Three insurance privacy, accountability laws backed by CDI sent to governor

The California legislature has approved a package of 10 bills sponsored by Insurance Commissioner Ricardo Lara, three of which are meant to hold insurance companies accountable, according to a California Department of Insurance (CDI) press release.

“Californians deserve an insurance system that works for them before, during, and after life’s most difficult moments,” Lara said in the release. “Consumers play by the rules, and insurance companies should too. These reforms strengthen accountability, speed disaster recovery, protect privacy, and expand access to health care. They reflect years of working with consumers, lawmakers, and the Governor to turn real challenges into lasting protections.”

Legislation related to insurance accountability and transparency includes Senate Bills 354, 1209, and 1206.

On or after July 1, 2028, if signed by Gov. Gavin Newsom, SB 354 would revise the state’s Insurance Information and Privacy Protection Act to establish new standards for how consumers’ personal information is processed and shared by insurance licensees, surplus line insurers, reinsurers, and third-party service providers. Senate President pro Tempore Monique Limón (D-District 21) sponsored the bill.

Under the bill, consumers’ personal information could only be shared if it’s “reasonably necessary and proportionate to achieve specified purposes related to an insurance transaction or another purpose that is fully disclosed to the consumer and to which the consumer has consented.”

It would also require insurance licensees to provide a privacy rights notice to each consumer with whom they have an ongoing business relationship.

In addition, SB 354 would require insurance licensees, surplus line insurers, or reinsurers to:

• • Provide specified information to consumers when an adverse underwriting decision is made
  • Provide a process for consumers to access, correct, amend, or delete any personal information in their possession
  • Require a contract between a licensee, surplus line insurer, or reinsurer and a third-party service provider to govern the processing and sharing of personal information performed on behalf of the licensee, surplus line insurer, or reinsurer.
  • Prohibit retaliation against a consumer when consumers exercise or attempt to exercise their rights under the act.

The CDI release states that California’s insurance privacy laws are more than 40 years old and haven’t “kept pace” with modern industry practices.

SB 1209, the Insurance Examination Compliance and Accountability Act, would close a major gap in existing law by providing the CDI with stronger enforcement authority when insurers fail to comply with corrective actions identified through financial and market conduct examinations, according to the release. Sen. Ben Allen (D-District 24) sponsored the bill.

The bill, as approved by the legislature, states that when examined insurance companies fail to take corrective actions to remediate identified violations of specified laws and regulations, they will be subject to a penalty.

The insurance commissioner would have the authority to issue and serve an order to show cause on an examined company, with a statement of the charges, its potential liability, and a notice of hearing if there is reason to believe it hasn’t complied with a recommendation in an examination report.

“If the charges are found to be justified, the commissioner shall issue, and serve on the company, an order requiring the company to pay the penalty imposed by this section and to comply with and implement the recommendations contained in the report,” the bill states.

CDI says the bill would establish clear compliance timelines, create a formal order-to-show-cause process, authorize penalties for failure to complete corrective actions, and allow insurers to request additional time when appropriate.

The release states that SB 1206, introduced by the Committee on Insurance, is CDI’s annual omnibus bill, and updates California insurance law by:

• • “Expanding grounds for inactive licenses;
  • “Adjusting insurer investment authority;
  • “Strengthening licensing and disclosure requirements;
  • “Updating public adjuster rules;
  • “Improving workers’ compensation fraud reporting requirements; and
  • “Modernizing other insurance regulatory provisions.”

“California faces real challenges, but resignation is not a strategy,” Lara said in the release. “I believe in a stubborn optimism grounded in action. These reforms prove that progress is possible when we meet challenges with determination and purpose.”

Three of the bills in the package, specific to home insurance coverage and relating to natural disaster claims, have the support of Consumer Watchdog, a nonprofit consumer advocacy organization.

“Arbitrary claims delays and unjustified non-renewals strip consumers of the financial security that comes with insurance,” said Carmen Balber, executive director of Consumer Watchdog, in an article by the organization. “These critical reforms hold insurance companies to their promises and keep families housed with clear instructions on what it will take to stay insured. We want to thank lawmakers for supporting these three bills from Senator Pérez and Senator Allen, and the thousands of Californians and dozens of organizations who raised their voices to back insurance that works for everyone.”

Newsom has until Sept. 30 to sign or veto bills that the legislature has passed.

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