After an intense lobbying push this year from automobile companies, dealers and consumer groups, more legislative battles over California vehicle purchases could follow in 2026. Sky-high car prices show no signs of falling, and a Republican-led Congress and the Trump administration have sought to thwart Newsom’s goal of having 100% of new cars sold in California be zero-emission by 2035. 

Sen. Ben Allen, a Democrat representing the El Segundo area, said he expects California’s Democratic-controlled Legislature will likely push back against national Republicans’ attack on California’s vehicle policies in some form next year, though he said it wasn’t yet clear how.

“We’re very committed to this path, so stay tuned, but clean air is a priority for our state,” said Allen, who chairs the Senate’s Select Committee on Transitioning to a Zero-Emission Energy Future. 

In the meantime, Gov. Gavin Newsom signed Allen’s Senate Bill 766, creating a first-in-the-nation policy that allows a buyer to return a used vehicle for a full refund within three days if the purchase price was less than $50,000. Dealers can charge a restocking fee. 

The law, which takes effect in October, also contains other protections for buyers intended to prevent them from getting suckered.

Car dealers will have to tell a potential buyer — including in advertisements and initial written communications — the actual price of a vehicle instead of an unrealistic advertised price. Potential buyers will also have to be informed of the full financing costs and lease terms. 

The law also prohibits dealers from charging for add-ons that have no benefit to the buyer, such as free oil changes for electric vehicles — which don’t need oil changes.

“That is a huge deal,” said Rosemary Shahan of Consumers for Auto Reliability and Safety, which championed the bill. “It’s historic. It’s going to make cars more affordable.”

Allen said he came up with the idea for the bill after shopping for a used car in 2024. He said he wanted to see what it was like trying to buy a used car in California and didn’t tell the various dealerships he visited that he was a state senator.

“I was kind of shocked by the hustle and the extent to which prices were quoted online and that ended up not really being truthful,” he said.

He ended up buying a 2021 Ford Mustang Mach-E, an electric vehicle.

Newsom blocked document fee increase

Most bills take effect immediately the year after they are signed, but lawmakers delayed the implementation of Allen’s bill until October to give dealers time to change their paperwork, amend their contracts and change their signs to meet the new law’s requirements.

Brian Maas, president of the California New Car Dealers Association, said the law should make buying a used car more transparent and easier for consumers.

“The bill certainly is a net positive in terms of more transparency about the total price and advertising,” he said. 

But he said the new law “clearly imposed more responsibility on dealers,” which is why Maas said his group was extremely frustrated Newsom vetoed its bill that would have allowed dealers to raise document-processing fees by $175.  

Senate Bill 791 would have raised the fees dealers can charge to process Department of Motor Vehicles and other paperwork from the current cap of $85 to up to 1% of the purchase price, capped at $260.

Maas said dealers were frustrated by Newsom’s veto message which said the fee increase wasn’t necessary because the state had imposed “no new state requirements” on car dealers. 

Maas said it was “especially frustrating that the veto message somewhat cavalierly said there are no new state requirements when the governor signed just such requirements a week earlier.”

Before the veto, SB 791 passed the Legislature overwhelmingly and with bipartisan support. The California New Car Dealers Association has donated at least $3 million to legislators since 2015, according to the Digital Democracy database. 

Maas said there are so many forms car buyers must fill out, almost all of them stemming from a law the Legislature passed, they’re getting to be like click-through agreements on websites that everyone just agrees to without actually reading.

“You shove form after form after form in front of consumers,” he said. “Consumers just tune it out, turn it off, and say, ‘You know what? I just want to know what my monthly payment is, what’s the interest rate, what the total price of the car is. And then let’s go. Why do I have to sit in here for a half hour or an hour and fill out all these forms?’ ”

Consumers face a watered-down lemon law

Newsom also signed Senate Bill 26, a bill that allows car manufacturers to opt out of changes to the state’s lemon law that gives consumers a right to get their money back if they buy a defective vehicle — sometimes referred to as a “lemon.” 

The result is that California car buyers have different legal protections under the state’s lemon law depending on which brand they buy.

The bill Newsom signed was in response to a law lawmakers hastily passed at the end of the 2024 legislative session, watering down the state’s 55-year-old landmark lemon law. Some 

auto companies, namely GM and Ford, were being sued so often for allegedly selling so many lemons that state courts were clogged with lawsuits. 

The companies and some attorney groups persuaded lawmakers and Newsom to pass legislation in 2024 that shrank the length of time a car buyer could sue under the lemon law to just six years instead of the entire life of a vehicle’s warranty

Last year’s legislation also puts more onus on car owners to initiate claims, not auto companies.

