A home burns as the Camp Fire rages through Paradise on Nov. 8, 2018. Photo by Noah Berger, AP Photo
In summary
The California Legislature adjourned this month without resolving the issue facing homeowners and their declining ability to acquire fire insurance. A move by the insurance commissioner to try and intervene seemed to double down on a major tradeoff.
Before the California Legislature adjourned this month, it managed to fulfill most of wishes of majority Democrats’ favorite interest groups, most notably labor unions.
However, legislators left town without doing anything concrete about something that threatens the psychic and economic wellbeing of millions of homeowners and those who aspire to ownership: the rapidly shrinking availability of residential fire insurance.
One by one, insurers have been reducing or eliminating their exposure in California, having paid out billions of dollars to cover losses from years of major wildfires and, they say, facing a fire threat that is likely to increase with climate change.
With Gov. Gavin Newsom and Insurance Commissioner Ricardo Lara involved in the background, there were weeks of private negotiations among legislators, insurance lobbyists and other stakeholders on how to bolster the state’s insurance market.
However, the negotiations ended a week before the Legislature adjourned without agreement, signaled when state Sen. Bill Dodd, a Democrat whose Napa-centered district is one of the state’s most fire-prone regions, sent a text message:“Deal is dead. Very frustrating.”
The discussions revolved about changing the way insurers calculate risk, from basing it on past experience to including potential future risk. Such a change would probably increase premiums and legislators wanted ironclad assurances that the companies would continue writing policies in fire-prone areas if the change was made.
As the session ended, there were public assurances that the issue would not be forgotten.
“We hear loud and clear from our residents that access to insurance is a problem,” Assembly Speaker Robert Rivas said in a statement.
Learn more about legislators mentioned in this story
Sen. Bill Dodd has taken at least
$953,000
from the General Business
sector since he was elected to the legislature. That represents
15%
of his total campaign contributions.
Asm. Robert Rivas has taken at least
$801,000
from the Labor
sector since he was elected to the legislature. That represents
18%
of his total campaign contributions.
The Legislature’s departure punted the issue, at least for a few months, to Lara and Newsom, who said, “We can do a lot of things. And I’m very mindful. We can do all of that.”
However, Newsom didn’t list any specifics. Last Thursday, he issued an executive order urging Lara to “take action to stabilize and improve California’s property insurance marketplace.”
Almost immediately, Lara issued new rate-setting regulations, which he had described earlier as “a package of regulatory solutions that will streamline the department’s rate review process, opening it equitably to public input – not just the entrenched interests that have benefited materially from the status quo.”
Newsom, Lara and the regulations drew praise from the American Property Casualty Insurance Association, which said, “Everyone understands that California’s insurance market is in a spiraling crisis that requires immediate policy solutions to protect consumer access to the coverage they need.”
Insurance Commissioner Ricardo Lara unveils a plan to shore up the California insurance market for homeowners. Insurers would return to wildfire zones, but would have an easier path to rate increases.
Given industry support, it’s likely that the new regulations will allow it to include, at least to some extent, estimates of future risk from wildfires in their rates which would probably lead to premium increases.
Newsom stopped short of declaring an emergency in Thursday’s executive order, which would have given Lara the authority to issue new rate-setting rules without going through the usual procedural hoops.
Earlier in the day, Consumer Watchdog, the organization that sponsored a 1988 overhaul of insurance regulation, Proposition 103, and has been a critic of Lara from virtually his first day on the job, issued a warning to Newsom and Lara about proceeding on an emergency basis.
Later, the organization said, Lara’s move “would allow insurance companies to use secret algorithms to set rates for homeowners’ coverage for wildfire and to add reinsurance costs to premiums will lead to higher insurance premiums.”
So there it is, a complex mélange of economic, political and societal factors and a huge tradeoff between the availability of coverage, which is mandatory for anyone having a mortgage, and the costs.
Dan Walters has been a journalist for more than 60 years, spending all but a few of those years working for California newspapers. He began his professional career in 1960, at age 16, at the Humboldt Times...
More by Dan Walters
California Legislature whiffs on insurance crisis, punting to Newsom and Lara
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In summary
The California Legislature adjourned this month without resolving the issue facing homeowners and their declining ability to acquire fire insurance. A move by the insurance commissioner to try and intervene seemed to double down on a major tradeoff.
