Candidate comment: Private insurers are holding California homeowners hostage

With the first anniversary of the devastating Southern California wildfires approaching, CalMatters asked candidates for the 2026 state Insurance Commissioner race to share thoughts on what the state can do to help victims and stabilize insurers. This is the sixth response. Read the other candidate responses here, here, here, here and here.

Over the holiday season California’s Insurance Commissioner, Ricardo Lara, quietly approved a 6.9% rate increase for Mercury Insurance and CSAA Insurance. 

Rate increases for Farmers Insurance Group and the FAIR plan are currently pending. Last year after the Los Angeles fires, State Farm received approval from the insurance commissioner to raise rates by 17% for the average homeowner.

The insurance industry’s most recent wave of rate hikes has been directly encouraged by regulators and politicians from both political parties. Caught in a hostage situation — where the insurance industry threatens to leave the state unless they receive higher rates and less regulation — California’s politicians are forcing the average consumer to pay the ransom, leaving us with an increasingly unaffordable and exploitative insurance market. 

A manufactured crisis 

Climate change has drastically increased the likelihood of destructive wildfires and other climate disasters. Since the catastrophic wildfires of 2017 and 2018, the insurance industry has been gnawing at the bit to upend California’s insurance regulations. 

Insurers took aim while searching for ways to mitigate the costs of repairs and rebuilds associated with climate disasters, without compromising their profit margins and long-term solvency. 

With Lara’s “Sustainable Insurance Strategy” they finally have their chance. At the heart of this strategy is deregulation, a promise of rate approvals and less bureaucracy, in exchange for the insurance industry returning to California and writing new policies in high risk areas again.

Through a coordinated boycott of California, the insurance industry has achieved the crux of what it wanted: public policy and regulation that allows it to pass the cost of the climate crisis off to anyone but themselves. 

By collectively withdrawing from the California market in 2022 and 2023, the insurance industry appeared to have all the leverage. 

Even now, most candidates for insurance commissioner say that unless insurers’ needs and desires are met, they will continue to leave the state, until there is no insurance available for homeowners. Regulators, who cannot see beyond the horizon of a private insurance system, have fallen for this pressure. 

Private insurers also are using internal claim procedures to pay policyholders as little as possible after disasters. Hundreds of fire survivors in Los Angeles have reported that the same insurers demanding rate hikes have yet to adequately compensate them for damages caused by last year’s fires. 

Adjusters are instructed to never put coverage denials in writing and are pressured by management to offer low settlements. Insurers prematurely cut off compensation for survivors whose houses are contaminated with carcinogens, forcing homeowners back into dangerous living situations. Instead of gauging the true degree of contamination in a household, insurers rely on sketchy research, funded and designed by the insurance industry to reach the conclusions insurers desire. 

Although similar stories occur after every major wildfire, regulators usually turn a blind eye, because they are afraid to challenge the power of the insurance industry.

Freeze rates and hold insurers accountable 

Californians must ask themselves: why are ordinary people expected to pick up the tab for the damage and destruction caused by climate change? 

As the saying goes, “If you break it, you buy it.” Those responsible for breaking our climate should be the ones covering the costs of mitigation or repairs associated with climate disasters. The fossil fuel industry, utility companies and their billionaire owners broke our climate and caused these disasters; it’s time they pay to fix it.

As insurance commissioner, I will freeze any further rate hikes. I will lead the department in market conduct investigations of the 10 largest property and casualty insurance companies in California. Investigations will expose the exploitative nature of internal claim procedures, unfair competition or illegal coordination between insurance companies.

That insurance is a commodity sold on the private market and not a right is exactly why we are in this situation. As climate change progresses, disasters become more likely for all of us. We all deserve the right to rebuild. 

Public insurance, not ‘market stabilization’

California already provides a de facto right to home insurance through the FAIR plan for all those who cannot find insurance. Still, the FAIR plan is not a public plan funded by taxpayers for all Californians. 

In 1968, the state of California ordered the private insurance industry to create the FAIR plan as an insurer of last resort, funded based on each insurer’s share of the market. The profits and losses through the FAIR plan are managed by such private insurers as AAA, Farmers, Mercury and others — the same companies who deny policies to begin with. 

Public insurance in California would not be modeled after the FAIR plan.

Without the motive of private insurance, which is structured to deny and limit claims as much as possible, a public insurance plan would allow maximum coverage through a tax on those who are responsible for the climate crisis. California without billionaires could fund a public insurer. 

The insurance crisis cannot be solved by maintaining the current structure of the private insurance industry. A crisis this big needs bold solutions. And I will work alongside every fire survivor and homeowner to make these proposals a reality.

The candidate guest commentaries are being published in the order in which they were received.