My Plan to Fix
California’s Insurance Market
The promise of life insurance is to provide you and your loved ones confidence and peace of mind for whatever may come in the future. The people of California deserve strong, skillful regulation to make sure that promise is fulfilled.
The guiding principle in good regulation is to put the consumer’s interests first. Life insurance companies must be prevented from chasing profits by taking too much risk to ensure they will be able to fulfill their claims. Customers must be protected from aggressive sales or misleading information to ensure the product sold is appropriate and reasonable.
Here are three actions I will take as Insurance Commissioner to protect customers while making the life insurance market work fairly, efficiently and transparently.
Implement a “Best Interest” or Similar Standard for Life Insurance Agents
Analysis shows that most customers “lapse” in their life insurance – they terminate their policy early – and that life insurance companies actually earn most of their profits from these customers who lapse. While some lapsing is normal, these facts suggest too many customers are not making the right purchase decision.
In 2023, staff at the California Department of Insurance drafted proposed legislation, modeled after New York State, to protect customers by requiring a higher standard of disclosures in the sales process. But by early 2024 the life insurance lobby had watered down the bill (SB 263) so much that a broad coalition of consumer advocacy groups begged the California State Senate not to pass it into law.
In spite of this opposition, the California State Senate unanimously voted to pass this sham customer protection into law.
As Insurance Commissioner, I will work to draft real consumer protection that does not get watered down, and fight to get the legislature to pass it into law.
Fully Disclose Consumer Complaint Data
Following the passage of SB 263 in 2024, the California Department of Insurance has repeatedly denied to disclose statistics on complaints by California consumers regarding life insurance and annuities.
I view this as a similar issue as my promise to grade every P&C insurance company on how they process claims. Customers have a right for the data on complaints and customer satisfaction to be public.
As Insurance Commissioner, I will fully disclose all available consumer complaint data, and create a reliable public dashboard to track customer satisfaction.
Address the Growing Risk of Related Party Transactions
There is increasing concern about life insurance companies taking greater risk in an effort to increase profits. Some life insurance companies are using what is called “related party transactions” to evade the safety and soundness regulations that are supposed to make sure your money is safe in their hands.
Unfortunately, because life insurance companies are regulated state by state, no single state can unilaterally close these regulatory loopholes. Many of the largest, best-known life insurance companies base themselves in a state that allows these shenanigans, and then they sell all across America, including in California.
Therefore, as Insurance Commissioner I will follow a two-pronged strategy both to protect consumers from further exposure and to address the root cause of this growing risk.
First: I will work with the legislature to require disclosures to alert the consumer when a life insurance company they are considering buying from is deemed a high risk by the California Department of Insurance because of these risky practices.
Second: I will work within the National Association of Insurance Commissioners – the nonprofit body that organizes all state insurance commissioners – to galvanize effective enforcement of the Model Holding Company Act (Section 5A). We already know what regulation is needed to stop this irresponsible behavior: what is needed now is the leadership to ensure every single state upholds it.