But other companies that don’t get sued as often for selling defective vehicles, such as Toyota and Honda, opposed the rule change. Those companies said the new law didn’t give them time to prepare their best defense

Newsom ended up reluctantly signing the 2024 bill, but he urged the Legislature to come back with a new bill in 2025 that would allow companies to opt out of the changes. SB 26 passed overwhelmingly and Newsom signed it.

Meanwhile, several car companies, including Ford and GM and dozens of RV and motorcycle manufacturers, opted in to the 2024 law this year.

Toyota and Honda, as expected, did not.

The post New California laws rewrite car-buying rules with return policy and pricing reforms appeared first on The Hemet & San Jacinto Chronicle.

A recent survey of more than 9,000 U.S. adults by the Pew Research Center found that approximately 73% experienced at least one or more online scams or attacks.

The most common virtual cons were credit card fraud, online shopping scams and ransomware attacks — a type of malicious software that prevents you from accessing your computer files or system until a ransom is paid.

About 24% of those surveyed said they had received a scam email, text message or call that tricked them into giving away personal information.

An estimated 32% of respondents said they were victims of a scam within the last year.

It’s often said that older adults are more vulnerable to online fraudsters. However, in 2021, the Federal Trade Commission reported that Gen Z adults, millennials and Gen Xers, collectively between the ages of 18 and 59, were 34% more likely than adults who are 60 and older to report losing money to fraud.

These generational groups are getting tricked by online schemes that originate from a social media ad, an investment scam or fake job opportunities.

The latest phishing attacks, or attempts to acquire sensitive data, are happening through your online calendar, (Google or Outlook calendar), multi-factor authentication app and HTML attachments.

Evading online scams is proving to be a challenge, but cybersecurity experts say there are steps you can take to protect yourself.

Unsolicited calendar invites

Scammers are constantly finding new ways to lure you into unknowingly giving up your personal information and the calendar connected to your email account is one of them, said Iskander Sanchez-Rola, director of artificial intelligence and innovation for Norton.

Unlike traditional phishing scams such as an unwanted text or call that requires your engagement, this invitation automatically appears on your calendar without you approving or denying it.

Anyone can easily be fooled by this because it can confuse you into thinking you accepted the invitation at some point, Sanchez-Rola said.

The scam happens when you click on the invite to get more information.

A link in the invitation can lead you to a phishing webpage that is masquerading as a Zoom link, or it can prompt you to download malware that is disguised as a software update.

This con often targets work-related email accounts and corresponding calendar apps.

The warning signs of this scam include:

• The calendar invite is unsolicited.
• There are misspellings in the link or sender address associated with the calendar appointment.
• The invite is associated with work, but you’re the only person to receive it.

What you can do: Change the settings in your online calendar to prohibit automatic updates. Microsoft Outlook users can follow these online instructions to change their calendar settings; Google users can limit which invitations appear on their schedule by following these online instructions.

If you have any suspicions, don’t reply directly to the invite, said Derek Manky, chief security strategist and global vice president of threat intelligence at Fortinet.

“Instead, send an email to your trusted contact from that organization asking if they have confirmed the meeting and request further details,” Manky said.

Multi-factor authentication scam

A multi-factor authentication app, also known as a “two-step verification,” is an application on your phone that provides you with a code or a “yes or no” prompt to verify that you’re accessing an account that’s linked to the authenticator.

“Multi-factor authentication attacks have been happening for well over a decade,” Manky said. “They just frequently take on new forms, or target new platforms such as the authenticator app.”

A scam occurs when you’re receiving multiple notifications from the authentication app even though you didn’t request verification.

“This scam is all about wearing you down to the point of clicking an unknown notification and accidentally providing your personal information,” Sanchez-Rola said.

The warning signs of this scam include:

• The authentication app is requesting verification or providing you with a verification code you did not request.
• The authentication app is sending you several notifications in a row even though you did not prompt the app.

What you can do: If you’re getting a string of authentication app notifications, pause before you click.

“Approving a login you didn’t request is like handing your keys to a stranger,” Sanchez-Rola said. “You just don’t do it.”

A safer way to use an authentication app — such as 2FAS, Aegis Authenticator, Microsoft Authenticator, Stratum or Google Authenticator — is to use one that provides you with a verification code. Don’t use an app that sends a notification because that’s how a scammer can pressure you into providing your login information.

Another step in protecting yourself is changing your passwords frequently, as it reduces the shelf-life for the ones that are stolen and sold, Manky said.

Emails with unknown HTML attachments

An email with an unknown HTML attachment can redirect you to a phishing webpage or prompt you to download malware.

It’s the oldest technique in the book but it’s still commonly used today, Manky said.

