The growing frustration about claims handling among policyholders, those advocating for them, and even many within the insurance industry itself is not misplaced. For years, people have asked why systemic claim-handling practices never seem to show up in market conduct examinations. The answer, unfortunately, has less to do with the absence of these practices and more to do with the structure of the examinations themselves.
Regulators rarely request the internal records, initiatives, scorecards, audits, engineering directives, or managerial programs that actually drive claim outcomes. When you do not ask to see the metrics of the steering mechanism, you cannot diagnose why the car is veering off the road. I have discussed this in The Regulatory Blind Spot: How Insurance Departments Fail to Detect Systemic Bad Faith Claims Practices.
The traditional market conduct methodology is built around file review. It looks at what is in the claim file, not what is behind it. But modern claims handling is not driven by adjuster discretion written neatly into a file; it is driven by internal initiatives, performance standards, third-party vendor arrangements, and executive-level directives designed to tighten, cap, or reroute indemnity payments. Those internal mechanisms are where the real decisions get made. Yet they remain largely untouched by regulators because the examination protocols do not demand them.
So, the public, understandably, has begun to look elsewhere for oversight. State attorneys and county prosecutors with consumer-protection authority are stepping into the vacuum left by passive or outdated regulatory practices. The recent inquiry by Los Angeles County into State Farm’s internal claim initiatives was not an accident. It was a recognition that traditional regulatory channels would never surface those documents on their own. This was explored in Los Angeles County Takes on State Farm Over Wildfire Claims.
The same is true in Oklahoma, where the attorney general has intervened to investigate allegations of a coordinated program to reduce roof-related claim payments. These are not fringe developments. They are early signs of a broader shift in who the public trusts to police systemic claim practices. Those interested should carefully read the allegations in the attorney general’s motion to intervene in a civil lawsuit. 1
Those upset with the lack of regulatory action should not be surprised. When regulators do not evolve their investigative tools to match the evolving strategies of insurers, a transparency gap opens wide enough to swallow entire market trends. In that void, attorneys general, county counsel, and other government entities with consumer-protection mandates are beginning to assert themselves. They have the power to subpoena internal initiatives. They can compel testimony from the people who design these programs. They can enforce statutes that do not require a market conduct framework to be triggered. Most importantly, they are not limited to reviewing whatever happens to sit inside the claim file.
This is not an indictment of every regulator. There are dedicated professionals working inside departments of insurance across the country. But the system they operate within is not built to detect systemic misconduct masked behind corporate language about “leakage reduction,” “accuracy improvements,” or “consistency initiatives.” When the methodology is outdated, the outcome is predetermined: nothing changes, nothing is revealed, and the public continues to pay more for policies while receiving less protection from the oversight structure designed to keep the marketplace honest.
The actions in California and Oklahoma signal a new path forward. If regulatory frameworks cannot or will not examine the internal machinery of claims handling, then consumer-protection authorities will. This is not only appropriate. It may be necessary. Because as long as insurers hold the only keys to the vault of their internal procedures, and regulators decline to ask for them, transparency will not come from inside the industry. It will come from those with both the jurisdiction and the resolve to demand it.
Thought For The Day:
“Power concedes nothing without a demand. It never did and it never will.”
—Frederick Douglass
1 Hursh v. State Farm Fire & Cas. Co., No. CJ-2025-2626 (Okla. Dist. Ct. Dec. 4, 2025).
