By Jillian D’Onfro, THE SAN FRANCISCO STANDARD

https://sfstandard.com/2024/05/30/california-insurance-crisis-new-newsom-trailer-bill

Gov. Gavin Newsom just released part of his solution to California’s home insurance crisis, and it boils down to a push to allow carriers to move faster to raise rates.

As the state has faced a dramatic exodus of insurance companies—with some pausing new policies and others pulling out of California entirely—Newsom and state Insurance Commissioner Ricardo Lara have tried to lure them back by rolling out new regulations that make it easier to operate. 

California’s insurance market is in free fall, and the governor foreshadowed executive action on the issue during his marathon budget announcement earlier this month.

 “We need to stabilize this market,” Newsom said. “We need to send the right signals. We need to move.” 

Newsom’s latest proposal, in the form of a budget trailer bill released this week, aims to streamline the approval process for insurance providers to raise rates and make other policy adjustments. One key change: Shortening the time state officials can take to act on proposed rate changes.

In most cases, the Department of Insurance would be required to act on an insurance carrier’s rate request within 60 days, unless extensions are necessary.

The proposed bill expedites the timelines laid out in Proposition 103, which requires insurance companies to have changes approved by the Department of Insurance and dictates how quickly the department must act on change requests. 

Critics fear that shortening approval timelines will allow insurance companies to jack-up premiums without room for public appeals and sufficient review by the Department of Insurance.

“Under this proposal, insurance companies will basically be able to charge whatever they want—it will mean massive and unjustified rate increases,” said Harvey Rosenfield, the author of Prop. 103 and head of the consumer advocacy organization Consumer Watchdog, which opposes the proposal. 

Insurance providers have argued that California’s current regulations don’t allow them to update their policies and premiums quickly enough, forcing them to take on excessive financial risk. The bill would allow insurers to raise rates more quickly, allowing them to address increased disaster risks from climate change, for example. 

To proponents, the bill could help avoid a breaking point for California’s insurance industry, as a mass exodus of carriers has left many homeowners struggling to get a policy and put a severe strain on the state’s “insurer of last resort.” 

“It’s ironically not that big of a change—it’s just tightening what’s already in place,” said Karl Susman, president of the Susman Insurance Agency in Los Angeles and an industry pundit. 

The heart of Prop. 103 doesn’t change, he said, and shortened timelines for the Department of Insurance won’t automatically lead to more or higher insurance hikes, just faster ones. The bill also includes changes like discounts and underwriting adjustments. 

“People are freaking out and saying, ‘Oh my god, this is going to mean fast rate increases!’ And that’s one thing that could happen,” Susman said. But the Department of Insurance will still have to look at a carrier’s data and approve the change. “It could be a rate decrease or a different type of premium. It’s super, super granular. It’s not just about rates.” 

Ultimately, he said, shortening timelines is a critical step to bringing insurance firms back to California. “Everybody agrees that we need to make changes,” he said. 

Newsom said as much  during a press conference in early May: “We’re trying to reconcile 30 years where there hasn’t been much reform in this space.”