“HTM/HTML files contain code that can be used in a variety of ways, including executing malicious scripts, for example Javascript, that could drop an information stealer on the system,” he said. “Likewise, they could be used to launch a phishing page to harvest credentials.”

Fraudsters will try to use trusted names or services that are of daily use to you.

“If an email is unsolicited, the end user should always question the identity of the emails being sent,” Manky said.

The warning signs of this scam include:

• The sender of the email is an unknown contact.
• The attachment within the email is unsolicited and looks suspicious.

What can you do: Always exercise caution before opening any attachments in an email, Manky said.

Look for typosquatting in the URL of the attachment. Typosquatting is when domain names on the URL have a small variation from the legitimate one, Manky said.

The post At least 73% of U.S. adults have fallen for online scams. How you can avoid the latest con appeared first on The Hemet & San Jacinto Chronicle.

Now, California lawmakers are scrambling to repair recent changes they made to the law to satisfy the very car companies accused of making so many lemon vehicles that their lawsuits have been clogging the state’s courts.

But the “fixes” lawmakers are considering have angered consumer groups, frustrated legislators and seemingly divided the car makers between ones that face a lot of lemon lawsuits and the ones that don’t. 

“I think what we have is a messy and frankly — all due respect — illogical resulting situation,” Sen. Roger Niello, a Republican whose family owns several car dealerships in the Sacramento area, said at a hearing last week. “I feel like I’m in Alice in Wonderland, quite frankly. What’s up is down and what’s down is up.”

With hope of granting relief to the courts, Gov. Gavin Newsom signed legislation last year intended to speed up the process, in part, by cutting years off the time consumers can exercise their rights to get their defective vehicles fixed or replaced. The law also puts more responsibilities on car owners to initiate claims instead of on the car companies.

But that law divided car makers because those that face fewer lawsuits wanted more time to prepare their best defense, and they felt it was too friendly to lemon law attorneys. So when he signed the bill, Newsom told lawmakers to act quickly this year to allow car makers to opt out of the new process and continue to work under the old rules.

Now, legislators are racing to pass the changes before the new law takes effect April 1. And they need a two-thirds vote of the Legislature to make the bill effective immediately. 

Meanwhile, they’re hearing concerns about a confusing two-tier lemon law with fewer consumer protections that is primarily intended to help the companies facing the most lawsuits. Just four companies are responsible for more than 70% of California’s lemon law cases: GM, Stellantis (formerly Fiat Chrysler), Nissan and Ford, according to consumer groups. 

It makes Susan Giesberg furious.

She spent almost a decade working on lemon law issues at the California Department of Justice. Now retired, she says she and her husband had to invoke their rights under the state’s lemon law under the old rules when their Chevy Volt broke down last summer.

“This lemon law has gone through Republican and Democratic (attorneys general) and governors with support over the years,” she said in an interview. “It’s just so shocking that under Democratic leadership that this would have gotten through.”

So how did it?

To answer that you have to go back to August, in the final chaotic days of the legislative session. 

How lawmakers jammed through new lemon law

As lawmakers were rushing through hundreds of pending bills – most of which had been under discussion for months – two Democrats, Sen. Tom Umberg of Santa Ana and Assemblymember Ash Kalra of San Jose, changed a stalled child-support bill into new, never-vetted legislation that sought to reform how lemon law disputes are resolved. Stripping out stalled legislation, replacing it with a completely different bill and jamming it through at the last minute is disparagingly known in the Capitol as a “gut-and-amend.” 

The lawmakers acknowledged that the bill, Assembly 1755, was the product of months of secret negotiations between U.S. car companies – primarily General Motors – consumer attorneys and judges who were frustrated that their courtrooms have become clogged with lemon law cases. 

Between 2018 and 2021, GM’s 9,800 lemon law suits accounted for nearly one in three lemon law suits filed in California, according to the most recent stats from consumer groups. A company spokesperson in a written statement to CalMatters defended its record and the new California law.

“General Motors is continuously recognized by top consumer intelligence groups for vehicle reliability, quality, and customer loyalty,” GM spokesperson Colleen Oberc said in an email. She called the legislation “a pro-consumer bill that will help drivers get back on the road sooner, while also helping clear court backlogs, benefitting both customers and the auto industry.”

Suits against car companies under California’s lemon law 2018-2021 

Source: CARS FoundationEmbed Download image

California defines a “lemon” vehicle as one that has serious warranty defects that the manufacturer can’t fix, even after multiple attempts. The lemon law applies only to disputes involving the manufacturer’s new vehicle warranty. 

If the manufacturer or dealer is unable to repair a serious warranty defect in a vehicle after what the law says is a “reasonable” number of attempts, the manufacturer must either replace it or refund its purchase price, whichever the customer prefers, according to the California Department of Consumer Affairs.

