California agency to decide how consumer groups can fight rate increases

Takeaways:

• Office of Administrative Law to consider limits on how consumer advocates can oppose rate increases
• Dispute about requirements for compensation for rate increase process work
• Consumer Watchdog, commissioner Lara attack each others' claims

The dispute between California's top insurance regulator and the Consumer Watchdog advocacy group about consumer advocate compensation is headed to its final destination — the state's Office of Administrative Law (OAL).

Insurance commissioner Ricardo Lara and the group have been fighting over proposed changes to rules from Proposition 103 from 1988. The rules in question require compensation for groups' and individuals' work to oppose insurance rate increases that the commissioner considers. This includes a lawsuit filed last year over denied compensation for work on an increase proceeding in 2024.

OAL approves proposed regulations and standards from more than 200 state agencies. Lara submitted the final version of his Intervenor and Administrative Hearing Bureau Fairness and Accountability rulemaking package to OAL on April 17. This follows two public comment periods last fall, and subsequent revisions to the proposed rules. Under state law, OAL has 30 working days to decide to approve or disapprove submitted regulation, which for this case is on or before June 1.

Leading the opposition to the changes, Consumer Watchdog responded to Lara's proposal, saying the regulation will limit public participation in consideration of rate increases. Will Pletcher, the organization's litigation director, said the proposal would ban challenges to rate increases less than 7%, allow retroactive denial of compensation for intervenors, retroactively undermine the status of consumer organizations challenging rate increases, and remove independent legal review of intervenor compensation requests. 

Lara disputed Consumer Watchdog's descriptions of these effects in a reply to the organization. He stated that Prop. 103 limits mandatory hearings to increases of 7% or more, that "retroactively deny payment" is misleading — that intervenors have to document their contributions to rate proceedings, and that Consumer Watchdog is suggesting intervenors should operate without scrutiny.

In its statement, Consumer Watchdog repeated a previous statement, noting that Lara had approved 97% of rate increases, but in home insurance rate increase requests where it intervened, fewer — 62% — were approved. Pletcher added that Consumer Watchdog's recent intervention in State Farm's rate increase requests led to a settlement saving policyholders $530 million off the insurer's original requests.

Numerous organizations and leaders co-signed Consumer Watchdog's statement opposing the commissioner's proposal. These include Dolores Huerta, the Consumer Federation of California, Consumer Reports, Douglas Heller of the Consumer Federation of America, Amy Bach of United Policyholders, Public Citizen and Joy Chen of the Eaton Fire Survivors Network.