Consumer Watchdog (CW) is calling on California Insurance Commissioner Ricardo Lara to meet with the nonprofit advocacy group after the California Department of Insurance (CDI) approved a $268 million increase in auto insurance premiums for GEICO customers without allowing public participation.

In a letter dated Dec. 7, Consumer Watchdog staff attorney Daniel Sternberg accuses Lara of taking “the drastic and unwarranted step of abandoning nearly two decades of Department practice honoring consumers’ rights under Proposition 103 to participate in the rate review process.”

“This long-standing process ensures that the Commissioner is presented with the positions of consumers, the Department, and the company before making his final decision on a rate application,” Sternberg wrote. “We believe a meeting with you and your executive team is necessary to help ensure that the rights of consumer participation in the rate review process are enforced in other pending rate proceedings.”

He asserted that “GEICO has been granted a significant rate hike without the scrutiny of consumer intervenors, as contemplated by Proposition 103 and reaffirmed by the courts. And adding insult to injury for consumers, Consumer Watchdog’s preliminary analysis based on the documents GEICO did produce shows that the rate hike is unjustified.”

CDI spokesman Gabriel Sanchez told Repairer Driven News that CW is “just wrong on the facts.” He said GEICO had submitted sufficient information to support its request, which was made available to the public, and that Lara was justified in denying a request for a public hearing.

“The Department reviews data for all rate filings to ensure rates are not excessive, inadequate, or unfairly discriminatory; this data is also publicly available on our website,” Sanchez said.

“As the Department stated in its denial of hearing to Watchdog: ‘Applicants have provided data and support for its trend selections, including data tending to show the selected trend factors and trend data period are actuarially sound and appropriate in light of possible changes to the book of business.’

“Rate filings are a data driven process under Proposition 103, and each filing undergoes a rigorous review by rate regulation, actuarial, and legal professionals,” he said.

Contacted for a response, CW senior staff attorney Pam Pressley stood by the organization’s assertion that CDI “failed to follow the process for consumer participation in rate proceedings as required under Prop 103, the Commissioner’s regulations, and long-standing practice.”

Pressley said CW became a party to the rate proceeding by petitioning for a hearing in August, and that under CDI regulations, all information filed with CDI from that point on should have also been simultaneously provided to CW, not simply posted to the department’s website.

Under Proposition 103, also known as the Insurance Rate Reduction and Reform Act, carriers must open their books to public scrutiny and justify requests for changes in their rates. Consumers are entitled to independently analyze the requests, obtain additional information from the insurance company, and request a full public hearing if they believe the rate request is unjustified.

The law, passed by voters in 1988, requires the insurance commissioner to notify the public of any application by an insurer for a rate change. If the commissioner denies a request from the public for a hearing, that decision must be accompanied by the commissioner’s written findings. A hearing is required if the proposed rate adjustment exceeds 7% of the then-applicable rate for personal lines.

Public notices of insurance company rate filings are posted at the end of every business week on the CDI website. Interested parties can also subscribe to receive public notice updates via e-mail.

CW said CDI had directed GEICO to honor the organization’s request for information it needed to fully evaluate the rate request. However, GEICO withheld most of the information the group had sought, and CDI failed to require the carrier to comply, Sternberg said.

Submissions made by GEICO to CDI on Nov. 8, Nov. 18, and Nov. 29 were not provided to nor noticed on CW, he said, in spite of CDI’s directive. Pressley repeated that assertion to RDN.

Sanchez disputed the claim.

“In fact, the Department and Consumer Watchdog received a response from GEICO on November 29 to the information request, which the Department determined was sufficient,” he told RDN.

He said CW was subsequently invited to meet CDI and GEICO to further discuss the response from GEICO, but failed to appear.

Pressley offered a different perspective on the events. She said the parties discussed GEICO’s “deficient response” on Nov. 30, and agreed to schedule a further three-way call on Dec. 8. However, CDI “short-circuited” the process by scheduling a call with GEICO on Dec. 5, over CW’s objections, and approved the rate increase the following day.

The carrier’s Nov. 29 response, though labeled “sufficient” by CDI, “largely failed to provide the information requested,” Pressley said. Among the missing material was the specific trend data that CW requested to allow it to complete its analysis.

She added that Lara’s calendar showed he met with GEICO without CW on Oct. 27. “If GEICO urged him to fast track the pending rate increase at that meeting, they violated rules prohibiting ex parte communications and undermined the consumer protections adopted by the voters under Proposition 103,” she said.

Overall, the 6.9% rate increase will affect 2.1 million GEICO policyholders who face an average $125 annual premium increase.

Lara and CDI have been under pressure from the insurance industry to end an informal moratorium on rate filings. In a joint letter sent in April and made public in September, the National Association of Mutual Insurance Companies (NAMIC), the Personal Insurance Federation of California (PIFC), and the American Property Casualty Insurance Association (APCIA) warned Lara that he was risking a crisis by refusing to approve any rate increases since the start of the coronavirus pandemic more than two years ago.

Lara had withheld action on rate cases filed by companies representing three-quarters of the California market, as a mechanism to compensate consumers for excess premiums paid during the stay-at-home period of the pandemic.

More information

Rate filings are available for viewing from the CDI web site. Rate filings are also available for public viewing at the California Department of Insurance’s offices. To schedule appointments to view filings, call 415-538-4300 (San Francisco) or 213-346-6707 (Los Angeles) in advance.

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