Now there’s an auto insurance crisis, too? Lara acts to protect access to auto insurance

California Insurance Commissioner Ricardo Lara today took action to protect California drivers’ access to auto insurance by issuing a Bulletin to personal auto insurance companies throughout the state. The California Department of Insurance continues to receive numerous complaints from consumers who have been having issues obtaining auto insurance coverage.

California Insurance Commissioner Ricardo Lara.

“These alleged passive-aggressive tactics by insurance companies to slow down drivers’ access to coverage are unacceptable, dangerous, and will not be tolerated,” said Insurance Commissioner Ricardo Lara. “I am taking action today to ensure these insurance companies are acting according to the law and giving drivers the coverage they are paying for at the rate they qualify for. We will continue to monitor the situation and take any and all steps necessary to protect California consumers.”

The consumer complaints that the department received were regarding waiting periods, questionnaires and other practices instituted by auto insurance companies that the department believes could be in violation of existing California law, including various provisions of Proposition 103, resulting in barriers for otherwise qualified drivers to secure and maintain auto insurance.

Auto insurance companies in California are required to submit complete rate applications to the Insurance Commissioner for review and prior approval before implementing any change to existing rates. These consumer complaints revealed that some insurance companies may be taking actions that are not a part of the underwriting guidelines they have previously filed with the department. Before implementing new practices, like using questionnaires or different filing instructions, insurance companies must file those guidelines with the department.

Auto insurance companies in California also are required to offer and sell insurance to all persons who qualify as “Good Drivers,” those who have been licensed for at least three consecutive years, have no more than one point on their driving record and were not principally at fault as the driver in a motor vehicle accident that resulted in bodily injury or death of any person.

The complaints from consumers claim that some insurance companies may not be offering “Good Driver” discounts for all who qualify and may be imposing unreasonable application requirements that are unrelated to set eligibility factors. These requirements in many cases discourage, inhibit, and/or delay Good Drivers from completing an application for insurance and result in failure or refusal by the company to provide the deserved discount, especially in a timely manner.

Some of these requirements include having to complete unnecessarily lengthy and/or confusing questionnaires, verify employment or school information, respond to physically mailed questionnaires despite applicants electing to receive documents electronically, provide information regarding excluded drivers living at the same address, and/or submit copies of applicants’ utility bills, vehicle registrations, and/or photos of driver’s licenses or vehicles, among other examples.

Today’s action by Lara sets the stage for future enforcement actions, if warranted. Bulletins are issued by the department to “clear the air” on any questions insurance companies may have regarding insurance law and regulations and their enforcement. In general, companies found to be violating insurance law and regulations after a bulletin is issued may be subject to enforcement actions such as market conduct reviews, fines, and other penalties. Once directly informed by the department, several insurance companies have since stopped their waiting periods, questionnaires, and other practices, filed their revised underwriting guidelines with the department for review, and reversed several previous actions made on their policyholders to restore their auto insurance coverage.

The department urges any California driver who is looking for new auto insurance coverage or renewing their current coverage and having concerns over the information they are being asked to share or are seeing changes to their policies to contact the department at (800) 927-4357. In order to avoid cancellations or delays of coverage, the department does advise policyholders to take the action that their insurance company requires and retain all documentation in order to file a complaint with the department.