REGULATORY UPDATE

The following update may be of interest to attorneys practicing insurance law:

INSURANCE PRIVACY LEGISLATION

Sponsored by the California Department of Insurance, SB 354 establishes data privacy standards for insurance licensees and their third-party service providers to give consumers greater control over their personal information.

The key provisions of SB 354 require California insurance licensees to:

• Ensure consumers’ personal information is used to provide the insurance product requested by consumer, and not for other purposes without consumer’s express consent (note: sale of consumers’ personal information is prohibited for any reason, except if preempted by the Fair Credit Reporting Act);
• Provide notices to consumers on what information is collected, how it is used, to whom it is closed, and what rights the consumer has under the law; and
• Develop and follow procedures related to consumer data protection, retention, and deletion.

Introduced on February 12, 2025, SB 354 passed the Senate Insurance and Judiciary Committees as of April 29, 2025, and has been referred to the Appropriations Committee. The bill is opposed by some industry associations, including the ACLI and APCIA. If enacted, it would be effective on January 1, 2026.

Please see the bill summary, FAQs, and California DOI’s press release for more information.

APPROVAL OF INTERIM RATE RELIEF FOR STATE FARM

In a noteworthy decision, California Insurance Commissioner Ricardo Lara approved State Farm General Insurance Company’s (“State Farm”) request for an emergency rate increase on May 13, 2025, making State Farm the first insurance company to obtain interim rate relief under Proposition 103 as part of a prior approval rate application. Commissioner Lara’s decision adopted an administrative law judge’s review and proposed decision to approve State Farm’s request for an interim rate relief after the Los Angeles wildfires. The administrative law judge’s order is available here. The administrative law judge’s review found, in part, that “State Farm is experiencing extraordinary financial distress, coupled with surplus depletion that threatens ongoing business operations.”

Pending a full hearing, Commissioner Lara’s approval grants State Farm a 17% interim rate increase for its homeowners line, effective June 1, 2025. As part of the approval, State Farm has agreed to secure a $400 million surplus note from its parent company to reinforce its solvency, and to refrain from issuing new block non-renewals until the end of 2025. A full rate hearing will be scheduled by the administrative law judge.

SMOKE CLAIMS & REMEDIATION TASK FORCE

Following a March 7, 2025 Bulletin providing guidance for handling of smoke damage claims, the California Department of Insurance is forming a Smoke Claims & Remediation Task Force which will be charged with:

• Evaluating existing methods of best practices and recommending uniform standards for inspecting, testing, and remediating properties with smoke damage;
• Recommending standards for determining whether structures damaged are below, at, or above, established levels for health and safety of occupants; and,
• Determining which state and local government agencies must be involved in creating and enforcing these standards, including to mitigate the submission of fraudulent or exaggerated smoke claims.

Commissioner Lara is actively appointing Task Force members and will announce its membership in the coming weeks. The first convening will be scheduled thereafter.

EXPORT LIST HEARING On May 16, 2025, the CDI issued a Notice of Export List Public Hearing scheduled for June 17, 2025 at 10 a.m. pacific. The public is invited to participate via videoconference. The Export Lists identifies types of coverage or risk that can be placed on a surplus line basis without a diligent search of the admitted market because the Commissioner has determined that there is not a reasonable or adequate market among admitted insurers or that the type of coverage is for new, innovative products for which a reasonable or adequate market among admitted insurers has not had time to develop.