Disputes can be resolved through arbitration or in court if a buyer sues.

The number of lemon law cases in California courts climbed dramatically since 2021. There were nearly 15,000 filings in 2022 and more than 22,000 in 2023. In Los Angeles County, nearly 10% of all civil filings are now lemon law cases. 

Kalra and Umberg pitched their legislation last year as a way for auto companies and car buyers to settle their disputes quicker and without needing as much time in court. 

But Tesla and several foreign auto companies including Volkswagen and Toyota that aren’t sued nearly as much said they were cut out of negotiations. They opposed the legislation.

Consumer groups, meanwhile, called the legislation a blatant and shameless attempt at weakening the lemon law by the very companies that get sued the most because they sell the most defective vehicles. 

There was a lot more in the bill, which was about 4,200 words long (the equivalent of a 16-page double-spaced term paper). What’s more, the bill’s legislative analysis, intended to explain the context and impact of a bill in non-legal language for lawmakers, was more than 10,000 words.

The bill passed easily even though some lawmakers complained they were uncomfortable with having to decide such a complicated, confusing piece of legislation so quickly. 

“There wasn’t a single person who represents the people of California who knew about this and was a part of those conversations – for months,” Democratic San Ramon Assemblymember Rebecca Bauer-Kahan told her colleagues on the Assembly Judiciary Committee in the final days of the 2024 legislative session. “They dropped this in our lap, and they expect us to buy an argument related to the urgency that feels, to be honest, not real. And we’re supposed to move this in a week’s time.”

Newsom signed the bill in September, with an accompanying letter to lawmakers demanding they fix the law.

Meanwhile, just a few weeks after Newsom signed the bill, the California Supreme Court weakened California’s lemon law even more. The court ruled that the state’s lemon law doesn’t require manufacturers to honor a car’s warranty when it’s re-sold as a used vehicle.

Before the Supreme Court’s ruling, courts had interpreted the lemon law to require manufacturers to replace or repair a defective used car or truck if the clunker was sold within the window of its original new-vehicle warranty. 

Uncomfortable lawmakers pass bill anyway

Fast forward to last week and the Senate Judiciary Committee’s first hearing of the new two-year session. There was one bill on the agenda: Senate Bill 26, the legislation that Newsom requested. The new bill does not address the state Supreme Court ruling. 

And again the clock is ticking toward a new deadline. 

The bill frustrated Sen. Aisha Wahab, a Democratic senator from Fremont. She told her colleagues she was worried the two-track legal system for different car companies would make an already confusing scenario for desperate car owners more difficult to understand.

“I’m very concerned about those first-time buyers, those immigrant communities, those people that don’t have the privilege to understand half of the stuff that was mentioned here,” she said. “It makes it too hard to begin with.”

Umberg, the bill’s author, suggested that after lawmakers pass this bill to meet the April deadline, they might need to pass other legislation to address lawmakers’ concerns as well as the Supreme Court’s used-vehicle ruling. 

That didn’t sit well either. 

“It’s unfortunate that protections for the consumers have gotten so complicated that we can’t more easily explain this law or the previous law, and I thought this was a clean-up (bill),” said Sen. María Elena Durazo, a Democrat from Los Angeles. “Now it seems like there may be a clean-up to the clean-up, maybe another clean-up, you know, after that.”

Nonetheless, the bill ended up easily passing the 13-member committee. Wahab declined to vote, and Democratic Sen. Angelique Ashby of Sacramento cast the only “no” vote. Ashby was one of the lawmakers who opposed last summer’s bill as well. 

“I still believe that it does not do enough to remove unsafe vehicles from our communities,” she said of this latest bill. “In fact, I argue that this might have more unsafe vehicles in our communities, and I think I would not be alone in that assessment. I don’t think it holds manufacturers accountable.”

Sen. Niello said he had to reluctantly vote for Umberg’s bill since it would help negate – at least for some auto companies – the legislation he also opposed last summer.

He said he wished lawmakers would just scrap the bill Newsom signed last year “and bring all of the interested parties together” to re-negotiate reforms to the lemon law, which he said probably could use some after five decades. 

Instead, he had to hold his nose and vote for another rushed bill.

“This is a perfect example of why we should not be approving legislation that is a gut and amend at the last minute of the end of session,” Niello said.

The post California lawmakers scramble to fix ‘lemon’ vehicle law — again appeared first on The Hemet & San Jacinto Chronicle.

The text arrived midday, saying a delivery to me was on hold. To fix the problem, all I had to do was click on a web link and enter my ZIP Code.

“Have a great day from the USPS team!” the text said.

