Prop 103 Is Failing Californians: Sam Sorich Reveals the 4 Horsemen of the Insurance Crisis

Published Date: 07/06/2025

Proposition 103 and the Four Horsemen of California’s Insurance Apocalypse

Why a 37-Year-Old Law Is Failing Homeowners, Consumers, and the Insurance Market

When California voters approved Proposition 103 in 1988, it was billed as a consumer victory—a promise to make insurance fair, affordable, and available for everyone. Nearly four decades later, however, many experts argue that Prop 103 has done the opposite.

In a recent presentation, Sam Sorich, former president of the Association of California Insurance Companies, delivered a stark assessment of the law’s unintended consequences. He described how the 1988 reform—once hailed as a model of consumer protection—has instead shackled the state’s insurance system with bureaucracy, inefficiency, and political paralysis.

Sorich labeled the key culprits the “Four Horsemen of the California Insurance Apocalypse.” These four provisions of Prop 103, he argues, have crippled the marketplace, driven insurers out of the state, and left consumers paying more for less coverage.

A Brief History: How Proposition 103 Was Born

To understand why Prop 103 matters so much today, it’s worth revisiting the political and economic climate of 1988.

California voters were angry. A new state law required drivers to carry proof of insurance, but premiums were soaring—fueled by expanding lawsuits and skyrocketing auto claims. During that election year, no fewer than five ballot initiatives promised to fix the “auto insurance crisis.”

Voters, overwhelmed by 29 statewide propositions, latched onto one that seemed straightforward. Proposition 103, authored by consumer advocate Harvey Rosenfield, promised sweeping reforms: a 20% rate rollback, a competitive marketplace, and guaranteed affordability for all.

It narrowly passed with 51% of the vote, though it only won a majority in six counties. Few voters, Sorich noted, had actually read the 10 pages of dense text buried in a 160-page voter pamphlet. What they didn’t realize was that the initiative didn’t just regulate auto insurance—it extended to nearly all property and casualty lines, including homeowners and commercial coverage.

Prop 103’s Original Intent—and Broken Promises

Section Two of Proposition 103 laid out its lofty purpose: to encourage competition, ensure fairness, and maintain affordability and availability of insurance for Californians.

But according to Sorich—and other experts like Karl Susman, Lars Carlson, and Christian Rusch—those goals have not been met.

• Competition has collapsed. Insurers have restricted their operations or left the state entirely.
• Affordability has eroded. Premiums are higher today than ever, and consumers are increasingly forced into the FAIR Plan, California’s costly insurer of last resort.
• Availability has shrunk. Many carriers have stopped writing new homeowner or auto policies altogether.

As Sorich put it: “Proposition 103 has broken the promise it made to voters.”

The Four Horsemen of California’s Insurance Apocalypse

So what exactly went wrong? Sorich identified four core provisions that have fueled California’s insurance meltdown.

Each was meant to protect consumers. Each, he argues, has instead helped create the system’s dysfunction.

1. Strict Prior Approval of Rates

Prop 103 requires insurers to get state approval before changing rates, a process originally meant to take 60 days. In practice, it’s anything but efficient.

Between 2018 and 2022, the average review time for a homeowners rate filing was 236 days, according to Sorich’s data. For auto filings, it was 226 days. By 2023, some filings took over a year to resolve.

The culprit: excessive bureaucracy. Rate filings in California can range from several hundred pages to over 10,000 pages, far outpacing other states.

The result is paralysis. Insurers can’t adjust rates fast enough to reflect inflation, wildfire losses, or reinsurance costs. Many simply stop writing new business rather than operate at a loss.

Ironically, Rosenfield’s own 1988 voter pamphlet promised that Prop 103 “does not create a new government bureaucracy.” Yet since then, the Department of Insurance (CDI) has ballooned from fewer than 400 employees to over 1,400, with a budget exceeding $260 million.

As Sorich notes:

“The same arguments made in 1988—that California’s rating plan was outdated and created a disastrous insurance market—are now being made about Prop 103 itself.”

2. The Election of the Insurance Commissioner

Before Prop 103, California’s Insurance Commissioner was appointed. The initiative changed that, making it an elected office—a reform meant to increase accountability.

Instead, it added politics to a job that should be about technical expertise.

Sorich points out that three of the last four elected commissioners have used the office as a stepping stone to higher political ambitions:

• John Garamendi ran for Lieutenant Governor.
• Steve Poizner ran for Governor.
• Dave Jones ran for Attorney General.

