California Department of Insurance News and Updates


Historic $41 million payment closes book on decades-long court battle with Mercury Insurance Company

News: 2019 Press Release

For Release: October 2, 2019

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Department prevails in fight against Mercury’s rating violations and unfair insurance practices

SACRAMENTO, Calif. — Today Mercury Insurance Company agreed to pay $41,188,505 ending a two-decades long Department of Insurance legal fight – the largest property and casualty payment in the department’s history.

The payment resulted from a record $27.6 million penalty plus more than $8.1 million in interest. The California Supreme Court recently rejected Mercury’s request for review of the case and historic fine prompting Mercury to pay the penalty, plus interest, and to settle a second phase for $5,460,868 that had not yet been tried in the courts. The second phase involved false advertising claims the department was preparing to prosecute under the Unfair Insurance Practices Act (Ins. Code, §790.03).

“Today is a testament to the tenacity of the Department of Insurance team who won this in court and kept the pressure on Mercury, which profited by skirting the law and taking advantage of consumers,” said Insurance Commissioner Ricardo Lara. “This was a hard fought legal battle to protect consumers, defend Proposition 103 and make sure all insurers play by the rules in California. No insurance company is above the law.”

In 1998, the department discovered Mercury’s scheme to evade Proposition 103 protections. As part of the scheme, Mercury misrepresented that its agents were brokers, implying that they worked for the consumers rather than Mercury. Mercury then illegally allowed agents to charge and collect unapproved fees directly from consumers on more than 180,000 transactions from 1999 to 2004. At the time, Mercury advertised its rates as lower than the competition, but did not disclose it charged illegal broker fees on top of the rates.

Under the scheme, the extra fees gave agents a huge incentive to place policies with Mercury, even if another insurance company’s policy would have cost the consumer less.

Aside from charging consumers unfairly discriminatory rates for a Mercury insurance policy and misrepresenting the amount of its rates in comparison to its competitors, Mercury’s use of unapproved fees unfairly edged its competitors out of large segments of the auto-insurance market.

“Mercury’s illegal actions misled consumers and undercut competitors, which gave them an unfair advantage in the insurance marketplace,” Lara said.

In the false advertising phase, the commissioner alleged that Mercury advertised its premium was lower than its competitors, when the premium was actually higher than advertised once the illegal fees were added. The commissioner settled those unfair practice claims for an additional $5,460,868, which includes cost-reimbursements for the 20 years of litigation, and a half-million dollars in additional penalties.

Of the $41 million payment, $36,227,637 in penalties and interest will be paid to the California General Fund. Nearly $5 million of today’s payment will repay the Proposition 103 Fund, which benefits all ratepayers, including those of Mercury’s competitors who played by the rules. The department’s Proposition 103 enforcement fund comes from a surcharge on insurance companies that they may pass through to consumers. Requiring Mercury to pay back the Proposition 103 Fund means the entire cost of prosecuting Mercury is borne by Mercury, and not by ratepayers.

 Media Notes:

Commissioner Lara Announces Insurance Strike Team During Meetings with County Leaders

News: 2019 Press Release

For Release: August 8, 2019

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Commissioner Lara visits Butte, Placer and Nevada Counties to pledge support to communities affected by insurance non-renewals and premium increases

BUTTE/PLACER/NEVADA COUNTY, Calif. — On Wednesday, Insurance Commissioner Ricardo Lara visited communities experiencing an upsurge in insurance non-renewals and other issues in the wake of the 2017 and 2018 fires, which caused nearly 150 deaths and $25 billion in property losses.

Commissioner Lara announced the formation of a Department of Insurance Strike Team to visit affected communities in the coming weeks and months. The Strike Team will connect residents to resources and assist local governments in assessing and responding to insurance issues.

Commissioner Lara met with community leaders and local officials in Butte, Placer and Nevada Counties to share their concerns about insurance availability and affordability in the wake of the fires. County leaders have recently contacted the Department of Insurance over how wildfire insurance issues are affecting residents. He told them that complaints to the Department of Insurance related to non-renewals are up nearly 600% since 2010 in areas with increased wildfire risk.

“Insurance issues are a reality for many across our state, and I am deploying Department of Insurance strike teams to some of our hardest-hit areas," said Commissioner Lara. "With non-renewals on the rise, I will work with local leaders on statewide policies that reduce risk to make sure we keep insurance available and affordable. My staff at the Department have already begun requesting more detailed insurer data in order to increase transparency.”

