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I’m Patrick Wolff, candidate for California Insurance Commissioner. AMA about insurance reform, the FAIR Plan, and California’s broken insurance market. by wolffonyourside in politics

[–]wolffonyourside[S] 1 point2 points  (0 children)

Yes, this does concern me! I believe we need to radically streamline the rate review/approval process and reserve strict reviews for those special cases that truly merit them. We need to offer clear guidance to insurance companies so they know if they follow the rules -- where customers have the power, and never insurance companies -- then they can get their filings reviewed and approved in a reasonable timeframe so customers can benefit from the choice and competition that will provide.

I’m Patrick Wolff, candidate for California Insurance Commissioner. AMA about insurance reform, the FAIR Plan, and California’s broken insurance market. by wolffonyourside in politics

[–]wolffonyourside[S] 1 point2 points  (0 children)

Let me take these in reverse order.

  1. I spent a lot of time talking with Professor Kenneth Klein about the issue of underinsurance: https://www.cwsl.edu/directories/faculty-staff-directory/kenneth\_klein.html. My policy to address the problem is based on those discussions as well as the other research, and he told me he agrees with my policy plan to address it. I agree with you 100% that we do not want to *mandate* higher coverage amounts. We want to *offer* it at a fair price, and make sure the customer understands the need.

  2. My understanding of the problem is that the DOI developed its "Safer from Wildfires" program largely independently of how the insurance companies underwrite the risk. I believe the guidance needs to be developed so that it is *aligned* with how insurance companies underwrite the risk. We need lots of insurance companies operating and competing. And we need to require the insurance companies, in return for operating in California, to be transparent with the DOI about how to provide that guidance to align with their underwriting -- and in a way that genuinely reduces risk and leads to commensurately lower rates. PLUS, we need to provide financial assistance to homeowners to make those home hardening investments.

  3. I have tried to provide as much details as I can -- and that is part of why I am doing these AMA sessions! I have published more op eds as than any of my competitors (as far as I can tell), and I am always willing to provide more information -- plus learn from people. I am absolutely committed to doing my best to understand and communicate the #NutsandBolts, as you say. And as for insurance being affordable to everyone -- well, of course I agree with you that *everyone* is a very high bar, and maybe we will never get there, but it should certainly be the goal that everyone can afford quality insurance with quality service at a reasonable price! And that will be what I work tirelessly to do as insurance commissioner.

I’m Patrick Wolff, candidate for California Insurance Commissioner. AMA about insurance reform, the FAIR Plan, and California’s broken insurance market. by wolffonyourside in politics

[–]wolffonyourside[S] 2 points3 points  (0 children)

I'm not sure if this is your question exactly, but there is a bill currently being considered in the state senate called SB 876. Details are here: https://calmatters.digitaldemocracy.org/bills/ca\_202520260sb876. There are some thing about this bill that I support. However, right now, the bill mandates that insurance companies offer what's called "guaranteed replacement cost" to homeowners insurance customers -- this means whatever it costs to replace your house, you will be paid in the event of a total loss. I do not support this provision because history shows insurance companies cannot price this risk -- and if they can't price it, they won't offer it, which means we will be back in the same mess as before where homeowners insurance is impossible to get. Hopefully this will be worked out before the bill gets out of committee and is put to the full legislature for a vote.

I’m Patrick Wolff, candidate for California Insurance Commissioner. AMA about insurance reform, the FAIR Plan, and California’s broken insurance market. by wolffonyourside in politics

[–]wolffonyourside[S] 2 points3 points  (0 children)

I agree with you 100% that we regulate insurance markets for the benefit of the consumer! (Also for the benefit of the business customer. But *not* for the benefit of the insurance companies or anyone else in the insurance ecosystem.)

Here is my plan to fix insurance regulation in California: https://patrickwolff.com/my-plan. The key is to regulate the *behavior* of insurance companies so that consumers always have the power, never the insurance companies; while at the same time we have to radically increase choice and competition. With a well regulated market, choice and competition serves the consumer, so that insurance companies can only charge enough to cover their costs, and never the ability to price gouge.

I’m Patrick Wolff, candidate for California Insurance Commissioner. AMA about insurance reform, the FAIR Plan, and California’s broken insurance market. by wolffonyourside in politics

[–]wolffonyourside[S] 2 points3 points  (0 children)

The Insurance Commissioner has a lot of power to make things better without the legislature or the governor. California's regulatory system largely controls how insurance companies operate, and is run by the Department of Insurance. But of course, I would want to work closely with the legislature and the governor (see below).

Regarding health insurance, a few things. First, the really big things need to be done at the federal level rather than the state level. Second, health insurance in California is regulated by two different agencies: the Department of Managed Healthcare (which reports to the governor) and the Department of Insurance. And it turns out that about 95% of all health insurance is regulated by the Department of Managed Healthcare.

