The Sacramento Bee – Wildfires Make it Hard for Californians to Insure Their Homes. Did a Deal to Help Fall Apart?

By Maggie Angst and Lindsey Holden, THE SACRAMENTO BEE

A last-minute push for a legislative deal to make it easier for more California homeowners to get insured is on the brink of collapse in the final days of the state’s lawmaking session.

Sen. Bill Dodd, D-Napa, who sits on the Senate Insurance Committee and whose district has been hit hard by recent wildfires, said Thursday afternoon that negotiations to address the state’s insurance crisis had “broken down.” He said closed-door talks were led by California Insurance Commissioner Ricardo Lara, Gov. Gavin Newsom’s administration and legislative staff.

“It’s dead for this year,” he told The Sacramento Bee just after the Senate floor session concluded. Dodd’s assessment was first reported by the San Francisco Chronicle.

The deadline to submit legislation for the year is Monday. Moves could still be made to reach an agreement, but Dodd is convinced it’s too late.

The goal of the negotiations was to strike a deal that would keep insurance companies in California by loosening restrictions around rate increases. Details of the proposed plan were never released and it is unclear which lawmakers had a seat at the negotiating table.

More than 1.2 million homes in California are at risk of wildfires, according to data compiled by the Insurance Information Institute. Yet, it’s becoming more difficult and more expensive for Californians to obtain coverage.


California’s insurance woes, escalating for years, exploded after a wave of devastating wildfires in 2017 and 2018 caused billions of dollars in damage. Insurance companies dropped tens of thousands of mostly-rural homeowners, who later had to pay two or three times more for replacement coverage.

The situation worsened during the last year, as two of California’s largest providers — Allstate and State Farm — announced they would stop selling new policies to homeowners across the state, whether or not they live in fire-prone areas.

Then Farmers Insurance — faced with a spike in applications for homeowners coverage — announced it would start capping the number of new policies it would write in California.

More recently, another insurer, the United Services Automobile Association Group, filed paperwork with the California Department of Insurance to reduce future coverage in the Golden State.

Companies have cited the increased risk of wildfires and other natural disasters, inflation and high material costs, among other factors, as reasons for their decisions. States such as Florida and Louisiana have similarly struggled to maintain reliable insurance markets because of hurricane damage.

The recent withdrawals in California quickly set off alarm bells for lawmakers. At a June Assembly subcommittee hearing, members agreed the state was facing an insurance availability and reliability crisis, but plans to address it never emerged.


Rumors of eleventh-hour dealings began circulating around the Capitol late last month and were first reported by Politico on Aug. 21.

Then, Dodd said, some lawmakers may have gotten “spooked” after the president of the advocacy group Consumer Watchdog overheard and recorded an industry lobbyist saying the industry was “trying to jam a bill in the last three weeks of the year.”

As recent as Wednesday, a coalition of business groups — included insurers, farmers, builders and realtors — were pushing legislators to support the plan. In a letter to lawmakers, the organizations called it a “crucial initiative that was endorsed by the California Insurance Commissioner” to “restore a competitive insurance market while maintaining oversight.”

Consumer Watchdog has spent the past few weeks fiercely lobbying against the “back-room” deal, saying it would amount to a bailout for insurance companies at the expense of customers. Earlier this week, leaders of the consumer group wrote to Attorney General Rob Bonta urging him to investigate alleged collusion by the insurance industry in California.

“To think that they tried to ramrod this through the legislature without a public hearing or for media to assess it, is a real insult to voters and a disappointing failure for democracy,” said Consumer Watchdog founder Harvey Rosenfield. Rosenfield wrote the state’s 1988 Proposition 103, which reduced insurance rates and required state approval for increases going forward.

He contends that insurers have been trying to dismantle the regulation ever since. When asked about the agreement falling apart, Rosenfield said he wouldn’t truly feel relieved until the legislative session ends and Lara “drops whatever secret plan he has to bail the industry out.” Lara’s office did not immediately return requests for comment.


Senate Insurance Committee Chair Susan Rubio, D-Baldwin Park, would not comment on negotiations over a last-minute bill. Instead, she said, the Senate is “still 100% committed to bringing relief and trying to figure out a solution.”

“Conversations are still really strong in my house,” she said.

If legislation is not introduced this session, lawmakers could take another crack at the issue next year or Lara could use his authority as insurance commissioner to adopt regulatory changes.

The Department held a workshop earlier this summer on possible solutions to address the state’s insurance issues and another one is scheduled for the end of September. A major point of contention between the Department of Insurance, consumer advocates and the insurance industry is how California regulators set premium rates.

California regulations prohibit insurance companies from using statistical modeling to assess future fire risks when setting rates. Instead, premium increases are based on a minimum 20-year average of historical losses.

Insurers have long pushed to change that. Insurance companies and industry consultants argue the state’s current system fails to recognize the intensity of climate change and the “new normal” of California’s wildfire risks.

They say that allowing them to use the future risk assessment system, known as catastrophic modeling, would create a more accurate picture of risks and give them the opportunity to charge premiums high enough to justify expansion of their underwriting.

Opponents, including Consumer Watchdog, worry that catastrophe modeling would drive up rates.

Lara, the state’s insurance commissioner, has resisted calls from insurers to adopt catastrophe modeling. In a February 2022 interview, he told the Sacramento Bee, “At the end of the day (it) doesn’t reduce the risk.”

In 2020, Lara tried — unsuccessfully — to push legislation forcing insurers to return to certain wildfire-prone areas. Instead, he launched a new program designed to help residents make their homes more resilient to wildfires and entice traditional insurers back into rural, fire-prone areas. Building off that effort, Lara last year advanced regulations requiring insurers to give homeowners discounts for making certain wildfire safety investments, such as installing fire-resilient roofs and eliminating hazards around the perimeter of their homes.

Californians who live in fire-prone areas and can’t get coverage from a traditional insurer are forced to buy fire coverage from the California FAIR plan, which is considered the state’s “insurer of last resort.”

While the state program provides some relief, it ends up costing homeowners significantly more, because they’re required to purchase insurance for burglary and other risks separately. In some rural parts of the state, FAIR has become the only option for homeowners.

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