California Insurance Commissioner Ricardo Lara is in the hot seat.
Just before the public official outlined reforms to stave off an exodus of insurance companies from the state, homeowners and consumer advocates gathered on the steps of Los Angeles City Hall to take Lara to task for trying to undermine Prop. 103, a landmark insurance law, the Orange County Register reported.
Lara “isn’t doing his job,” Crestline homeowner Gigi Bannister, 64, said. “He needs to hold the insurance companies’ feet to the fire.”
Bruce Breslau, a resident of California West, a 290-unit condominium complex in Chatsworth, added his homeowners association faced a 400 percent premium hike for reduced coverage after Farmers Insurance terminated its policy. The association had to levy a $4,700 special assessment on every homeowner to pay for the new $1.7 million policy from various providers.
“We’ve got a diverse community, old, young, all persuasions, and we’ve got many people who are on fixed incomes,” Breslau said. “We need a law bringing these regulated insurers back into our marketplace for premiums that are reasonable.”
Lara defended the reforms, saying from a City Hall meeting room: “By mid-2025 in California, we (will) have insurance companies running back in every corner of the state.”
For more than two years, insurance providers that included Allstate, Farmers, State Farm and Travelers Insurance have announced plans to stop underwriting new policies in California and deny renewal to hundreds of thousands of policyholders in fire-prone regions.
Residents received premium hikes as high as 1,000 percent. Others unable to get traditional coverage were forced to seek policies from the state’s FAIR plan, which provides higher-cost coverage for customers who couldn’t get policies from private carriers.
Condo associations have struggled to replace fire and casualty coverage, as have homebuilders and affordable housing developers.
On Tuesday, Sept. 17, Lara addressed the state Assembly Insurance Committee’s third hearing on his proposed regulations overhaul. The commissioner noted that, according to a recent California Association of Realtors survey, nearly 7 percent of home sales fell out of escrow because of insurance issues.
For months, Lara has advocated for what he called the state’s biggest insurance reform in three decades. He said climate change and wildfires created an urgent need to bring the state’s rate-review system into the 21st century.
“Massive wildfires are burning just miles from where we sit, fueled by record-breaking heat waves and continued dry winds,” Lara told committee members on the 10th floor of City Hall.
Before the hearing, however, consumer advocates argued that the proposed reforms will gut Prop. 103, the 1988 citizen reform designed to keep California insurance rates in check by forcing insurance companies to publicly justify rate-hike requests.
Harvey Rosenfield, founder of Consumer Watchdog, said the insurance industry spent 36 years trying to undercut Prop. 103, “and they finally found an insurance commissioner willing to do the dirty work for them.”
Rosenfield and others argued the reforms would allow insurance companies to keep their proprietary catastrophe modeling algorithms private. Another provision allowing for rate hikes to take effect 60 days after they are filed eliminates the ability of public “intervenors” to review the increases, they said.
“Over the last 36 years, one elected commissioner after another (has held) the line,” Rosenfield told the Register. “And now suddenly the dam has burst, and (insurers) are getting everything they’ve asked for.”
Lara countered during the local Assembly hearing that increased risk from fire, floods and hurricanes sparked devastating insurance rate hikes across the country and around the world. He argued that California is the only U.S. state to not use catastrophe modeling to set rates.
Company filings for state homeowners’ insurance rate hikes jumped to 450 in 2022 from an average of 120 to 150 a year before 2019.
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Insurance companies applauded the proposed reforms, vowing to expand coverage in California if they’re adopted by the end of the year as planned.
“California’s outdated regulatory environment is in need of some fixing,” Laura Curtis of the American Property and Casualty Insurance Association told the Register. “We support urgent action to streamline the rate-making process.”
— Dana Bartholomew