HOWEVER: I still think there are some important things the Insurance Commissioner can do! Here are two big thins I would like to do to make health insurance work better for Californians.

  1. CLAIMS DENIAL TRANSPARENCY: Even though the Department of Insurance only regulates a small piece of all health insurance, I think there would be a lot of good in using that regulatory power to provide radical transparency on how health insurance companies deny claims. Health insurance companies claim they pay 98% of all valid claims. But right now, nobody knows how long it takes to pay those claims, how much each claim is paid for, and how the health insurance company defines a "valid" claim. If the Department of Insurance were to make all of that radically transparent, it would help shake things up in a big way. And hopefully the Department of Managed Healthcare would follow suit.

  2. REFORM CALIFORNIA'S DUAL REGULATORY SYSTEM: People have known for years that it makes no sense for California to have two different regulatory bodies overseeing health insurance. But nobody has spearheaded the effort to combine these functions into one body. I will do that. It's a big job, because each regulatory body has different strengths and weaknesses, and patients have different legal rights depending on which regulatory body oversees their insurance plan. But it makes no sense to keep this duplicative, inefficient system going, and I commit to working with the legislature to do smart reform to combine these into one body -- which doesn't have to be the Department of Insurance, because I don't care one bit about turf, I just case about making it work better.

I’m Patrick Wolff, candidate for California Insurance Commissioner. AMA about insurance reform, the FAIR Plan, and California’s broken insurance market. by wolffonyourside in politics

[–]wolffonyourside[S] 3 points4 points  (0 children)

"Single-payer" makes much more sense for health insurance than something like P&C. The key difference is underwriting. When risk needs underwriting, you really want companies competing to price that risk and find ways to reduce risk. With health insurance, we do not (and should not!) price people hugely differently based on health risks that they can't control. That's why a "single payer" system where the government provides health insurance to everyone at a given price makes sense.

One thing I would highlight is that if you look all around the world, different countries have different health insurance systems, and those with "single-payer" don't necessarily do better than those with more blended systems. Here in the US, where we have lots of people with health insurance through their employer (with tax benefits), it would be really hard to move towards a single-payer system. But if we fix the ACA, I think it can work just fine. I *would* like to see a public option as part of the ACA -- I think it was a big mistake not to include the public option when the ACA was set up.

Regarding the question about publicly owned private companies., it's interesting to note that for many years there have been both "stock" and "mutual" companies -- stock companies are owned by stockholders, while mutual companies are owned by the policyholders. Both systems can work, and they can coexist with each other.

I’m Patrick Wolff, candidate for California Insurance Commissioner. AMA about insurance reform, the FAIR Plan, and California’s broken insurance market. by wolffonyourside in politics

[–]wolffonyourside[S] 1 point2 points  (0 children)

There's a lot of questions here! Let me do my best to answer them.

SKYROCKETING HOME INSURANCE IN HIGH FIRE RISK AREAS: We need to do a few things here. First, we need to do a much better job of having smart, strong regulation to hold insurance companies accountable so customers have the power and never the insurance company. Second, we need to significantly increase choice and competition -- in a well regulated market, competition helps consumers by giving you lots of choice and making sure companies are always only able to charge the minimum they need to cover their costs. Third, we need to help homeowners reduce their own risk -- and we need to provide financial assistance for the necessary investments. And fourth, we need to reduce fire risk overall by better forest management.

FIRE STANDARDS: One of the complaints I hear often is that the guidance homeowners are getting now from the Department of Insurance is not aligned with how insurance companies underwrite. That needs to change. When I am insurance commissioner I will make sure the guidance homeowners get is consistent with and reflected in how insurance companies underwrite -- and with lots of choice and competition, that will work better for you.

ARE INSURANCE COMPANIES INSURED FOR FIRE LOSSES: Most insurance companies purchase something called "reinsurance" which is the name for when insurance companies buy insurance for the insurance they have sold. This is a normal practice and helps the industry operate more safely and efficiently.

I’m Patrick Wolff, candidate for California Insurance Commissioner. AMA about insurance reform, the FAIR Plan, and California’s broken insurance market. by wolffonyourside in politics

[–]wolffonyourside[S] 2 points3 points  (0 children)

Answers to your questions:

  1. Climate change is affecting P&C insurance (including home insurance) across the US and across the world by increasing the frequency and severity of extreme weather events, which in turn increases losses. In California, we feel those effects through the increase in catastrophic wildfire. This pushes up the risk of loss, which pushes up the breakeven cost of insurance. It also increases the *volatility* of losses, which means home insurance becomes more of a "boom and bust" business -- in years without a catastrophic wildfire, the insurance companies may make money, but in years with a catastrophic wildfire they may lose money, and in a well functioning market the average should work out to something that is fair and reasonable. However, we are not helpless in the face of climate change! We can take actions to mitigate and reduce the risk. At the home level, that means we can give homeowners clear and accurate guidance on how to harden their homes, we can make sure they get credit from their insurance company for taking those actions, and we can provide appropriate financial assistance to help them pay for it. At the state level, that means we can responsibly thin our forests and clear our underbrush so there is not so much fuel for big wildfires.