Commissioner Lara and United Nations Announce Nation’s First Sustainable Insurance Roadmap to Reduce California’s Climate Risks

News: 2019 Press Release

For Release: July 24, 2019

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Commissioner Lara and United Nations Announce Nation’s First Sustainable Insurance Roadmap to Reduce California’s Climate Risks

Commissioner Lara announced the Sustainable Insurance Roadmap at a roundtable with Senator Ben Allen, Kate Gordon, Director of Governor Newsom's Office of Planning and Research, Senator Nancy Skinner and Senator Henry Stern.

Commissioner Lara announced the Sustainable Insurance Roadmap at a roundtable with Senator Ben Allen, Kate Gordon, Director of Governor Newsom's Office of Planning and Research, Senator Nancy Skinner and Senator Henry Stern.

Commissioner Lara announced the Sustainable Insurance Roadmap with the United Nations yesterday at UCLA School of Law.

Commissioner Lara announced the Sustainable Insurance Roadmap with the United Nations yesterday at
UCLA School of Law.

LOS ANGELES, Calif. – The California Department of Insurance and the United Nations Environment Program (U.N. Environment) have launched a yearlong effort to develop a Sustainable Insurance Roadmap to confront California’s climate risks. Insurance Commissioner Ricardo Lara and Butch Bacani, who leads U.N. Environment’s Principles for Sustainable Insurance (PSI)—the largest collaboration between the United Nations and the insurance industry—announced the groundbreaking initiative at a roundtable co-hosted with the UCLA School of Law and UC Berkeley School of Law.

This is the first time the United Nations has partnered with an American state to create a sustainable insurance strategy and action plan that would tackle the growing risks of climate change. Last year, California experienced the deadliest and most destructive wildfires in the state’s history, resulting in more than $12 billion in insured losses, making it the world’s costliest disaster. 

“We have a historic opportunity to utilize insurance markets to protect Californians from the threat of climate change, including rising sea levels, extreme heat and wildfires,” said Insurance Commissioner Ricardo Lara. “Working with the United Nations, we can keep California at the forefront of reducing risks while promoting sustainable investments.”

“A sustainable insurance roadmap will enable California to harness risk reduction measures, insurance solutions, and investments by the insurance industry in order to build safer, disaster-resilient communities, and accelerate the transition to a low-carbon, sustainable economy,” said U.N. PSI leader Butch Bacani. “With Commissioner Lara’s vision and leadership, we look forward to working together with insurers and key stakeholders to drive ambitious climate action now, in line with the aims of the Paris Agreement on Climate Change.”

California is the largest insurance market in the U.S., and one of the largest in the world. The California Department of Insurance was one of the first insurance regulatory and supervisory authorities in the world to sign U.N. Environment’s Principles for Sustainable Insurance and commit to tackling global sustainability challenges such as climate change, biodiversity loss and ecosystem degradation, pollution, and social and financial exclusion.

The California Sustainable Insurance Roadmap is envisioned to pave the way for innovative risk management, insurance and investment solutions that reduce climate risks and protect natural ecosystems. For example, new insurance products could be developed to promote cooler streets and renewable energy. In other countries, insurance solutions for coral reefs and mangroves are emerging as these natural ecosystems have been proven to significantly reduce wave energy and buffer storm surge, reducing flood risk and protecting communities. In this vein, insurance solutions for California’s protective, life-supporting natural infrastructure—such as wetlands and forests—could reduce climate and disaster risk and present new opportunities. 

The latest report of the Intergovernmental Panel on Climate Change (IPCC) highlights the rapid, far-reaching and unprecedented changes needed to limit global warming to 1.5°C. It shows that every extra bit of warming matters, and that warming of 1.5ºC or higher increases the risk associated with long-lasting or irreversible changes, such as the loss of some ecosystems. Moreover, the latest report of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) finds that around 1 million animal and plant species are now threatened with extinction, many within decades, more than ever before in human history.