The awkwardly worded message (with bad punctuation and an international phone number) was clearly not from the Postal Service. And if I can hazard a wild guess, I don’t think the senders really wanted me to have a great day.

They wanted to rip me off and, so, a word to the wise this holiday season:

Watch your wallet.

Fraud is a year-round, multibillion-dollar international enterprise. But for thieves, the season of joy is a wide-open window of opportunity, as AARP warned Nov. 18:

“With scammers looking to take advantage of consumers from all angles, new AARP survey research reveals that people need to be vigilant this holiday season as they buy gifts, book their travel arrangements, and donate to charities.”

Many of the scams are run by sophisticated international syndicates, said Kathy Stokes, director of fraud prevention at AARP’s Fraud Watch Network. Those crooks are working every channel, fishing for victims by email, phone calls, texts, fliers and regular mail.

Unwitting people are forking over money via gift cards, cryptocurrency, credit cards, cash and wire transfers. Losses often are virtually impossible to recover because the money is on foreign soil before the victims know they’ve been robbed.

Stokes said that in one common ripoff, thieves are going after people who own timeshares they’re trying to dump.

“There’s all this paperwork that makes it look legitimate, like you’re paying to get out of the timeshare,” Stokes said. But the crooks are pocketing thousands of dollars while the target is still stuck with the timeshare.

Last week, in a national conference on scams targeting older adults, Deborah Royster of the federal Consumer Financial Protection Bureau warned that consumers are being wiped out in a flash.

“Retirement savings and other resources that people have earned over a lifetime, and depend on,” Royster said, “can be gone in an instant.”

In that same conference, Virginia lawyer Julie M. Strandlie said her 85-year-old mother lost $80,000 between Thanksgiving and Christmas five years ago in a common scam that began with “flashing graphics and pounding voices” on her computer screen, warning of a virus.

“There’s a number to call for help, but it’s not the real Microsoft,” Strandlie said.

Her mother fell for the ruse, giving the criminals remote access to unlock her frozen computer. She was then duped into believing they had deposited money into her account, and she needed to pay it back in cash and gift cards from Best Buy and Target.

Steve McFarland, president and CEO of the Better Business Bureau region that runs from Palo Alto to Long Beach, said his office is getting 1,100 consumer complaints of all types each and every day.

He wasn’t kidding and repeated the number.

McFarland and other sources say a greater percentage of millennials report fraud than do older adults, but the latter group suffers greater losses. And across the age spectrum, McFarland said, gift card scams are hot right now.

Bar codes on those cards can be tampered with or photographed by someone before they’re sold, McFarland said. The buyer of the card goes to a checkout stand and puts, let’s say, $100 on the card to be redeemed at Target, Burger King or any number of establishments.

But when the recipient goes to redeem it, the funds are gone. It happened last year to L.A. County Supervisor Janice Hahn, who bought a $100 VISA gift card for a nephew who found that it wasn’t worth a nickel. Hahn later warned of the scam, along with McFarland, on L.A.’s Eyewitness News.

“It’s called gift card draining and these scammers have found several slick ways to victimize unsuspecting shoppers,” Hahn said.

In addition to outright scams, this is a time of year when solicitations for charitable donations can fill your mailbox.

“A lot of charities are trying to close out strong, and criminals know that and are vying for the same dollars,” Stokes said.

If it’s not an established organization that’s known for its good work, Stokes advised going to the Better Business Bureau’s give.org website, where you can type in the name of the charity to find out whether it’s legit. You can also find out what percentage of donations go to the cause versus overhead costs.

Your best policy, unfortunately, is to be suspicious of everything. I recently got a letter with my mortgage lender’s name in the window and opened it to find a warning that this was my “FINAL NOTICE” to avoid a monthly payment increase.

It looked hinky, and on the back page, in fine print, I learned that the mail was from a lender unaffiliated with my mortgage company.

If you see “final notice,” “urgent” or “benefit disbursement enclosed,” don’t even bother opening the envelope.

A friend shared a tall stack of mail that keeps coming for his mother, who died months ago, and as I sifted through it I found one attempt after another to separate her from her money. “Copy of Final Check Enclosed,” said one, and in the cellophane window was what looked like a check for $437.18 that said “Pay to the order of …”

But it wasn’t a check, of course. It was a solicitation from a lobbying firm claiming it will fight to preserve Social Security funding (and by the way, she had a lot of mail from organizations claiming they were out to do the same).

The fake check was described as an example of what she stood to lose if she didn’t immediately support the cause by pulling out her credit card and making an “urgent donation” to keep Social Security solvent.

And then there were solicitations from organizations representing a Noah’s Ark of endangered animals. Look, I’m an animal lover, but how does one begin to sort through all the pleas?

