Los Angeles wildfire survivors insured by State Farm keep asking us a fair question: “What is taking so long for California to investigate State Farm’s wildfire claims handling? The Los Angeles County Counsel announced its civil investigation months ago. The California Department of Insurance launched its market conduct examination in June 2025. Yet there has been no public report, no consent order, and no announced penalties. Meanwhile, many policyholders are still frustrated with how their claims were handled. Some wonder if it was all a publicity stunt to placate them.
I have written before about what a market conduct study is in “What Is a Market Conduct Study?” I have written about the history behind these regulatory reviews and the need to obtain internal documentation, and not just look at claims files, in “What is the History of Market Conduct Studies?” Market conduct examinations are supposed to serve as the referee in the arena. They are designed to determine whether an insurer’s practices comply with statutory and regulatory requirements. In theory, they protect the public from systemic unfair claims handling. In practice, they can be slow, opaque, and, in my opinion, most often incomplete because they do not ask for enough internal documentation.
Let’s start with the timeline. The California Department of Insurance publicly confirmed that it opened a targeted market conduct examination into State Farm’s wildfire claims handling in June 2025. That examination focuses on patterns such as delays in payment, adjuster reassignments, smoke damage handling, additional living expense payments, and compliance with California’s Fair Claims Settlement Practices Regulations. These claims examinations typically take six to twelve months. Catastrophe-related exams often take longer because they involve large claim volumes and extensive sampling. Draft reports are prepared, insurers are given the opportunity to respond, language is negotiated, and only then is a final report issued.
So from a purely procedural standpoint, the passage of time is not unusual. But that does not mean policyholders should be satisfied. Given the gravity of State Farm’s market share and the number of complaints, many wonder if the Department of Insurance is doing as diligent a job as possible.
Market conduct exams are data-driven. Regulators request claim files. They perform statistical sampling. They review timelines and written communications. They compare actions to regulatory deadlines. They should, but often do not, examine written claims manuals and internal catastrophe bulletins. If the violations are isolated or technical, the result may be a quiet corrective action plan. If the violations are systemic, the result may be a consent order with penalties and restitution.
Here is where my skepticism enters. In my experience, market conduct exams often focus on whether insurers followed their written procedures rather than whether those procedures were designed to minimize payments in the first place. I have long questioned whether regulators consistently request the most revealing internal documents. Do they demand the internal catastrophe playbooks and internal claims management emails? Internal emails about how vendors should be selected and what the standards are to determine if a structure is safe to be occupied? Communications between claims leadership and outside consultants? Internal training memos and the actual instructions given to independent adjusters? Incentive compensation metrics tied to claim severity reductions? Those documents tell a very different story than just claims files. They explain why claims are handled in a certain manner. I have noted my skepticism and that of others in “Do Market Conduct Claims Studies Effectively Regulate Wrongful Insurance Company Claims Practices?”
All insurance companies have written claims processes. The real question is whether those processes are engineered to fulfill the promise of insurance or to contain losses at the expense of policyholders. If regulators do not dig deeply enough into internal decision-making, market conduct exams risk becoming compliance audits rather than truth-finding missions.
The Los Angeles County Counsel investigation adds an unusual and important layer. County-level enforcement under California’s Unfair Competition Law is not typical in the claims handling space. That parallel pressure suggests that public officials understand the political and human stakes. Thousands of wildfire victims are still rebuilding their lives. For them, this is not an academic exercise about regulatory frameworks. It is about whether their homes will be properly restored and whether their additional living expenses will be paid in full and on time.
My bet is that regulators want this examination completed. The wildfire losses were massive. The scrutiny is intense. Legislators are watching. Consumer advocates are vocal. But thorough investigations take time, and negotiated regulatory outcomes take even more time.
The real signal to watch will not be the length of the process. It will be the language of the report. If the Department of Insurance uses terms like systemic violations, general business practice, or failure to implement adequate controls, and cites internal emails and claims directives rather than just claims statistics, that tells us regulators did a thorough job. If the result is a consent order with meaningful restitution and corrective measures, that will speak volumes. If the outcome is quiet and procedural, policyholders may reasonably question whether the right questions were asked and the investigation was conducted fully.
Insurance is built on trust. Market conduct exams exist to reinforce that trust. But trust is earned through transparency and accountability, not through delay.
For Los Angeles policyholders still struggling with wildfire claims, the waiting is not theoretical. It is personal. They deserve a regulatory process that is thorough, independent, and fearless in examining how decisions were actually made inside the claims operation. California officials need to move this along and provide a result.
Thought For The Day
“That’s why investigations are so important, to drill down and to connect those dots and to get the facts.”
— Maxine Waters
