California Warns Auto Insurers: No Stalling Tactics, Discount Skirting

Some California auto insurers may be intentionally making it difficult to apply for car insurance in the state, or failing to offer required “good-driver” discounts to drivers who should qualify for one, the California Department of Insurance recently announced.

In a December bulletin, Ricardo Lara, California’s insurance commissioner, cited “numerous consumer complaints” as evidence some insurers may be violating the state’s insurance regulations. Insurance companies that use unapproved tactics like waiting periods, complicated questionnaires, or other practices outside their state-approved underwriting guidelines could face enforcement action from the state Department of Insurance (DOI), Lara warned.

“These alleged passive-aggressive tactics by insurance companies to slow down drivers’ access to coverage are unacceptable, dangerous, and will not be tolerated,” Lara said in a press release. “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.”

Consumer complaints

California drivers have complained to the department about insurance company practices that hinder consumers from getting new or renewed coverage, Lara said in a Dec. 21, 2023, bulletin.

Consumers have reported insurers:

• Imposing waiting periods

• Requiring completion of long and confusing questionnaires

• Requiring physically mailed questionnaires despite applicants choosing to receive electronic communications

• Requiring information on excluded drivers

• Demanding copies of applicants’ utility bills or vehicle registrations

• Requiring photos of driver’s licenses or vehicles

“Unreasonable application requirements” may also discourage or delay good drivers from completing an application — thereby giving insurers justification for denying an application or refusing to provide a good-driver policy discount. California law requires insurers to provide the discount to drivers who’ve had a license for at least three consecutive years, have no more than one point on their driving records, and haven’t been at fault in an accident that caused injury or death.

Lara’s bulletin reminds insurers that California law requires them to file for DOI approval for any new or changed forms, programs, policies, coverages, rates, rating factors, underwriting guidelines, rating rules, or other changes.

Consequences for insurers

By issuing a bulletin, Lara has put California insurers on notice. The Department of Insurance uses bulletins to clarify issues of insurance laws, regulations, and 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,” the department said in a press release announcing Lara’s bulletin.

What’s next

The DOI said it has already informed several insurers they may be in violation of state regulations. Those companies stopped using waiting periods, questionnaires, and other practices, and filed revised underwriting guidelines for the department to review.

Concerned consumers can contact the DOI at 800-927-4357. The department recommends drivers take any action their insurer requires to avoid cancellation or delayed coverage — but keep documentation of all requirements in order to file a complaint.