Save the pigs. The horses. The bees. The lions. The donkeys.

“Sunday, a baby donkey was ripped from his mother and brutalized,” said one envelope.

Lots of appeals for dogs, too. One included the photo of a dog with amazing verbal skills, judging by the quote attributed to the canine: “I wish for no one else to be hurt the way humans have hurt me.”

I feel for the dog, but if he can actually speak, let’s get him an agent and send him out on tour so the pup can raise a fortune for his cause.

Of course, there are plenty of good charities out there that are worthy of your generosity, but be careful.

With solicitations. With email. With texts. With phone calls.

All of it.

Banks should be doing more to prevent repeated, questionable, out-of-the-ordinary withdrawals and wire transfers. The gift card industry ought to be able to rein in rampant fraud with smarter security measures.

And people of all ages need to be more discerning, refuse to provide personal information such as Social Security numbers, and get some advice from a trusted friend or loved one before signing any checks or doing business with strangers.

Last year I wrote about two retired L.A. residents, a former teacher and a former banker, who were swindled out of roughly $80,000 apiece in internet scams. Earlier this year I wrote about a Redwood City woman who was taken for $1.8 million, and an Alhambra woman, Alice Lin, who lost $720,000 in an “investment” scheme introduced to her by a man she met on a chat app.

I reached out to Lin, who had some good advice on all forms of communication from sources you don’t know or trust.

“Do not respond,” Lin said. “Don’t touch it.”

The post Column: It’s the season for scams, so here’s a piece of advice: Never do business with strangers appeared first on The Hemet & San Jacinto Chronicle.

Aiming to both quell soaring prices and bring back firms that have left the Golden State, regulators are proposing sweeping reforms that they believe could revive a competitive insurance market.

While experts agree that the status quo may no longer be sustainable, opinions remain divided on the merits of the proposed changes — which some fear could drive up prices further.

“The situation is hurting consumers badly,” Amy Bach, executive director of the consumer advocacy group United Policyholders, told The Hill.

“It doesn’t feel like it’s going to resolve on its own,” Bach added.

California Insurance Commissioner Ricardo Lara last week called for public input on the final phase of his wildfire modeling regulation, which is many months in the making and has sparked significant debate.

Lara’s strategy would update Proposition 103, a 1988 ballot measure that served “to protect consumers from arbitrary insurance rates and practices” and encouraged a competitive and fair marketplace, according to the Insurance Commission. 

Proposition 103 determined that rate changes could only occur with the authorization of the commissioner, while also establishing a public participation process in which so-called “intervenors” could provide technical input and recover associated costs.

Lara’s office said in a press statement that his update aims to close a loophole in Proposition 103: Insurance firms today can request rates at any level to help compensate for an increased risk of losses but are not required to cover all Californians.

The new regulation, in contrast, would require companies to insure properties in distressed regions at a rate equivalent to 85 percent of the firm’s statewide market share. 

In addition, the proposal would incorporate the state’s first use of “catastrophe modeling,” localized simulations of potential risk based on historical analyses and probabilistic calculations that such events will occur in the future.

Whether relying upon such simulations, also known as “cat models,” would end up lowering or raising consumer rates, however, is a matter of contention.

Those in favor of employing these tools argue that other states have long done so and that proactive efforts to adapt California homes to a changing climate could mitigate risk.

“Over the past several years, the state has put billions toward wildfire mitigation efforts and homeowners have made significant investments in home hardening,” Lara said in a statement.

“This is not accounted for by our existing retrospective, past-focused models for ratemaking,” the commissioner continued. “We want consumers to reap the full benefits of these efforts through modern, forward-looking models on how rates are calculated.”

But others are far less certain that the models would account for such improvements — especially because the technology is often proprietary.

Bach cited catastrophe models as a reason for her muted enthusiasm about Lara’s proposal. Yet she expressed willingness “to let the commissioner’s sustainable insurance strategy go into place.”

“If it doesn’t work, then I guess we go back to the drawing board,” Bach said, expressing approval for the mandatory coverage component of the regulation.

Bach stressed that thus far, she has seen no indication that catastrophe models, when applied to wildfire-prone areas, are accounting for active mitigation efforts in price determinations. She also expressed concern that wildfire models are much newer than those for, say, hurricanes.

“We are nervous,” she continued. “The reality is that prices are so high already, and affordability is so low right now.”

Nonetheless, Bach acknowledged that California’s lack of catastrophe models was contributing to the exodus of insurance companies from the state. Beginning in 2022 and 2023, many big firms stopped offering services to new customers, often citing wildfire risk. 

