For months, lawmakers, regulators, the insurance commissioner and the governor sat on their hands while the state’s wildfire insurance market became a full-blown crisis for tens of thousands of Californians.
The governor and the Legislature could have proposed bills initiating a transparent process that would have allowed the public to vet legislation through widespread debate.
Now, lawmakers are trying to push through a last-minute deal without public input that could bail out insurers at the expense of Californians. It also threatens to violate the spirit of Proposition 103, the 1988 insurance reform measure that outlawed price-gouging, saving policy-holders billions of dollars.
It’s an outrageous flaunting of the political process. Californians deserve better.
Proponents are expected to unveil their legislation in the next few days, using the egregious, sleazy “gut and amend” process, in which a dormant bill is pulled to the floor in the last days of a legislative session, gutted entirely and amended with new language that the authors know won’t be thoroughly scrutinized before the full Legislature votes on the bill.
As a result, information on the proposed legislation is sketchy.
Politico reported last week that the late-session push from insurers, home builders and the state’s insurance commissioner would allow rates to rise in exchange for carriers staying in California. State Farm and Allstate are not writing new policies in the state, and Farmers is limiting its new policies.
As the author of Proposition 103, Harvey Rosenfield, noted in an oped published earlier this week, companies must now prove that the premiums they want to charge are necessary to cover projected claims, reasonable expenses and a fair profit. Instead, the new legislation would allow insurers to use a “forward-looking” model to set premiums that creates the potential for them to gouge policy-holders.
Rosenfeld notes that the deal would also bail insurers out of their responsibilities under the California FAIR Plan, which allows people who aren’t able to purchase coverage from an individual insurer to buy a policy — though with less benefits and higher prices. Under that scenario, California consumers — not insurance companies — would in effect experience increased rates to insure insurance companies against wildfire losses.
It should come as no surprise that California Insurance Commissioner Ricardo Lara is supporting the proposed legislation. Lara has a history of cozying up to the industry and putting its needs before the needs of Californians.
During his 2018 campaign for the office, Lara vowed not to accept insurance industry money. But he broke that promise and then after his election quickly began raising more money from the industry for his 2022 campaign. The San Diego Union Tribune calculated that Lara collected at least $270,000 from 56 people and companies with insurance industry ties.
Make no mistake. The shrinking wildfire insurance market calls for legislative action. But allowing the insurance industry a seat at the table while preventing the public from scrutinizing any legislation hardly serves Californians’ interests.