Department of Insurance Holds Pre-Notice Public Workshop on Proposed Regulations Regarding Auto Insurance Discounts


By Marie McDonald Hulen

On January 28, 2020, the California Department of Insurance (the Department) held a pre-notice workshop in Los Angeles to hear public feedback on a proposed regulation that would change the way auto insurers offer discounts to drivers. The proposal comes after the Department conducted a study, including a representative map, revealing that people who live in areas with a higher average income receive more affinity group discounts from auto insurers than people who live in lower-income areas. According to the Department, the goal of the proposed regulation is to promote economic equity, make auto insurance discounts more accessible to people in low-income areas, and prevent insurers from “cherry-picking” those who receive discounts. In November 2019, the Department held an informal hearing presenting their research and hearing public comment with respect to the findings.

On December 23, 2019, in preparation for the workshop, the Department released workshop draft text of its proposal to amend sections 2632.5 and 2632.9, Title 10 of the California Code of Regulations (CCR), and adopt section 2644.27.5, Title 10 of the CCR, to address the disparities revealed in the study. Specifically, the new regulation would require, among other things, that “[a]n insurer’s group plans, taken as a whole, shall afford all persons full and equal advantages, privileges, and services, no matter their sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, sexual orientation, citizenship, primary language, immigration status, education, occupation or income level.”  It would also subject insurers to reporting requirements with respect to this information, and require compliance with these new provisions as a prerequisite to approval of any group rating plan on or after January 1, 2022. According to a Department press release, the proposed regulations are designed to reform how insurance companies offer group discounts based on occupation, education, and other arbitrary factors that historically have not been available to drivers in less-affluent and more diverse communities. “If adopted, this would be the first major change to the use of so-called ‘affinity group’ discounts since California voters approved Proposition 103 in 1988, outlawing “redlining” and other forms of discrimination in insurance.”

At the workshop, a `three-person panel from the Department provided an overview of the proposed amendments and announced that while the Department takes the position that this regulation is exempt from the Administrative Procedure Act (APA) rulemaking requirements because it is about implementing fees, rates, and tariffs, in the spirit of transparency they are planning to follow a public notice procedure that is similar to that required by the APA.

The majority of public commenters at the workshop were community leaders who represented religious groups, social organizations, and unions. In general, they commended the Department for the intent behind this regulation but expressed concern that it would not in practice actually benefit those who need auto insurance discounts most. Many commented that the regulation as drafted would make it even more difficult for people in low-income communities and owners of small businesses to create and become part of affinity groups, and encouraged the Department to reduce the currently-proposed burdensome filing requirements, to withdraw provisions requiring the disclosure of private information, and to work with small groups and lower-income communities to educate them about the benefits available to them and help them create more avenues to discounts.

Representatives from consumer advocate groups also offered public comment expressing concerns about the practical outcomes of its implementation, calling on the Department to make the rating methodology more clear and to implement a system that would actually ensure that abuses would not continue.

Representatives from the Insurance industry also commented, advocating for maintaining the existing program, challenging the Department’s authority to implement this regulation and asserting that the proposed regulation is not authorized by Proposition 103 because its specific provisions exceed the limitations set out in the statute. They also disagreed with the Department’s conclusion that insurers are currently abusing the system, and denied that they “cherry-pick” drivers who receive discounts.

The Department plans to take the public comments into account as it considers any revisions it might make to the proposed regulation. At this time, no further information is available to the public about what revisions might be made and when, but the Department promises to continue press releases about the proposed regulation as its process continues.


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