate adjustments are finally approved. Additionally, the steep rise in reinsurance premiums is causing financial difficulties for home insurers. An important point to note is that California is the only state in the country that restricts insurers from determining their rates based on their actual reinsurance expenses. Although California's regulations do allow earthquake insurers to factor in reinsurance costs for rate calculations, the same privilege is not extended to wildfire insurers. To address this inequity, a revision of California's regulations is necessary to allow insurers to determine their rates based on all legitimate expenses, including reinsurance costs. In a departure from the practices of all other states, California regulations prohibit the use of forward-looking climate models to estimate future losses. By employing forward-looking loss projection models, insurers can demonstrate their readiness to operate in areas of increased risk. These models provide evidence for the projected growth in losses, enabling insurers to secure rates required to compensate for losses in these riskier regions. Strikingly, the existing regulations ironically penalize the very behavior that is widely sought after—insurers voluntarily entering high-risk areas. This prompts the question: why are earthquake insurers currently permitted to construct their loss projections using these models? While a thorough process for rate approval is indeed of great significance, the focus at this juncture should shift towards prioritizing urgency to hasten the recovery of this destabilized market. Insurers are consistently inundated with inquiries from CDI staff, and in the case of major insurers, encounter questions from "intervenors," leading to an environment where the urgency of time is seemingly understated. Our present dire scenario could have been avoided had the CDI effectively managed auto insurance rate submissions for a continuous period of 31 months—rather than resorting to sweeping assertions indicating that insurers reaped "excessive" profits due to reduced driving during the peak of the COVID pandemic. The CDI must deviate from its customary mode of operation, processing rate filings as if all is proceeding smoothly, which is far from accurate. The buildup of personal automobile rate filings is also resulting in delays in the essential evaluation of homeowners and commercial insurance rate submissions. State Farm's recent announcement about discontinuing new customer sales appears to be a definite harbinger of more negative updates in store for California consumers. The CDI should address this crisis with the gravity it warrants, instituting regulatory revisions and introducing a streamlined, efficient rate approval process to expedite the resurgence of a competitive marketplace for both agents and consumers.