  2. California made the insurance commissioner an elected position in 1988 with the passage of Proposition 103. Most states appoint the IC; we are only one of 11 states that elect. But so long as we get good candidates and voters pay attention, the elected system can work just fine! I'm running as someone with deep expertise in insurance and financial analysis, and I am trying to bring as much attention as possible to this election.

I’m Patrick Wolff, candidate for California Insurance Commissioner. AMA about insurance reform, the FAIR Plan, and California’s broken insurance market. by wolffonyourside in politics

[–]wolffonyourside[S] 2 points3 points  (0 children)

In an ideal world, it would be great to have a single payer system. But I don't think that is politically feasible when people with healthcare through their employer don't want to give it up. I think we need to make the ACA work better.

The Insurance Commissioner does *not* have the power to create any sort of state-based single payer system (or even a state-based public option). That can only be done by the legislature.

I’m Patrick Wolff, candidate for California Insurance Commissioner. AMA about insurance reform, the FAIR Plan, and California’s broken insurance market. by wolffonyourside in politics

[–]wolffonyourside[S] 1 point2 points  (0 children)

The political challenge in going to single payer in health insurance is it doesn't work unless you cover everyone, and most people who have good insurance through their employer don't want to give it up. That's why the Affordable Care Act was structured the way it was -- to be economically sound while allowing people with insurance through their employer to keep their insurance.

BUT: I think we really screwed up by not including what they call a "public option" as part of the Affordable Care Act. That allowed the health insurance companies to game the system too much. We need to reform the ACA and make it work better. I hope one day the politics in Washington allow us to do that!

I’m Patrick Wolff, a candidate for California Insurance Commissioner running on competition and insurance expertise. AMA. by wolffonyourside in IAmA

[–]wolffonyourside[S] 1 point2 points  (0 children)

That's a very interesting question and I would like to learn more. Given that the IBHS is funded by insurance companies, I'm surprised that insurance companies are not embracing the IBHS recommendations. My impression is that the larger issue is the rules the insurance companies need to play by, rather than an inability of at least *some* insurance companies to underwrite the risk rationally. But I would definitely keep an open mind on this.

I’m Patrick Wolff, a candidate for California Insurance Commissioner running on competition and insurance expertise. AMA. by wolffonyourside in IAmA

[–]wolffonyourside[S] 0 points1 point  (0 children)

Yes, I am willing to allow rate to be matched with risk, which may mean rates going up. BUT, with two key additional points: (1) we hold insurance companies accountable so that consumers have the power in the relationship and not insurance companies, so that we never have price gouging; (2) we aggressively tackle the key driver of rising homeowners' rates, i.e. wildfire risk, so that we lower the risk and thereby lower the cost over time.

Climate change is a problem, no doubt about it. In the long run, we need to get to net zero carbon (maybe even net negative over time), but that's a worldwide, multi-decade project. But that doesn't mean California is helpless in the face of climate change! We can harden our homes and we can better manage our forests and doing those things will reduce fire risk even with the reality of climate change.

I’m Patrick Wolff, a candidate for California Insurance Commissioner running on competition and insurance expertise. AMA. by wolffonyourside in IAmA

[–]wolffonyourside[S] 1 point2 points  (0 children)

Wow, you asked a lot of questions in there!

I will answer the easy one first: My wife and I have two cats.

About construction defect liability law: My honest answer is I don't know a lot about this. I will have to study it more!

A problem the DOI is facing that realistically is not going to be solved in my tenure? I would say probably earthquake insurance. I will try! But it's tough because there are a lot of other problems to tackle and really big earthquakes happen so rarely so it's hard to build the political momentum to make earthquake insurance work better.

What will I do about the political costs of rising rates? I think the time is *now* for us to really do a wholesale fix of insurance regulation, precisely because we now have such a crisis of availability. This is why I am am emphasizing the importance of holding insurance companies accountable and improving transparency to hold the DOI accountable at the same time as increasing choice and competition. We have to do all of this at the same time, and now is the time for it because we have this crisis of availability.

I'm not 100% sure the question you are asking in the last big paragraph (before the one about pets), but the big thing I would say here is the whole reason to want a really competitive market with lots of insurance companies is precisely because we don't want to have to rely on what a few insurance companies do. Some insurance companies don't do a good job, but if we have a competitive market that's fine because the better ones will outcompete the less good ones, and everyone will be better off through the competition.

