SACRAMENTO, Calif. — Over the past two years, the majority of California's biggest homeowners insurance companies, and many smaller ones, have paused or limited business in the state.
They cite rising risks due to wildfires and other natural disasters, the high cost of rebuilding homes and what they see as burdensome state regulations.
This has led to tens of thousands of homeowners finding the cost of their coverage sky-rocketing or losing coverage altogether and having to turn to the expensive, state-mandated insurer of last resort, the California FAIR Plan.
"I want to be able to afford to live here for a long time,” Granite Bay homeowner Dan Raley told ABC10, after his insurer more than doubled his annual premium on the home where he has lived for more than 30 years.
ABC10 has been talking with homeowners about this growing crisis for years now.
"We moved here in 2014 and we've been canceled by our homeowners insurance at least five times, possibly six,” Tuolumne County homeowner Elaine Hagen told ABC10 in July. “The costs keep going up, and I don't know what folks are going to do. It's just terrifying."
Many people hit hardest by this crisis are retired and on fixed incomes.
"My payment has doubled, and I'm not making any more money,” Tuolumne County homeowner Cathy Townsend said in July, tearing up.
In response, back in September, Governor Gavin Newsom issued an executive order, directing California Insurance Commissioner Ricardo Lara to issue emergency regulations, addressing the crisis. The result was a sweeping package of reforms, called the Sustainable Insurance Strategy, with a deadline of December 2024.
But on Friday, Governor Newsom announced he wants action sooner.
"December? I don't think we have that much time,” he said, while discussing the details of the May revision of his budget proposal.
He wants to tack a trailer bill onto this year's budget bill. That’s a bill that doesn’t necessarily have anything to do with the budget, that would go into effect along with the budget, which has to be passed by June 15.
This particular trailer bill would require the state's Department of Insurance to review insurance company rate approval requests within 60 days. Currently, that’s a slow process that can take months, and it's one of the complaints that have led those companies to pause writing homeowners insurance in California.
"We need to get this rate ruling process done, and that's why we want to expedite it over 60-day period,” Newsom said.
ABC10 asked the governor if he has talked with insurance companies and gotten reassurances that if the state follows through on these reforms, then these companies will come back and write once again fully.
"Yes and yes and yes. That's why I'm moving forward with this trailer bill. Let's go. Let's move this along,” he replied. “We've been meeting with everybody on this."
Insurance expert Karl Susman said he's optimistic this change, if passed, can help.
“To actually hear on the stage from the governor that not only does he understand that there is a problem, but that he even realizes the urgency factor — meaning, 'We cannot wait another day, let alone through the end of the year' — was very refreshing to hear,” Susman said. “And I can tell you from my conversations with people in the industry and home offices from several insurance companies, they're feeling the same way: that if all of these things happen the way they're supposed to happen, they're ready to go. They're starving to write business."
ABC10 asked Newsom what he would say to the average homeowner, all over California, including folks in the Foothills, who say, “Look, I'm retired. I'm on a fixed income. I simply can't possibly live in California for much longer.”
“I'm with them. That's why we're doing the trailer bill. I'm with them. That's why I did the executive order. I can't impress upon them more the urgency that we share,” Newsom said.
He went on to share that he, himself, with his home in the foothills, is also on the FAIR Plan — the insurer of last resort.
“I'm also deeply mindful the burdens that have been placed and the stress on the FAIR Plan and — just full disclosure — I’m a participant in the FAIR Plan in the Foothills. So, to those specific individuals, we share similar experiences as well,” he said.
The governor and insurance commissioner say they are in this together and want to see action as soon as possible.
Posting on X after Newsom's Friday announcement, Lara said he appreciates the Governor's support of his Sustainable Insurance Strategy.
"We are working together with Governor Newsom and Legislature on critical budget language that keeps us on track to get the job done, strengthen our insurance market for homeowners and businesses, and protect consumers," Lara wrote, in part. "We are well on our way to enacting the largest insurance reform in 30 years. Thank you Governor for your commitment to making sure we have all the support and resources we need for Department of Insurance staff who are working day and night to stabilize our market."
In a statement, the group Consumer Watchdog told ABC10 it is “waiting to see the details of the proposal but is worried it could amount to a rubber stamp on higher rates. We are confused by the Governor’s proposal because Prop 103 already specifies a 60 day rate review period except in certain cases (see statute). We are happy to have quicker rate review so long as it is a thorough rate review as required by voters and await the details.”
Insurance Commissioner Lara is expected to give an update on his Sustainable Insurance Strategy reform to the Assembly Insurance Committee, at an oversight hearing on Wednesday afternoon.
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