SACRAMENTO, Calif. —
California Insurance Commissioner Ricardo Lara is promoting the biggest overhaul to the state’s insurance market in 35 years, calling it the Sustainable Insurance Strategy.
Its goals include expediting the state’s rate approval process, which was put in place by Prop 103. It can now take more than a year for companies to get rate approvals. The plan also addresses the ability to use forward-looking catastrophe modeling and getting people off the California FAIR Plan.
Lara has promised the Sustainable Insurance Strategy would be implemented by the end of 2024. To the Point host Alex Bell sat down with Lara and asked when California can expect to see changes.
“So, with the reforms that we're proposing, I'm very confident that we're going to see some real change coming mid-2025. We're going to see that California is back open for business," said Lara.
ABC10 asked the commissioner what guarantees he has from insurance companies his new plan will bring insurance companies back to California. Lara explained the Department of Insurance feels confident because they’ve worked alongside insurers and consumer groups to craft regulations.
One key component of Lara's strategy is adding forward-looking catastrophe modeling. Right now, insurance companies doing business in California can only use historical data.
“...Insurance companies are going to be able to use some technology that they've been wanting to use for so long. We are actually one of the only states that prevent insurance companies from being able to forecast these future events," said Lara.
He shared the new technology will help better inform how and where Californians can build.
Another goal of Lara's Sustainable Insurance Strategy is getting people off the California FAIR Plan, the state’s insurer of last resort, which is taking on more and more risk. He explained how the FAIR Plan offers limited coverage at a higher cost. He wants consumers back in the insurance marketplace and details how his plan will require insurance companies to write 85% of their business in the wildland urban interface (WUI). The group Consumer Watchdog says the plan has loopholes, arguing companies could offer less and charge more.
Lara feels once insurance companies come back to California and expand their footprint, “...you're going to create that natural market flow to be able to bring down the cost for everybody.”
Lara said the Department of Insurance is on track to completely roll out the Sustainable Insurance Strategy by December 2024, and the department will also be ready to accept new rate filings by January 2025.