“The writing was on the wall that cat models are going to come to California, just for practical reasons,” she acknowledged.

“We’re glad at least there’s a quid pro quo — that as a condition of insurers getting to use cat models, they also have to pledge to insure more homes in the areas that have been abandoned,” Bach added.

Harvey Rosenfield, founder of Consumer Watchdog and the author of Proposition 103, decried catastrophe models as “completely unjust, untested and unreliable.”

“Models are cloaked in the guise of technological infallibility, but they are drafted, they’re written, they’re controlled by humans,” Rosenfield told The Hill.

He also argued that their use would violate provisions of the voter-approved Proposition 103, because this would deny consumers their legal right to examine the details of these models.

“Nobody has the power to rewrite Proposition 103 to eliminate its protections,” Rosenfield added.

The applicability of catastrophe models to wildfire risk assessments was one focal point in a June 2024 working paper about the adaptation of insurance markets to a changing climate. Although these models have improved the ability of insurers to gauge wildfire risk, the resultant projections remain “inherently uncertain,” according to the paper, published by the National Bureau of Economic Research.

“The modern catastrophe models bring a lot of value to insurance pricing and rate setting,” co-author Judson Boomhower, assistant professor of economics at the University of California San Diego School of Social Sciences, told The Hill.

“They give you a much more nuanced view of risk for a given property or a given area,” added Boomhower, who is also a faculty research fellow at the National Bureau of Economic Research.

That more detailed vantage point, he explained, is more sophisticated than the “backward-looking historical rate-setting methods that insurers have been required to use in California.”

Nonetheless, Boomhower also recognized that catastrophe models “are sort of a black box” due to their proprietary nature and resultant questions of transparency.

“Those are legitimate challenges for regulators to think about, but at a high level, this is the best scientific method for assessing catastrophe risk,” he said.

Boomhower described Florida as “a little bit ahead” of California from this perspective, as the state requires companies to give regulators some insight into how their individual models work.

In the working paper, Boomhower and his colleagues reconstructed pricing formulas used in California by six major insurers — combining data from company-provided premiums with proprietary information from about 100,000 households.

The authors found that following the 2017 and 2018 wildfire seasons, both premiums and the rate of policy cancellations in high-risk areas surged. They also observed increasing reliance on the state’s “quasi-private insurer of last resort” —  called California FAIR —  the basic but expensive property insurance provided when traditional coverage is unavailable.

Among the paper’s key findings was the fact that insurers exhibited “striking variation” in how firms priced wildfire risk, with some only divided the market roughly, at the zip-code-level, and pricing risk at a more granular level — using catastrophe models.

“There’s tons of heterogeneity in wildfire loss risk, even within zip codes or even within neighborhoods,” Boomhower said.

Insurers with less sophisticated models seemed to end up with a slew of higher-risk customers and greater-than-expected costs, which the authors dubbed the “winners’ curse.”

Meanwhile, they found that companies using the more granular models tended to attract lower-risk customers. With that in mind, Boomhower projected that there would be “a lot of competition among insurance companies to find the low-risk homes in these designated high-risk areas.”

“There are parts of the state where wildfire risk has increased really rapidly,” he continued. “Those are places where insurance rates probably do need to go up relative to where they’ve been historically, just to reflect the increasing risk.”

To the extent that Proposition 103 has held rates down, Boomhower acknowledged that the proposed updates could end up raising prices.

“On the other hand, that may be what you need to ensure availability in some of those places,” he said.

While the status quo may not be ideal for anyone, Rosenfield stressed his belief that insurance firms might come back to California without a change in regulation — simply because it will be in their financial interest to do so.

“California is the biggest single insurance market in the planet, and they’re just going to come back in and take advantage of that,” he said.

The post California weighs sweeping reforms in insurance regulations, amid mounting wildfire risk appeared first on The Hemet & San Jacinto Chronicle.

Insurance industry representative Rex Frazier argues that state leaders have the right idea: Burdensome regulations are making a difficult situation worse. But consumer advocate Jamie Court contends that the state needs to take a harder line by requiring coverage of homeowners who meet fire protection standards.

As the leader of an association of homeowners’ insurers, I frequently hear from anxious Californians who are losing their coverage and wondering whether the situation will get better. My answer is that I am not one of those who believes California is facing an uninsurable future. The problems we face are difficult but solvable.

The insurance challenges the state is facing today have roots in the past. While the giant wildfires of 2017 and 2018 had a huge impact, requiring insurers to pay claims equivalent to more than 20 years of profits, the state’s insurance problems predate the fires. California’s failure to update the old rules governing insurance rates have long prevented insurers from preparing for a hotter, drier future.

