SACRAMENTO, Calif. — Hundreds of thousands of Californians are struggling to find affordable homeowners insurance, and a new legislative proposal seeks to help alleviate that.
As ABC10 has been reporting for years now, most major insurers have paused or limited business in the state. They cite rising wildfire risks, increased costs of rebuilding homes and what they consider burdensome regulations.
State lawmakers will now consider a so-called trailer bill from Governor Gavin Newsom, which he announced at a news conference unveiling revisions to his budget proposal earlier this month. The exact language of that bill came out on Tuesday.
“We need to stabilize this market. We need to send the right signals. We need to move,” Gov. Newsom said at his May 10 news conference.
Newsom announced plans for a bill he said would help lead to more affordable and available insurance for homeowners.
“I can’t impress upon them more the urgency that we share,” he said.
One of the reasons why homeowners insurance companies have been pausing or limiting business in California is the sluggish rate approval process.
Under Proposition 103, which voters passed in 1988, insurance companies are required to get state approval before raising their rates, and the public can intervene in that process if they feel the increase a company is requesting is too high.
The rate approval process can take months, even more than a year. Insurance companies say their rates can’t keep pace with rising costs.
"We need to get this rate ruling process done, and that's why we want to expedite it over a 60-day period,” Newsom said.
It would require the California Department of Insurance to complete a company’s rate request within 60 days, with possible extensions if needed.
Carmen Balber is executive director of Consumer Watchdog, which is the group most often intervening in the rate approval process, objecting when they feel insurance companies are asking for too high of an increase.
“Will we continue to make insurance companies be transparent and make them justify what they want to charge? Or will the Department of Insurance turn into a rubber stamp for the insurance industry, getting whatever rate increases they want? And that's where this proposal is heading,” she told ABC10 on Wednesday.
She said Newsom’s proposal would limit the ability of the public to object to a rate request, and she worries it could lead to higher rates for California homeowners.
“This bill targets directly the public participation process that has saved homeowners more than $2 billion in the last 20 years in excessive rate increases,” she said.
Balber acknowledges something has to be done to get insurance companies writing fully in California again. She said she’d like to see a mandate requiring insurers to cover people who harden their home against wildfire.
ABC10 asked Governor Newsom at his May 10 news conference whether insurance companies have committed to him that if the rate approval process can be done in 60 days, among other reforms, then they’ll return to full business in California.
“That’s why I’m moving forward with this trailer bill. Let’s go,” he said. “We’ve been meeting with everybody on this.”
On Wednesday, ABC10 asked the Governor's office what's next for this proposed bill.
"We intend to work with the Legislature on this policy proposal, which will determine how and when it would be enacted,” spokesperson Alex Stack said.
The American Property Casualty Insurance Association is the primary national trade association for home, auto and business insurers. Denni Ritter, APCIA Department Vice President for State Government Relations, tells ABC10:
“Streamlining the rate review process will help increase consumer access to coverage by ensuring rates adequately reflect risk and consumer claims – especially in the wake of rapidly changing conditions. Year-long delays in the rate approval process have created a significant market imbalance – forcing more than half of the state’s top 15 insurers to restrict new policies or exit out of the market entirely. Streamlining approvals is key to modernizing our regulatory system and fixing the California insurance crisis. We are evaluating the language and are committed to working with the Governor, Legislature, and the Department of Insurance on this important reform.”
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