In his May 10 press conference announcing his revised budget plan, California Gov.
Gavin Newsom revealed that he will introduce language in the 2024-25 fiscal year budget trailer bill to address the state’s insurance crisis.
This follows an executive order signed by the governor in September 2023, urging insurance commissioner Ricardo Lara to strengthen and stabilize the insurance markets affecting home and commercial property owners.
The insurance crisis has been affecting millions of property owners in California, with dozens of insurers either stopping writing policies for certain properties or leaving the state altogether.
Many are being forced onto the FAIR plan—meant to be an insurer of last resort—which offers higher premiums and less coverage compared to traditional insurers.
Victoria Roach, president of the FAIR plan, informed the state Assembly’s Insurance Committee that a record number of applications and inquiries are overwhelming the plan, necessitating rate increases to remain solvent.
The governor expressed his understanding of the challenges faced by both property owners and the FAIR plan but emphasized the need for urgent action.
The insurance commissioner has stated he hopes to see reforms completed by December 2024, but Gov.
Newsom believes more needs to be done sooner.
He aims to speed up the process by having reviews completed within 60 days of the bill’s passage.
The governor’s goal is to stabilize the market and send the right signals to move forward with reforms.
Seven out of the top 12 insurers, responsible for writing about 85 percent of insurance coverage in California, left the state in 2023, according to the state’s Department of Insurance.
Some lawmakers believe that the lack of available and affordable insurance is exacerbating the state’s housing crisis.
California’s housing market is being affected by this crisis, as business owners, condominium associations, apartments, and single-family homeowners are struggling to find insurance coverage.
The issue began in earnest after a series of devastating wildfires swept through communities across the state starting in 2017.
Regulators argue that their hands are tied due to Proposition 103—passed by voters in 1988—which requires pre-approval before rate increases can be passed on to consumers.
However, Insurance Commissioner Ricardo Lara believes that by updating the approval process and allowing insurance companies to use forward-looking risk assessment models, the market could be stabilized.
The trailer bill language is expected to be released in the coming weeks, with Gov.
Newsom looking to sign the measure into law this summer.
The deadline for its passage by the Legislature is June 15, and it must be approved by the governor by July 1.