The California Department of Insurance and U.N. Environment’s PSI Initiative will engage insurers and reinsurers, public policy leaders, environmental NGOs, researchers, and risk management experts on this major collaborative effort to make California’s communities and economies resilient, inclusive and sustainable.  About U.N. Environment’s Principles for Sustainable Insurance Initiative: Endorsed by the UN Secretary-General, the Principles for Sustainable Insurance serve as a global framework for the insurance industry to address environmental, social and governance risks and opportunities—and a global initiative to strengthen the insurance industry’s contribution to building resilient, inclusive and sustainable communities and economies.

About Commissioner Ricardo Lara: Commissioner Lara is one of California’s environmental leaders who authored the state’s super-pollutant reduction strategy and received the first Climate and Clean Air Award with former Governor Jerry Brown. He wrote the nation’s first climate insurance bill to protect California’s natural environment. Under his leadership, the Department of Insurance has created the first deputy-level position for climate and sustainability.

Climate Change

Commissioner Ricardo Lara has appointed the nation’s first Deputy Insurance Commissioner of Climate and Sustainability in the United States as California once again leads the nation by working with environmental and industry leaders to find innovative solutions to the risks posed by climate change. Our new Climate and Sustainability Office will address the threat of climate change by working with the insurance industry, climate experts, California and international leaders. 


Department warns insurers against discriminating over HIV prevention medication

News: 2019 Press Release

For Release: June 20, 2019

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Department warns insurers against discriminating over HIV prevention medication

Investigation uncovers evidence of denying coverage, charging higher rates to HIV-negative individuals who used PrEP

SACRAMENTO, Calif. – Today California Insurance Commissioner Ricardo Lara warned insurers after an investigation uncovered evidence of discrimination against HIV-negative individuals who used medication to prevent contracting the disease.

The Department of Insurance investigation of life, disability income and long-term care insurance companies found that some insurers had denied or limited coverage, restricted products available through accelerated underwriting, placed conditions on coverage, or charged higher rates to users of pre-exposure prophylaxis, or PrEP, medication.

The Department of Insurance’s notice advises insurers that under California law, a person’s history of PrEP use cannot be used as a justification to deny life, disability or long-term care insurance coverage or charge higher premiums for that coverage. The notice encourages insurers to review their underwriting guidelines and practices to ensure they are not unlawfully discriminating against applicants

With an influential medical panel now recommending daily medication to prevent upwards of 40,000 HIV infections annually in the United States, Insurance Commissioner Ricardo Lara took action to protect patients who could face discrimination from life, disability or long-term care insurers based on a record of taking antiretroviral therapy to prevent HIV.

“PrEP prevents HIV, pure and simple, and I will not tolerate insurers violating California law by discriminating against people taking proactive steps to be healthy,” said Commissioner Lara. “The Department of Insurance warns insurers to stop discrimination against PrEP users and review their underwriting rules before we take action. As we celebrate Pride Month, ending HIV infections is within our reach. But first we have to eliminate prejudice and fear that still stands in the way of a cure.”

The notice applies to all companies who sell life, disability and long-term care insurance in the nation’s largest insurance market. During the Department’s investigation, a number of insurers reported that they have discontinued these practices.

The Department will continue to review insurer compliance with the law, and individuals who believe they were subject to discriminatory underwriting practices can contact the Department of Insurance at 800-927-4357 for assistance.

The influential U.S. Preventive Services Task Force recommended on June 11 that doctors prescribe daily PrEP medication to those at high risk of HIV infection. Studies show only 17 percent of those eligible for daily PrEP actually take it.

The Department of Insurance recently participated in a lawsuit against federal rules that would allow medical providers to deny care to LGBT patients and other vulnerable people.

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Media Notes:

  • Notice on Insurer Underwriting Practices for Truvada/PrEP Users

  • California law prohibits unfairly discriminating for life insurance between similar individuals in the rates charged, benefits payable, or any other terms or conditions. California Insurance Code (Ins. Code) §§ 790.01 and 790.3(f)(1).

  • California law also prohibits insurers who write disability income or long-term care from refusing to insure, limiting coverage, or charging different rates because of an impairment unless there is an actuarial basis. Ins. Code §§ 10144 and 106(b)(8).

  • California law prohibits denying insurance coverage, restricting benefits payable, or modifying the terms or conditions of coverage based on the sexual orientation of the insured or prospective insured. Title 10, California Code of Regulations § 2560.3.

Wildfire insurance losses from November 2018 blazes top $12 billion

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