Consumer and Environmental Groups Locked Out of Secret Wildfire Insurance Deal Oppose 11th Hour Insurance Industry Bailout, Consumer Watchdog Says

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Sep 07, 2023, 14:50 ET

SACRAMENTO, Calif., Sept. 7, 2023 /PRNewswire/ -- Fourteen consumer, environmental, economic justice organizations and consumer advocate Ralph Nader said that public interest groups have been intentionally excluded from backroom negotiations with the insurance industry over an insurer bailout and deregulation plan, and called on Governor Gavin Newsom and legislative leaders to reject the deal in a letter sent this morning.

"Consumers must be at the table," wrote the groups, because news reports about the wildfire insurance deal "make clear the plan would raise rates dramatically and devastate Californians already struggling to pay their insurance bills."

"It is particularly offensive that this proposal is being rushed through in secrecy during the final weeks of the legislative session. A plan to bail out the insurance industry and make Californians pay demands a thorough public debate, but the details of this proposal have yet to be seen in public," said the groups. "We urge you to reject an end of session deal that would gut consumer protections and put policyholders on the hook for a multi-billion-dollar bailout of the insurance industry."

Consumer Watchdog has obtained a copy of a letter written by insurance lobbyist John Norwood asking legislators to back "the plan" endorsed by Insurance Commissioner Ricardo Lara. Read the industry letter here.

"In addition to consumers bailing out insurers for their responsibilities to the FAIR Plan, we understand the proposal also would: give insurance companies, in violation of Proposition 103's strongest-in-the-nation rate regulation, rushed, unjustified rate hikes; pass through to policyholders the unregulated costs of reinsurance; and allow the use of black box algorithms to set insurance rates – pushing homeowners' rates ever higher.

"Nothing in the plan would guarantee that any homeowner who wants to buy a policy from an insurance company will be able to do so," said the groups.

"When politicians and Big Insurance negotiate behind closed doors, and consumer groups are actively barred from the room, consumers are going to lose," said Consumer Watchdog executive director Carmen Balber. "As insurers push big rate hikes and for consumers to pay all the costs of climate change, real solutions to the insurance crisis – like protecting our homes so they don't burn down in the first place – aren't even on the table."

"Insurance companies have, unsurprisingly, unilaterally decided that the best way to get what they want is to physically exclude consumer representatives from any of the conversations and negotiations," said Robert Herrell, Executive Director of the Consumer Federation of California. "Insurance companies don't want anybody to inject facts into their overstatements. California's insurance industry doesn't want an honest public debate about these important issues. Consumers deserve so much better than private, back-room deals that exclude consumer voices and concerns."

Last week, a 17-year veteran insurance industry lobbyist, Michael Gunning, now chief strategy officer for Lighthouse Public Affairs, was caught bragging on a Southwest flight about "trying to jam a bill in the last three weeks of the year" for an industry bailout as a "surprise you don't know about. Right that's always the fun thing that comes up. 'Where did that come from?'" Listen to the tape recording here.

The public interest groups' letter points out that every solution proposed by the insurance industry in California has already been tried in Florida yet has not kept insurance companies selling in the homeowners insurance market.

"There are many, more comprehensive solutions that will embed climate resilience into the practices of regulators, insurance companies, and policyholders.

"That starts with funding to assist home hardening and mitigation efforts by homeowners that are proven to reduce the risk of loss and offering tax credits for those efforts. Unfortunately, climate resilience measures like these that are critical to reduce the risk of wildfire loss statewide are reportedly absent from the bailout deal," the letter continued.

Solvency oversight requiring insurers to consider climate risk and requiring insurance companies' to reduce their own contributions to climate change – by insuring and investing in fossil fuel companies – are also excluded from the deal, wrote the groups.

The consumer, environmental and economic justice organizations sending the letter include: Consumer Watchdog, Californians for Auto Reliability and Safety, Center for Economic Justice, Center for Justice & Democracy, Center on Race, Poverty, & the Environment, Consumer Federation of America, Consumer Federation of California, Earth Ethics, Inc, Extinction Rebellion San Francisco Bay Area, Public Citizen, Rainforest Action Network, Rise Economy, Stand.earth, and Sunflower Alliance.

Read the coalition letter here.

SOURCE Consumer Watchdog