Before the California Legislature adjourned this month, it managed to fulfill most of wishes of majority Democrats’ favorite interest groups, most notably labor unions.
However, legislators left town without doing anything concrete about something that threatens the psychic and economic wellbeing of millions of homeowners and those who aspire to ownership: the rapidly shrinking availability of residential fire insurance.
One by one, insurers have been reducing or eliminating their exposure in California, having paid out billions of dollars to cover losses from years of major wildfires and, they say, facing a fire threat that is likely to increase with climate change.
With Gov. Gavin Newsom and Insurance Commissioner Ricardo Lara involved in the background, there were weeks of private negotiations among legislators, insurance lobbyists and other stakeholders on how to bolster the state’s insurance market.
However, the negotiations ended a week before the Legislature adjourned without agreement, signaled when state Sen. Bill Dodd, a Democrat whose Napa-centered district is one of the state’s most fire-prone regions, sent a text message: “Deal is dead. Very frustrating.”
The discussions revolved about changing the way insurers calculate risk, from basing it on past experience to including potential future risk. Such a change would probably increase premiums and legislators wanted ironclad assurances that the companies would continue writing policies in fire-prone areas if the change was made.
As the session ended, there were public assurances that the issue would not be forgotten.
“We hear loud and clear from our residents that access to insurance is a problem,” Assembly Speaker Robert Rivas said in a statement.
Learn more about legislators mentioned in this story
Bill Dodd
State Senate, District 3 (Napa)
Bill Dodd
State Senate, District 3 (Napa)
Time in office
2016—present
Background
Napa County Supervisor / Businessman
Contact
Email Legislator
Voter Registration
Sen. Bill Dodd has taken at least $953,000 from the General Business sector since he was elected to the legislature. That represents 15% of his total campaign contributions.
Robert Rivas
State Assembly, District 29 (Salinas)
Robert Rivas
State Assembly, District 29 (Salinas)
Time in office
2018—present
Background
County Supervisor / Educator
Contact
Email Legislator
Voter Registration
Asm. Robert Rivas has taken at least $801,000 from the Labor sector since he was elected to the legislature. That represents 18% of his total campaign contributions.
The Legislature’s departure punted the issue, at least for a few months, to Lara and Newsom, who said, “We can do a lot of things. And I’m very mindful. We can do all of that.”
However, Newsom didn’t list any specifics. Last Thursday, he issued an executive order urging Lara to “take action to stabilize and improve California’s property insurance marketplace.”
Almost immediately, Lara issued new rate-setting regulations, which he had described earlier as “a package of regulatory solutions that will streamline the department’s rate review process, opening it equitably to public input – not just the entrenched interests that have benefited materially from the status quo.”
Newsom, Lara and the regulations drew praise from the American Property Casualty Insurance Association, which said, “Everyone understands that California’s insurance market is in a spiraling crisis that requires immediate policy solutions to protect consumer access to the coverage they need.”
Can this plan fix California’s insurance crisis? What you need to know
Insurance Commissioner Ricardo Lara unveils a plan to shore up the California insurance market for homeowners. Insurers would return to wildfire zones, but would have an easier path to rate increases.
Given industry support, it’s likely that the new regulations will allow it to include, at least to some extent, estimates of future risk from wildfires in their rates which would probably lead to premium increases.
Newsom stopped short of declaring an emergency in Thursday’s executive order, which would have given Lara the authority to issue new rate-setting rules without going through the usual procedural hoops.
Earlier in the day, Consumer Watchdog, the organization that sponsored a 1988 overhaul of insurance regulation, Proposition 103, and has been a critic of Lara from virtually his first day on the job, issued a warning to Newsom and Lara about proceeding on an emergency basis.
Later, the organization said, Lara’s move “would allow insurance companies to use secret algorithms to set rates for homeowners’ coverage for wildfire and to add reinsurance costs to premiums will lead to higher insurance premiums.”
So there it is, a complex mélange of economic, political and societal factors and a huge tradeoff between the availability of coverage, which is mandatory for anyone having a mortgage, and the costs.
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Dan WaltersOpinion Columnist
Dan Walters has been a journalist for more than 60 years, spending all but a few of those years working for California newspapers. He began his professional career in 1960, at age 16, at the Humboldt Times... More by Dan Walters