One hallmark of the 1988 ballot measure that governs California’s auto and home insurance code allows the public to review insurer requests for rate increases — and get paid by those same insurers for the costs of doing so.
It’s a provision that has irked the industry ever since the measure, Proposition 103, also established an elected insurance commissioner with the authority over rates.
Now, current Commissioner Ricardo Lara wants to more tightly regulate the process and make it harder for so-called “intervenors” to get reimbursed for their work.
Lara contends that existing regulations, updated in 2006, have enriched a single Los Angeles advocacy group, Consumer Watchdog, which he claims has taken credit for rate savings his regulators already extracted from insurers — all while delaying reviews at a time when wildfires have caused carriers to write fewer policies in California.
“To stabilize our market, we need a rate review system that delivers timely, fair, accurate, and thorough decisions, rather than one that gets bogged down in process or delays real solutions,” Lara said in a statement.
Although the release doesn’t cite Consumer Watchdog, it links to a document showing Consumer Watchdog was the recipient this year in 24 of 26 recent rate cases and received all but $47,500 of the $1.47 million in payments..
Lara has previously accused Consumer Watchdog of continuing to “profit under Prop. 103 in the millions through higher rates on policyholders when insurance companies seek justified rates from my Department,” he said in July..
The group founded by Harvey Rosenfield, author of Proposition 103, has defended itself, saying Lara’s proposal is a giveaway to the insurance industry.
“Lara has no reason to change the intervenor compensation standard except to get insurance companies unjustified rate hikes quicker and as revenge against his critics,” Jamie Court, president of Consumer Watchdog, said in a statement.
The industry supports the changes, echoing similar arguments to Lara’s.
Denni Ritter, a lobbyist for the American Property Casualty Insurance Assn., a major industry trade group, said they are “much-needed reforms to the broken intervenor process” that has “contributed to the insurance crisis by delaying rate approvals, duplicating the Department’s work, and ultimately driving up costs for consumers.”
Consumer Watchdog by its own calculations has received $14.2 million in fees from 2002 to 2024 for the cost of hiring attorneys, actuaries and other experts who can go toe-to-toe with insurers seeking to justify their proposed rate increases.
The group claims it has saved consumers $6.54 billion during that period in premium hikes largely sought by home and auto insurers, and that its fees amount to 25 cents for every dollar saved.
Consumer Watchdog says Lara approved 97% of what insurers requested in rate increases from January 2022 to October 2023 without a public intervenor, but when the group intervened home insurers got 62% and auto insurers, 71% of what they wanted during that period.
The group also says it intervened in a request by State Farm General, the state’s largest home insurer, for an emergency 22% rate hike this year after the January fires, resulting in the company trimming it to 17%, and that it has saved consumers $166 million.
Consumer Watchdog also disputes that interventions have slowed the rate-review process, providing statistics that show little difference from 2022 to 2024 when it involved itself in rate proceedings.
The proposed changes are sprinkled through 27 pages of insurance regulations that set how rates are determined, and they put the commissioner fully in charge of rate applications while limiting the role of the department’s independent administrative law judges.
Intervenors would be subject to limits on the number of attorneys and experts for which they could get reimbursement, and additional criteria determining whether they get paid. Intervenors also would have to report potential conflicts of interest they might have in representing consumers.
Rosenfield, now outside counsel to Consumer Watchdog, alleged that the changes would vest the commissioner with powers not intended by Proposition 103 and not supported by decades of case law.
“These regulations allow the insurance commissioner to arbitrarily deny compensation if he doesn’t agree with the positions taken by consumer advocates,” he said.
Gabriel Sanchez, a spokesperson for Lara, declined to comment on specific criticisms but defended the proposals.
“Stakeholders — including consumer advocates, insurers, and the public — have expressed concerns that the process established decades ago … lacks transparency, is dominated by a small number of recurring participants, and can lead to unnecessary delays and costs for consumers and taxpayers,” he said.
The department is taking public comment on the proposed regulations and has scheduled a Nov. 20 public hearing.
Rex Frazier, president of the Personal Insurance Federation of California, a trade group representing large property and casualty insurers in the state, dismissed Consumer Watchdog’s concerns.
“These are garden variety changes to establish normal standards for paying legal bills. The fact that Consumer Watchdog is complaining that they may not get paid when they merely duplicate Department of Insurance work is laughable,” he said.
Public Citizen, an advocacy group founded by Ralph Nader, is backing Consumer Watchdog, contending that the real driver of rate increases is climate change.
“Attacking California’s public intervenor program is a short-sighted attempt to scapegoat consumer advocates for what is clearly a national crisis,” Carly Fabian, senior insurance policy advocate with the group’s Climate Program, said in a statement.
Consumer Watchdog has an ongoing lawsuit against Lara it filed in July over the denial of more than $300,000 worth of intervenor payments.
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