Wildfire is Latest Battleground in 35 Year Fight over Prop 103

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Consumer Watchdog Proposes Actions to Address Climate Change and Industry Abuses 

Sacramento, CA – Thirty-five years after California voters passed Proposition 103 to protect themselves against skyrocketing insurance rates, insurance companies’ refusals to insure, and other abuses that destabilized California’s economy, its author will testify before the Senate Insurance Committee today on how Proposition 103 addresses the similar crisis in home, condo and renters insurance today – and what more can be done.

Harvey Rosenfield, who wrote and led the campaign for Prop 103 and founded Consumer Watchdog, will urge California legislators and the Insurance Commissioner to enforce Prop 103’s protections to keep homeowners insured, expand funding for homeowners to reduce wildfire risk on their property (and make insurance companies recognize when homeowners do so), and restrain the insurance industry’s own contributions to climate change. 

Rosenfield will reject the insurance industry’s campaign to blame Proposition 103, and climate change, for companies’ misconduct in the marketplace. Lobbyists for the industry, which spent a then-record $63 million on their unsuccessful campaign to defeat the grassroots initiative in 1988, are swarming the state Capitol urging lawmakers and Insurance Commissioner Lara to undercut Proposition 103’s key protections against inflated insurance rates, non-renewals in neighborhoods across California and other discriminatory practices.

Read the analysis Consumer Watchdog submitted to state legislators here.

Consumer Watchdog’s recommendations to the legislature include: 

  • Speed up implementation of actions to reduce wildfire risk across the state by allocating new funding sources to assist individual homeowners and communities, such as directing cap and trade dollars to fund home-hardening and defensible space projects, particularly for low- and middle-income Californians.
  • Require insurance companies to sell insurance to all residential property owners in California who meet state fire-mitigation guidelines.
  • Impose an annual surcharge on premiums collected by insurance companies when they sell insurance policies to companies that explore for or produce fossil fuels. Connecticut lawmakers are presently considering similar legislation.
  • Make the FAIR Plan, California’s “insurance company of last resort,” more accountable to the public by creating a public majority on the FAIR Plan’s governing board, which is now controlled by insurance companies.  

Recommendations to the Insurance Commissioner include: 

  • Continue the Department’s longstanding protection of Californians against industry proposals to: pass on to consumers the cost of reinsurance, which would cause insurance rates to go up by an estimated 40%, and to replace verifiable data with secret, biased algorithmic models when requesting future insurance rate increases.
  • Address redlining and market withdrawal. Set clear and uniform rules for analyzing whether withdrawals are consistent and supported by data. The insurance industry should not decide housing policy in California; that responsibility belongs to state and local officials accountable to the voters. 
  • Mandate disclosure of each insurance company’s contributions to climate change through direct and indirect emissions, underwriting and investing in fossil fuel projects, and examine whether each company’s underwriting of fossil fuels is consistent with state law and California’s 2045 Net Zero climate goals.
  • Require insurance companies to consider the actions taken by homeowners and communities to limit wildfire risk when they decide whether to sell an insurance policy, not just when insurers set premiums as required under the Commissioner’s new rules. 
  • Initiate a public investigation of whether the insurance industry is evading Proposition 103 when it sells insurance to condo associations.
  • Many policyholders who experienced losses in past years’ wildfires have yet to receive all the coverage they paid for. Conduct a public investigation of claims abuses and issue regulations strengthening protections against improper claims handling practices. 
  • Recruit and deploy more agency staff to ensure that rate applications and insurance companies’ practices are closely reviewed as required by Proposition 103. 

Consumer Watchdog’s testimony also exposes how profitable the insurance industry is in California, belying the insurance companies’ claims of financial catastrophe due to climate change and regulation:

  • California homeowners’ insurance companies were more profitable than the national average over the last 20 years. They earned an average 8.8% return on net worth in California, compared to 6.2% nationally, according to data reported to the National Association of Insurance Commissioners. 
  • PG&E and Edison, the utilities that caused the biggest fires in California, were forced to reimburse insurance companies $12.1 billion for the damage from the 2017-18 wildfires. 

This year marks the 35th anniversary of voters’ passage of Proposition 103 in 1988. The law requires insurance companies to open their books, justify their rates in a public process, and get approval from the Insurance Commissioner before a rate change takes effect. All documentation an insurer submits to justify a rate increase must be open to public review, and the public may challenge a rate that is excessive, unjustified or unfairly discriminatory.  

In a 2019 study of the nation’s insurance laws, the Washington, D.C. based Consumer Federation of America called Proposition 103 “the best in the nation” and calculated it had saved Californians $154 billion on their auto insurance premiums alone, while allowing insurance companies to earn fair profits. Read the CFA analysis here

Read more about Proposition 103 here

Harvey Rosenfield
Harvey Rosenfield
As Consumer Watchdog's founder, Harvey Rosenfield is one of the nation's foremost consumer advocates. Trained as a public interest lawyer, Rosenfield authored Proposition 103 and organized the campaign that led to its passage by California voters in 1988 despite over $80 million spent in opposition (still a record).

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