Key Takeaways
- The California Department of Insurance (CDI) regulates all P&C insurance activities under the California Insurance Code
- The Insurance Commissioner is elected by California voters to a 4-year term—one of only 11 states with elected commissioners
- CDI handles licensing, rate review, market conduct examinations, and consumer complaints for P&C insurance
- Proposition 103 (1988) requires prior approval for most P&C insurance rates in California
- California requires fingerprinting through Live Scan for all insurance license applicants
California Department of Insurance (CDI)
Important: This study guide covers California state-specific Property & Casualty insurance content only. You should complete the national Property & Casualty exam preparation first, as it covers the foundational insurance concepts tested on your exam.
The California Department of Insurance (CDI) is the state agency responsible for regulating the Property & Casualty insurance industry in California. Unlike many state agencies headed by appointed officials, California's Insurance Commissioner is elected by voters.
The Insurance Commissioner
The Insurance Commissioner is:
- Elected by California voters to a 4-year term
- One of only 11 states where the commissioner is elected
- Responsible for enforcing the California Insurance Code
- Authorized to adopt regulations, review rates, investigate violations, and discipline licensees
Commissioner Powers for P&C Insurance
| Power | Description |
|---|---|
| Licensing | Issue, suspend, and revoke producer licenses |
| Rate Review | Approve or disapprove P&C insurance rates (Prop 103) |
| Market Conduct | Examine insurer business practices |
| Enforcement | Investigate and prosecute violations |
| Consumer Protection | Handle complaints and protect policyholders |
| Rulemaking | Adopt regulations interpreting the Insurance Code |
Proposition 103
Proposition 103 (1988) significantly changed California P&C insurance regulation:
Key Provisions
- Prior Approval: Most P&C rates must be approved by CDI before use
- Rate Rollbacks: Initial 20% rollback of auto and other P&C rates
- Good Driver Discount: Mandates 20% discount for qualified drivers
- Rating Factors: Limits factors insurers can use for auto insurance
- Consumer Intervention: Allows consumer groups to challenge rates
Prop 103 Rating Factors for Auto Insurance
California law mandates these factors be considered in this order of importance:
- Driving safety record (most important)
- Annual mileage
- Years of driving experience
Exam Tip: Remember the three mandatory rating factors for California auto insurance and their order. This is frequently tested.
CDI Organization
CDI operates through several branches for P&C insurance:
- Producer Licensing Bureau - Handles agent/broker licensing
- Rate Regulation Branch - Reviews P&C insurance rates
- Market Conduct Branch - Examines insurer practices
- Fraud Division - Investigates insurance fraud
- Consumer Services Bureau - Handles consumer complaints
How is the California Insurance Commissioner selected?
Under Proposition 103, what is the most important rating factor for California auto insurance?