While writing up his biography on the website of the California Department of Insurance back in early 2019, the newly elected Commissioner Ricardo Lara informed all comers that “I ran for (this) office to make a difference in the lives of Californians.”
He has certainly done that, but not quite in the manner he claimed elsewhere on his department’s site website, where he declared he would “protect Californians’ futures.”
In fact, Democrat Lara has made a difference in the lives of most Californians, not by protecting them, but rather by enabling the insurance companies he regulates to take advantage of almost everyone in this state.
That’s all happened via his going along with vastly increased insurance rates for both vehicle and property insurance, even for Californians who live nowhere near areas endangered by wildfires.
Those fires are the excuse insurance companies from the largest, like State Farm, down to the very smallest, have used to jack up prices at the same time they’ve made homeowner insurance hard to get, and not only in areas that border on wildlands subject to brush and forest fires.
Under deals that Lara sanctioned, insurance companies will soon be able to use “black box” secret formulae to predict where risks will be highest, with no one looking over their collective shoulder. If they did not get this privilege, the companies threatened, they would stop writing new policies in California and cancel many that are already in force.
To stymie this blackmail, all Lara had to do was revive the concept of linkage: If you want to write one type of insurance in California, you must write all types. If you won’t offer all types, you can’t sell any (including, for one example, hugely profitable life insurance).
That was the rule about earthquake insurance here until the 1990s, when the later-disgraced Republican Commissioner Chuck Quackenbush bowed to pressure from the industry (his largest campaign donor) and ended such linkage. Instead, Californians now have the high-priced California Earthquake Authority, which might or might not have enough money to cover damage from the next major urban quake.
Like Quackenbush, Lara could have played hardball with the industry, but also like Quackenbush, he was cowed. For example, he is offering little or no resistance to State Farm’s announced plan to raise its rates soon by 30 percent or more. He’s even resisting the idea of holding public hearings on this and other planned rate increases; the industry hates being subjected to such hearings.
Now Lara has quietly announced a plan that could make customers everywhere in California liable for paying billions of dollars if the state’s Fair Plan, the last-resort insurer for property, should go broke in a huge fire or other disaster.
Currently, if that should happen, the insurance industry would have to make up whatever funds the Fair Plan lacks. But Lara would shift that risk to consumers. The Fair Plan, whose policies are more expensive and offer less coverage than most others, now insures about 420,000 homes, many in wildfire areas where private companies routinely refuse coverage. Many of these are luxury properties in scenic areas.
Essentially, Lara and the industry he serves (“regulates”) want to put all other Californian (even renters, whose payments could rise if their landlords must pay higher insurance costs) at risk in order to subsidize those who build or buy in beautiful locations they know are dangerous. But it’s insurance companies, not consumers, whose business has long entailed taking risks in order to make profits.
So Lara is trying to make life less risky and more comfortable for this industry, at the same time he makes financial life less secure and more expensive for almost every insurance customer in California – without actually informing each customer of their new risk.
That’s not exactly living up to the promise of protecting Californians’ futures, but it may be a way to “make a difference” in people’s lives.
The question now is whether consumer advocates or anyone else can go to court and drag out this process until 2027, when Lara’s term in office will end. If not, get set to write even higher checks for insurance coverage.
Thomas D. Elias is a freelance political writer whose column appears in newspapers throughout California. Email him at tdelias@aol.com.
