Former San Francisco Supervisor Jane Kim and state Sen. Ben Allen finished first and second in the June primary, receiving about 27% and 20% of the vote, respectively. The winner will replace Ricardo Lara, the Democratic former lawmaker who has served two terms as insurance commissioner. Lara has led the state Department of Insurance for the past eight years, a period marked by some of the deadliest and most destructive wildfires in California history.

Either Kim or Allen will inherit a complex set of problems with direct consequences for communities across the state, including Southern California and the Inland Empire, where wildfire risk, housing costs and insurance availability have become increasingly urgent concerns.

In recent years, insurers have stopped writing new policies or declined to renew existing ones, particularly in areas considered at high risk for wildfire. The companies have pointed to growing fire danger tied to climate change, as well as inflationary pressures that followed the COVID-19 pandemic. As private coverage has become harder to find, more homeowners have turned to the FAIR Plan, the state’s insurer of last resort, which is required by law to provide fire coverage.

The FAIR Plan, run by an association of insurers, had more than 684,000 policies in force as of March, a 152% increase since September 2022. It has warned about its ability to continue paying claims after major disasters.

Under Proposition 103, approved by voters in 1988, California’s elected insurance commissioner has the power to approve rate increases, among other responsibilities. The measure has helped keep California homeowners insurance premiums near the national average over the years, but that could change. Last year, the commissioner put new regulations in place allowing insurers to use additional factors in setting premiums, including catastrophe models and reinsurance costs. Some companies have requested and received approval for rate increases and have begun writing policies again.

The next commissioner’s most pressing challenge will be making sure insurance remains available while still being affordable. The office also regulates auto, pet and certain health insurance matters, along with workers’ compensation.

Another major issue will be ensuring that insurers pay claims promptly so communities can recover after disasters. Fires in the Los Angeles area brought new attention to complaints that insurers delayed or denied claims, as well as concerns about underinsurance and the lack of clear standards for smoke damage. Those problems have slowed recovery in some communities. Pending legislation, including bills backed by Allen, whose district was affected by fires last year, and ongoing lawsuits are expected to address some of those issues. Organized fire survivors who previously called for Lara’s resignation over his department’s response are likely to keep pressure on the next commissioner.

Kim has drawn attention for proposing a “universal natural disaster insurance” system inspired by a program in New Zealand. Under her plan, part of policyholders’ premiums would be collected by insurance companies and transferred to the state. California would then guarantee coverage for fires and floods, while insurers would continue covering other risks.

Critics, including consumer advocates, have questioned why Kim has not provided more detail about how much money such a fund would require. Kim told CalMatters the idea would need further study, but said the program would generate revenue.

Opponents also argue that shifting catastrophe risk to the state is a mistake. They point to what they view as the failure of separating earthquake insurance from homeowners coverage, noting that most California homeowners now lack earthquake insurance.

“We taxpayers are already footing the bill,” Kim said. “When insurers and utility companies refuse to pay, they simply pass it on to us. Sharing risk is important.”

Kim also told CalMatters that an idea advanced by Merritt Farren, a Republican candidate for insurance commissioner, could be “a more efficient model.” Farren proposed creating a state reinsurance authority to encourage insurers to write policies in California.

If elected, Kim’s short-term priorities would include creating public dashboards showing how insurers spend policyholder premiums and documenting their claims records. She also wants to expand eligibility for a low-cost auto insurance program for drivers earning less than $38,000 a year, link an insurer’s ability to sell auto policies in California to its willingness to write homeowners policies, make the FAIR Plan more transparent by requiring its board membership and meetings to be public, and freeze rates when policyholders file claims.

Kim, an attorney and former San Francisco elected official, points to several accomplishments from her time in local government, including free community college tuition for city residents, the state’s first local ordinance establishing a $15 minimum wage, and tenant protections intended to prevent unjust evictions. She served as California director for U.S. Sen. Bernie Sanders’ 2020 presidential campaign and more recently as California director for the Working Families Party.

Her supporters include a long list of unions, including SEIU California. Sanders has endorsed her, as has U.S. Rep. Ro Khanna of Silicon Valley.

Allen, a state senator nearing the end of his time in the Legislature, says he wants to bring together the state, insurers, builders, local governments and firefighters to focus on reducing risk.

“I think that ultimately that is going to be the way we get out of this mess,” he told CalMatters.

Allen has described his approach as comprehensive, including a closer look at where Californians live and build. “We should not be building new, irresponsible buildings in high-risk areas,” he said. “We should find ways to carefully and sensitively encourage people to move away from those areas.”

If elected, Allen’s plans include creating a consumer advocate position within the Department of Insurance and increasing staffing to help customers. He also wants to require insurers to explain claim denials and provide real-time reports on delays and pending claims after disasters, increase oversight of the FAIR Plan and ensure it follows commissioner orders, and prohibit the insurance commissioner and department staff from going to work for the industry immediately after leaving the department.