When campaign donors and voter optics influence regulatory decisions, long-term policy stability suffers. Insurance approval processes become political events rather than actuarial judgments—delaying reforms and discouraging insurer participation.

3. Consumer Interveners in Rate Filings

Prop 103 opened the door for consumer groups to intervene in rate filings—a mechanism designed to promote transparency.

However, in practice, it’s created a parallel bureaucracy that often undermines the Insurance Commissioner’s own authority.

Here’s how it works: when an insurer files a rate change of 7% or more, the CDI may decide no public hearing is needed. But any consumer group can demand a hearing anyway, forcing delays and driving up administrative costs.

The most active intervener, Consumer Watchdog, has collected nearly $19 million in fees since Prop 103’s passage—representing 90% of all intervention payments. These fees are reimbursed by insurers and ultimately passed on to policyholders.

Commissioner Ricardo Lara himself questioned Consumer Watchdog’s legitimacy, noting that the group “has no members” and is “not accountable to the consumers they claim to represent.”

Sorich argues that this system no longer benefits the public:

“Consumer intervention was meant to protect policyholders, not to fund a permanent bureaucracy of self-appointed watchdogs.”

A 2024 study from the International Center for Law and Economics found that consumer intervention is a key reason for California’s extraordinary delay times in rate reviews.

4. Mandated Auto Rating Factors

Finally, Prop 103 introduced rigid auto rating mandates that prevent insurers from using the most accurate predictors of risk.

Under current rules, California’s Department of Insurance must base auto rates primarily on three factors: driving record, miles driven, and years of experience. Insurers are allowed to use 15 secondary factors, but the Commissioner can override them—even if actuarial data shows they better reflect loss risk.

The result? Cross-subsidies that distort fairness. Safe drivers in low-risk areas often pay higher premiums to subsidize riskier drivers in high-loss regions.

Sorich calls this “unsound underwriting,” arguing that it violates the very principle of risk-based pricing—one of insurance’s core foundations.

Why It’s So Hard to Fix

So why hasn’t California simply reformed or repealed these provisions?

The answer lies in the California Constitution.

Proposition 103, like other voter-approved initiatives, can’t be amended by the Legislature unless the initiative itself explicitly allows it—and even then, any amendment must “further the purposes” of the original law.

California’s courts have interpreted that phrase so narrowly that meaningful reform is virtually impossible without another statewide ballot measure.

For example:

• In 1995, the California Supreme Court struck down a legislative attempt to exempt surety bonds from Prop 103’s prior-approval system, ruling it did not further the law’s purposes.
• Later rulings in 1998 and 2005 reinforced this strict standard, concluding that even well-intentioned legislative tweaks were unconstitutional if they modified the initiative’s “subject matter.”

As Sorich explained, this has left the Legislature powerless to address today’s crisis—even with supermajority support.

Quoting insurance scholar R.J. Lehman, he summed it up bluntly:

“There is effectively no legislative path—not even with two-thirds majorities in both chambers—to undo a decision made by a narrow majority of voters more than three decades ago. Does that sound like democracy to you?”

Can Regulation Save the System?

Insurance Commissioner Ricardo Lara deserves credit, Sorich says, for attempting to modernize certain regulations under his Sustainable Insurance Strategy.

Recent rules now allow limited use of catastrophe modeling and reinsurance costs in rate filings—changes long sought by insurers. But these reforms still operate within the rigid framework of Prop 103.

“Regulations can improve operations,” Sorich noted, “but they can’t fix the structure.” The elected commissioner remains bound by the same procedural delays, intervener rights, and rate caps that define Prop 103’s architecture.

The Bottom Line: 37 Years Later, Time for Reform

After 37 years, it’s clear that Proposition 103’s once-noble experiment has reached its breaking point. What began as a populist attempt to protect consumers has evolved into a rigid system that punishes both insurers and policyholders.

The Four Horsemen—prior approval, politicized leadership, consumer intervention, and flawed rating mandates—have transformed a once-vibrant market into one where coverage is scarce, costly, and slow to adapt.

California now stands at a crossroads: continue patching a broken system through regulatory tweaks, or undertake the harder but necessary task of structural reform—potentially through a new ballot initiative.

As Sorich concluded,

“Proposition 103 promised fairness, affordability, and availability. After nearly four decades, it has delivered none of them. Reform isn’t optional—it’s overdue.”