California's insurance commissioner addresses crisis

Yahoo

20-03-2025

The Brief
CA insurance commissioner Lara testifies the FAIR insurance plan has enough funds to cover LA wildfire losses
Lara says state must focus on fire mitigation efforts to help homeowners and insurance companies continue coverage
Lara says he expects rates to stabilize by 2026.
OAKLAND, Calif. - The State Assembly Insurance Committee listened to California Insurance Commissioner Riccardo Lara testify about the state of California's home insurance crisis.
"If we don't prioritize...rebuilding better, how we build, where we build, we're going to repeat past mistakes," Lara testified.
WATCH:FULL HEARING VIDEO HERE.
Lara reported on some of the reforms he is implementing, allowing insurance companies to use algorithms to tailor policies to individual home's fire risk, instead of pricing rates based on broad, generic, historic data.
Lara vowed to demand that State Farm justify its requested rate hike with hard data, when they appear at a hearing on April 8.
He also discussed the status of the state's FAIR Plan, an insurance of last resort administered by insurance companies, that has ballooned as many of those companies have canceled Californian's insurance policies.
The Assembly Insurance Committee Chair, Rep. Lisa Calderon announced a new bill Wednesday to require two legislators be placed on the FAIR insurance committee, saying the insurance companies and governor's appointees make up the committee, but there is no representation for elected lawmakers.
Lara says reform is desperately needed.
"It's been 30 years since the last FAIR plan assessment, which was prompted by guess where, wildfires in Altadena, Topanga, Malibu and West LA," Lara said.
Critics say Lara is not doing enough.
"The regulation that the commissioner passed requiring so- called commitments for insurance companies to move back to wildfire-distressed areas has so many loopholes that it is unenforceable," Carmen Balber, Executive Director of Consumer Watchdog said.
Balber says she agrees with Lara's call for more scrutiny of how fire-prone communities rebuild, but wants decisions to be based on local communities, not insurance companies. She also says the state needs to do more to set parameters.
"We need a mandate, just like auto insurance for good drivers, that if you do the right thing for your home, you will be covered," Balber said.
Lara did testify that fire mitigation efforts are important moving forward, and said rates should normalize once his reforms kick in.
"Currently, the rates don't reflect the mitigation that people are doing. So what's the incentive for people to do the mitigation if it's not reflected in their rates or they're not getting these discounts?" Commissioner Lara said. "By the end of 2026, you'll start seeing the insurance companies normalize the rates because they're going to be able to truly reflect the risk of what we're living in."