Allen has emphasized his record as a state lawmaker, including bills aimed at holding insurance companies accountable. One law he wrote now requires insurers to pay 60% of a policyholder’s contents coverage without requiring a detailed inventory, while giving consumers more time to provide that inventory. He also highlights his work drafting Proposition 4, the bond measure approved by California voters in 2024 for safe drinking water access, wildfire prevention, and protection of communities and natural lands from climate risks.

Among Allen’s pending bills is a proposal that would require insurers to provide homeowners with 90 days’ notice and a clear explanation if they do not intend to renew a policy. Another bill would penalize insurance companies that fail to correct their practices after the Department of Insurance determines they have violated laws or regulations.

Allen also has significant support, including endorsements from the Legislature’s two leaders, Senate President Pro Tem Monique Limón and Assembly Speaker Robert Rivas. U.S. Sens. Adam Schiff and Alex Padilla of California, several unions and the Consumer Federation of California have also endorsed him.

Original source: CalMatters

The post California Insurance Commissioner Race Set as Kim Faces Allen appeared first on The Hemet & San Jacinto Chronicle.

Former San Francisco Supervisor Jane Kim and state Sen. Ben Allen advanced from the June primary as the top two finishers. With 88% of ballots counted, Kim had about 27% of the vote and Allen had about 20%. The winner will replace Insurance Commissioner Ricardo Lara, a Democrat and former state lawmaker who is completing his second term.

It is the first time since California made the insurance commissioner an elected office that two Democrats will face each other in the November runoff.

The next commissioner will inherit a system under intense strain. In recent years, major insurers have stopped writing new policies or declined to renew existing ones in parts of California, particularly in areas considered at high risk for wildfire. Companies have pointed to climate-driven fire danger and post-pandemic inflation as reasons for pulling back.

That shift has forced more homeowners into the California FAIR Plan, the state’s insurer of last resort for fire coverage. The plan, which is operated by an association of insurers, had more than 684,000 policies in force as of March — a 152% increase since September 2022. The FAIR Plan has also warned about its ability to continue covering claims after major disasters.

For residents in fire-prone areas of Riverside, San Bernardino and other Southern California counties, the debate is not abstract. Insurance availability and cost can affect whether families can keep their homes, whether buyers can obtain mortgages, and whether businesses can afford to operate.

Under Proposition 103, the 1988 voter-approved law that reshaped insurance regulation in California, the elected insurance commissioner has authority over rate increases, among other powers. The law has helped keep California homeowners insurance premiums in the middle range compared with other states, but that may be changing.

Last year, the state adopted new rules allowing insurers to use additional factors when setting premiums, including catastrophe modeling and reinsurance costs. Some companies have already sought and received approval for rate hikes, and some have begun writing policies again.

Balancing affordability with availability is expected to be the central challenge for the next commissioner. The office also regulates auto insurance, pet insurance, parts of the health insurance market and workers’ compensation.

Another major issue will be claims handling after disasters. The 2025 Los Angeles-area fires intensified scrutiny of insurer practices, including delayed or denied claims, underinsurance and disputes over smoke damage. Those problems have slowed rebuilding for some residents and small businesses. Pending legislation, lawsuits and pressure from organized fire survivors are expected to keep the issue at the forefront after Lara leaves office.

Kim has drawn attention for proposing what she calls “natural disaster insurance for all,” a state-backed system inspired by a New Zealand model. Under her concept, insurers would collect a portion of policyholder premiums and direct that money to the state, which would guarantee fire and flood coverage. Private insurers would continue covering other risks.

Critics, including some consumer advocates, have questioned how much funding such a system would require and whether shifting catastrophic risk to the state would create new fiscal problems. Some have compared the idea to the separation of earthquake coverage from homeowners insurance, noting that many California homeowners now do not carry earthquake insurance.

Kim has argued that taxpayers are already left paying when insurers and utilities do not cover losses.

“We already are on the hook,” Kim told CalMatters. “When insurers and utilities refuse to pay, they just pass it on to us anyway. Sharing the risk is important.”

She has also said that a proposal raised by Republican commissioner candidate Merritt Farren — creating a state reinsurance authority to encourage insurers to keep writing policies in California — could prove to be “a more efficient model.”

Kim’s shorter-term proposals include creating public dashboards showing how insurers spend premiums and how they handle claims; expanding eligibility for a low-cost auto insurance program for drivers earning less than $38,000 a year; connecting an insurer’s ability to sell auto coverage in California to its willingness to write homeowners policies; increasing transparency at the FAIR Plan by making its board membership and meetings public; and freezing rates when policyholders file claims.