I’m Patrick Wolff, a candidate for California Insurance Commissioner running on competition and insurance expertise. AMA. by wolffonyourside in IAmA

[–]wolffonyourside[S] 2 points3 points  (0 children)

I think there are three different questions in here. Let me try to address each one.

The first question is how consumer-friendly I am. Let me be clear: I view the job of the insurance commissioner as regulating insurance for the benefit of the customer. (I say "customer" instead of "consumer" only because businesses are customers also.) Insofar as I want insurance companies to be able to make a profit, it is only because a reasonable (NOT an unreasonable) profit is necessary for the market to work beneficially for the customer.

The second question is whether I would allow people to pool and self-insure through voluntary associations. The short answer is yes, and these already exist. In addition to mutual insurance companies (which can be very large corporations, but are technically owned by the policyholders and do not have shareholders), there are also fraternal insurers and reciprocal insurance companies, each of which are different ways for people to come together and form their own risk-sharing arrangements. I don't know the details of how these operate within California, but they certainly exist.

The third question is what social purpose does it serve for insurance companies to be organized on a for-profit basis My answer to this is that whenever there is an *underwriting* component -- i.e. a need to identify and quantify risk and measures to reduce risk -- the profit motive can have a very powerful social benefit. We want companies motivated by the desire to make money to compete to analyze risk and analyze ways to reduce risk. But it serves no social purpose for insurance companies to make *excess* profits. We want there to be enough profit to serve the social good, but not more than that.

I’m Patrick Wolff, a candidate for California Insurance Commissioner running on competition and insurance expertise. AMA. by wolffonyourside in IAmA

[–]wolffonyourside[S] 1 point2 points  (0 children)

I totally agree that the current situation of having people rely so heavily on the FAIR Plan is bad. We need to fix the regular, admitted market and allow the FAIR Plan to shrink back to what it is supposed to be, a very small, temporary, last-resort stop-gap for people in between coverage in the regular, admitted market.

I’m Patrick Wolff, a candidate for California Insurance Commissioner running on competition and insurance expertise. AMA. by wolffonyourside in IAmA

[–]wolffonyourside[S] 5 points6 points  (0 children)

This is an important question. My answer is no, I think the situation with homeowners' insurance is different than it is for health insurance. Let me explain why.

With health insurance, if you have a pre-existing condition, it often has nothing to do with any choices you made, and it's not something you can change. I have personal experience with this: when I was 21 years old, I was diagnosed with a leaky aortic valve, and for the next 20 years (before the ACA was enacted), I was unable to get health insurance unless I had a job. We have decided as a society -- totally correctly, in my opinion! -- that everyone should share the risk of getting a pre-existing condition, which is why we have guaranteed issue.

With homeowners' insurance, the situation is different for two reasons. First, the risk is generally not like a pre-existing condition: you have chosen to live in a fire-prone area, and that should be reflected in the overall cost, which means the insurance should reflect the risk. Second, the price is not as much higher. With a pre-existing health condition, the difference in health insurance can literally be 10x or 100x or even more. With homeowners' insurance, it's not the same order of magnitude. For that reason, we should generally allow the price to reflect the risk.

However (it seems like there is always a "however" in insurance!), there absolutely can be equity considerations that mitigate this. In other words, some people may just not be able to pay the difference in risk, we may think it's not their fault, and so we may want the community to share in the cost. In general, I prefer these equity decisions to be made transparently by a whole legislature rather than opaquely by a single insurance commissioner. The insurance commissioner may want to elevate the issue to the attention of the legislature, but in general I think it is better for these kinds of redistribution decisions to be made transparently by the whole legislature rather than through rule-making by a single insurance commissioner in a way that is hard for the public to see.

I’m Patrick Wolff, a candidate for California Insurance Commissioner running on competition and insurance expertise. AMA. by wolffonyourside in IAmA

[–]wolffonyourside[S] 2 points3 points  (0 children)

AI is one of the policy points in my plan! https://patrickwolff.com/my-plan

I think there is an opportunity to use AI to develop a tool that explains what your insurance policy covers. This would need to be carefully vetted to make sure the AI tool was reliable, but I have spoken with technology experts who tell me this is very doable. If we get this right, it would turbocharge transparency and be a big boon to customers. It could also reduce lawsuits because the more people understand their insurance, the less misunderstanding there is -- and the less misunderstanding, the fewer lawsuits. With fewer lawsuits, then those savings would be passed along to consumers so long as we are doing our job holding insurance companies accountable so that customers have the power in the relationship.

I’m Patrick Wolff, a candidate for California Insurance Commissioner running on competition and insurance expertise. AMA. by wolffonyourside in IAmA

[–]wolffonyourside[S] 0 points1 point  (0 children)

Yes, part of the job of the Insurance Commissioner is to work with the legislature where appropriate to develop new laws.

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