California’s laws are a national outlier. The rules for projecting wildfire losses, a crucial aspect of calculating insurance rates, are a case in point. California is the only state in the country that requires property insurers to project future wildfire losses based on average wildfire losses over the last 20 years, regardless of where they plan to do business. Every other state allows insurers to base their rates on where they intend to sell insurance, taking into account the degree of fire risk to the properties they plan to insure.

California is also a national outlier on rate approval in that it’s a “prior approval” state. That means an insurer must receive approval from the California Department of Insurance before it may increase or decrease rates.

While California law promises a 60-day approval period, it often takes six months or more to get permission to change rates. At times of high inflation, slow approvals require insurers to leave the highest-risk areas or face financial ruin.

A less visible but nevertheless critical issue is the financial well-being of the FAIR Plan, a pool of insurers providing last-resort coverage. The FAIR plan is growing well beyond its ability to pay claims for large fires. And if it runs out of money, it will charge insurers, as members of the pool, a fee in addition to claims from their own customers for the same fire. If that fee gets large enough, it could devastate insurers. We must address this.

Fortunately, Insurance Commissioner Ricardo Lara has recognized the need to fix these problems. His Sustainable Insurance Strategy would update California’s rate regulations and approval process while requiring insurers to make commitments to cover high-risk areas. The proposal is far from perfect, but we look forward to working with all the interested parties to increase insurance availability and restore the health of the market.

While state regulations and processes can be changed, we remain vulnerable to forces that are beyond our control. Inflation makes repairing and rebuilding homes much more expensive, driving up rates. Longer dry seasons increase the chances of devastating fires, having the same effect in the short term. We need a system that acknowledges these realities.

But raising rates is not a long-term solution. Reducing them over time will require consensus on how to handle combustible fuels near valuable property.

That will take a lot of time and effort. California homeowners’ insurers are ready to do our part to secure an insurable future for the state.

Rex Frazier is the president of the Personal Insurance Federation of California.

Home insurance companies have put Californians in a bind by refusing to sell new policies or renew many customers, leaving them with few coverage options. That has driven more homeowners into the high-cost, low-benefit FAIR Plan, a pool of insurers required to provide last-resort coverage.

Gov. Gavin Newsom recently announced legislation to allow insurance companies to hike rates more quickly in an effort to woo them back to the state. While that will certainly leave Californians paying higher rates, it’s not likely to get more people covered.

Insurance companies are refusing to write new policies despite substantial recent rate hikes — an average of 20% for State Farm and 37% for Farmers, for example. What has them spooked is greater exposure through the FAIR Plan, which increasingly covers expensive homes in wildfire-prone areas. Insurers are on the hook for FAIR Plan claims, and their exposure increases with market participation, so they limit their participation.

Only freeing people from the FAIR Plan will solve this. The most practical way to do that is to require insurers to cover people who harden their homes against fire. We have mandatory health and auto insurance, so why shouldn’t we have it for homes that meet standards?

Hardening is expensive enough that most homeowners are unlikely to do it without guaranteed coverage. Mandating insurance is therefore the best way to mitigate wildfire risks.

Mitigation efforts are already working, with major claim events dwindling in recent years. Moreover, insurers recovered billions from the utilities responsible for major fire losses in 2017 and 2018.

The current crisis was precipitated not so much by wildfires as by investment losses and rising construction costs. Insurers responded by tightening underwriting and raising rates.

Insurance companies got their hikes, but they refuse to write new business here until they get more. Unfortunately, Newsom and Insurance Commissioner Ricardo Lara are ready to give them what they want.

Last week, Lara proposed regulations attempting to address the crisis. Echoing a legislative proposal that failed last year, they would allow companies to raise rates based on black-box climate models. Florida tried a similar approach, and its rates are now about double California’s. Florida’s insurer of last resort covers 20% of its homeowners, roughly five times the share in California.

The proposed regulations purport to require insurers to increase sales to homeowners in “distressed areas” by 5%. However, they would not require them to charge prices consumers can afford. The requirement to cover these areas could also be waived if an insurer shows it’s “taking reasonable steps to fulfill its insurer commitment.” And the plan gives companies two years to comply but lets them start charging all policyholders higher rates immediately.

Newsom cheered the proposal, essentially arguing that California’s insurance rates are too damn low. He didn’t mention that California insurers’ profits have generally outpaced the national average over the last 20 years.

Newsom’s latest legislative proposal would limit public participation in rate-setting by cutting out so-called intervenors such as Consumer Watchdog, which can challenge unnecessary increases and has saved consumers more than $6 billion over 22 years.

Throwing more money at insurers won’t end the crisis; requiring them to cover responsible homeowners will.

Jamie Court is the president of the nonprofit Consumer Watchdog.

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