An attorney and former San Francisco elected official, Kim points to her work on free community college for city residents, a $15 minimum wage ordinance and tenant protections against unjust evictions. She later served as California director for Sen. Bernie Sanders’ 2020 presidential campaign and as California director for the Working Families Party.

Her endorsements include Sanders, Rep. Ro Khanna of Silicon Valley and several labor groups, including SEIU California.

Allen, who represents a Los Angeles-area district in the state Senate and will be termed out of the Legislature, has emphasized a broader risk-reduction strategy. He has said the state needs to bring together insurers, builders, local governments, firefighters and state officials to reduce fire danger and stabilize the market.

“I think that’s ultimately going to be the way that we get ourselves out of this mess,” Allen told CalMatters.

Allen has also called for a more careful approach to development in high-risk areas.

“We shouldn’t be building new construction that is irresponsible in high-risk areas,” he said. “We should be looking for ways to carefully and sensitively encourage people to pull back from high-risk areas.”

If elected, Allen says he would create a consumer advocate position within the Department of Insurance and increase staffing for customer service. He also wants insurers to provide clearer explanations when they deny claims and to give real-time information about delays and unresolved claims after disasters.

Other parts of his platform include stronger oversight of the FAIR Plan, ensuring the plan follows commissioner orders, and prohibiting the insurance commissioner and department staff from immediately taking jobs in the insurance industry after leaving state service.

Allen has highlighted his legislative record on insurance issues. One law he authored requires insurers to pay 60% of a policyholder’s contents coverage without first requiring a detailed inventory and gives consumers more time to provide that inventory. He also authored Proposition 4, the climate bond voters approved in 2024 for safe drinking water, wildfire prevention and protection of communities and natural lands from climate risks.

Allen is also carrying pending bills that would require insurers to give homeowners 90 days’ notice before nonrenewal, along with a clear explanation, and impose penalties on companies that fail to correct unlawful practices identified by the Department of Insurance.

His endorsers include Senate President Pro Tem Monique Limón, Assembly Speaker Robert Rivas, U.S. Sens. Adam Schiff and Alex Padilla, labor unions and the Consumer Federation of California.

Original source: CalMatters

The post California Insurance Commissioner Race Set as Kim and Allen Face Off appeared first on The Hemet & San Jacinto Chronicle.

Could grants to low- and middle-income residents help? That’s an idea California Insurance Commissioner Ricardo Lara wants to bring to the Legislature next year, he said in conversation today with CalMatters’ economy reporter Levi Sumagaysay.

Lara discussed his multi-pronged approach to the insurance crisis — with companies decreasing coverage, raising premiums for residential and commercial customers, or leaving the state altogether. Part of the plan includes speeding up the state’s reviews of insurance companies’ proposed rate hikes — which are supposed to take 60 days, but often take as long as 18 months, by which time rates might not reflect the risk anymore. 

“This was completely ignorant on my part as a new insurance commissioner. I’m like, ‘Okay, we’re reviewing these rates. We’re done, right?’ They’re like, ‘Oh no, there is a whole backlog,’” he said during the hour-long CalMatters event in Sacramento, adding that companies often submit another rate review immediately after one is done because of the long wait times. 

Another significant change Lara is pushing to make insurance more available: For California to come out of the “dark ages” to join other states in allowing insurance companies to do “catastrophe modeling.” That would allow them to take projected losses into account – not just historical information — using data such as frequency, severity, damage and loss from wildfires and other natural disasters. Insurers can start using the modeling to set rates next year.

While companies are allowed to keep the modeling private, Lara promised there will be safeguards in place to ensure data and transparency. 

“We’re doing this from scratch,” he said. 

Lara also wants to tackle problems with the FAIR Plan — a “last resort” insurance plan required by state law that offers minimum coverage for wildfires. His plan is to raise the amount of coverage. Run by a pool of insurers, the FAIR Plan has grown to 400,000 policies. 

While he worries about “Armageddon” scale disasters, Lara said the recent flurry of wildfires in Southern California don’t undermine his proposals, noting that he issued emergency declarations to protect 750,000 policyholders from losing coverage. 

“I’m so confident in my plan,” he said. “I know it’s going to work.” 

But consumer groups and Lara’s predecessors as insurance commissioner have expressed concerns that his plan favors insurers.

What’s not in Lara’s proposals? Requiring insurers to address climate change in the regulations. 

“My immediate goal is to stabilize this market now, to get insurers to come back, to grow, and then we’re going to be having conversations on separate issues, separate requirements that we can look at,” he said. 

The post Why Ricardo Lara says his plan to fix California’s insurance crisis will work 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.

The post With fires burning again, is California becoming uninsurable? appeared first on The Hemet & San Jacinto Chronicle.