A claims practice expert who wants to remain anonymous commented to me on the recent Los Angeles Times article regarding wildfire victims and State Farm with the following:
Regulators have a tough choice: Do we regulate the ‘sale’ of policies, or do we regulate ‘delivery’ of the product? There’s a compelling reason to focus on sales. A regulator’s prime concern is solvency. Premiums support solvency while indemnity and service costs erode the company’s financial condition.
So the focus on Market Conduct Examinations (MCEs) has pretty much been about price and promise, not on the myriad ways insurers can delay or underperform on claim-handling duties. It shouldn’t be a shock to learn that a fledgling NAIC hired McKinsey & Company back in the 1970s to advise how to regulate insurers; McKinsey leveraged this engagement to help many personal lines insurers redesign their systems to either comply with its new methods or to give the appearance of compliance.
We’re now in a world where insurers want claims people to be called ‘claim professionals,’ but they don’t want licensure, increased education requirements, claim practices surveillance, fact-finding, or remedial actions like sanctions and suspensions. Insurers have a real problem with staffing on the claims side, and it’s not just a matter of meeting the qualifications. The work of handling the public’s troubles is challenging. It shouldn’t be but often is … confrontational. Not every employee can take that day in and day out!
Pulitzer Prize–winning investigative journalist Paige St. John’s recent Los Angeles Times article shows what happens when regulators lean too heavily toward overseeing the sale of insurance and not enough toward ensuring its performance. The headline to her story emphasizes the point: “L.A. Fire Victims Say State Regulators Ignored Complaints About State Farm.” 1
According to the article, more than a dozen homeowners and their representatives reported that the California Department of Insurance did little to resolve complaints about delays, denials, low rebuilding estimates, and slow payments of additional living expenses. Some policyholders said they were told to stop communicating with complaint handlers. Others found their files closed while their claims were still very much in dispute. One homeowner described sending emails “into oblivion” while wrestling with ever-changing adjusters and unresolved smoke damage issues.
These are not abstract compliance problems. They are family and community problems. They are the difference between returning home and living in limbo. Insurance has a big impact on communities trying to rebuild after a large scale disaster.
The article also details how a senior regulator who sharply criticized State Farm’s claims handling was disciplined after a State Farm lawyer complained to department leadership. Whether one agrees with her tone or not, the optics are troubling. When those inside a regulatory agency who push hard on behalf of policyholders are sidelined, it sends an uncomfortable message to other regulators.
Meanwhile, State Farm was pursuing rate increases and non-renewing tens of thousands of policies while handling the largest share of wildfire claims. That is precisely the tension the anonymous expert described. Premium adequacy and solvency dominate regulatory attention throughout the country. When that happens, claims delivery becomes a secondary concern until disaster strikes. Then the public learns that complaint units are understaffed, claims enforcement authority is limited, and even when compliance regulators see potential violations, they may not be able to act or even inform the policyholder of what they found.
This is not just happening in California. Virtually every state insurance department currently faces the same issue and tension because property insurance companies are charging more and becoming more discerning with underwriting. Insurance affordability is the current big issue. But what about claims performance?
Insurance is not a commodity product like a toaster or an apple. It is a contract with a future promise. The true test of that promise is not at the point of sale but at the moment of loss. If regulators focus overwhelmingly on rate filings, actuarial models, price, and capital reserves while treating claims handling as a customer service issue rather than a core regulatory function, the system becomes unbalanced.
In my view, the claims department is the insurance company. Marketing sells the dream. Underwriting prices the risk. Claims is where the promise and the product is either honored or broken.
If insurers want their claims personnel to be regarded as professionals, then professionalism must come with standards, more stringent licensure, more education, transparent performance metrics, and meaningful oversight. There should be consequences when systemic underperformance is uncovered. Doctors, lawyers, and engineers operate under that framework. Why should the people entrusted with determining whether a wildfire victim can rebuild their life be held to less?
Regulators do face difficult choices. Solvency matters. We do not want hollow insurers unable to pay claims. But solvency without accountability regarding fulfilling the promise is not stability but imbalance. The insurance companies and their representatives want the delivery of the insurance product to be one in which the consumer cannot hold the insurer accountable for non-performance.
So, my view is that Paige St. John’s reporting forces asking the uncomfortable question: Who regulates the delivery of the promise?
Until regulators give equal weight to how claims are handled as they do to how policies are sold, wildfire survivors and victims of every other catastrophe will continue to feel that they are navigating the most important financial event of their lives alone, and often without meaningful civil methods to privately enforce accountability.
If you are interested in further reading on this topic, I suggest: Wrongful Claims Practice Regulation Is Ineffective, and Why Florida’s New Market Conduct Examination Laws Mean Nothing.
Thought For The Day
“The time is always right to do what is right.”
—Martin Luther King Jr.
1 St. John, Paige. “L.A. fire victims say state regulators ignored complaints about State Farm.” Los Angeles Times, Feb. 19, 2026; updated Feb. 21, 2026. Available online (subscription required): https://www.latimes.com/business/story/2026-02-19/la-fire-victims-say-state-regulators-ignored-complaints-about-state-farm
