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Paul Zimmerman
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State Bar Insurance Law Regulatory Update

The information below is current as of the date of the report.  Additional information about any of these proposals may be obtained from the California Department of Insurance (CDI) web site at http://www.insurance.ca.gov/0250-insurers/0500-legal-info/0200-regulations/proposed-regulations.cfm

Department of Insurance Regulations Currently Under Review by OAL – The following CDI regulation is currently under review by the California Office of Administrative Law (OAL).

  • Independent Medical Review System Fee Assessment – OAL File # 2015-0413-02 S.  This regulation provides a mechanism for the costs of the Independent Medical Review System for insureds to be borne by disability insurers.  Final OAL action on this regulation is due by 05/26/2015. 

Recently Approved Department of Insurance Regulations – OAL has approved the following CDI regulations in the past 45 days.   

  • Credit for Reinsurance, OAL File # 2015-0212-01 N. This regulation implements non-substantive changes to 10 CCR §§ 2303-2303.25, which establish requirements for reporting reinsurance transactions.  The regulations are submitted to OAL pursuant to 10 CCR 100, which allows the adoption of non-substantive changes to regulations without public participation.  OAL approved the regulation on 03/25/2015.   

Currently Proposed CDI Regulations – CDI currently has two substantive rulemaking proposals subject to regular APA rulemaking. 

  • Assigned Risk Program Commercial Rates – CDI File # REG-2015-00002.  This proposal implements a commercial insurance rate increase for commercial risks insured by the CA Auto Assigned Risk Program (CAARP).  The proposed average increase is 20.5%.  A public hearing on this proposal was held in Los Angeles on 4/15/15.  Since this proposal sets rates, it will probably be submitted to OAL as exempt from OAL disapproval pursuant to CA Gov. Code 11340.9. 

Informal Rulemaking Activities – Pursuant to CA Gov. Code 11346.45, state agencies are permitted and encouraged to conduct informal workshops and discussions with interested persons when they are considering adoption of “complex” regulations.   

  • Group Plans Under Prop. 103.  On 2/19/15, CDI published draft regulations to govern the approval of “affinity groups” pursuant to Insurance Code § 1861.12.  A workshop on this draft proposal took place on 3/23/15.  The draft proposal, among other changes, provides that an affinity group must be a membership organization rather than a general classification of risks.  Since this is a pre-notice discussion, the formal rulemaking process has not yet been invoked.  Actual adoption of the regulation would require a formal rulemaking proceeding.  The Department has made no formal announcement of what action, if any, will follow on this proposal. 
  • Labor Rate Surveys and Steering – CDI File # REG-2012-00002.  On 3/20/15, CDI published a notice of two workshops to be held in April for discussion of regulations which would deal with auto body shop labor rate surveys and steering.  The draft regulations would establish detailed rules which an insurer must follow in discussing choice of body shop with a claimant or in conducting a labor rate survey.  Workshops on these draft regulations were held in Los Angeles on April 3, 2015 and in Sacramento on April 16, 2015.  The Department has made no formal announcement of what action, if any, will follow on this proposal. 

Regulatory Notice.  On February 18, CDI issued a Notice Regarding Unfair Discrimination In Rating: Price Optimization.  The Notice advises admitted property and casualty insurers that California law prohibits insurance rates from being based upon “price optimization.”  The term “price optimization” is defined as “as any method of taking into account an individual’s or class’s willingness to pay a higher premium relative to other individuals or classes.”  The Notice requires “any insurer that has a factor or factors based on Price Optimization in its rating plan” to submit a new rate plan which does not employ price optimization.  The revised plans must be submitted “no later than six months from” February 18.  

The Notice may be retrieved from https://www.insurance.ca.gov/0250-insurers/0300-insurers/0200-bulletins/bulletin-notices-commiss-opinion/upload/PriceOptimization.pdf

This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.