California Gov. Gavin Newsom is urging the state’s insurance commissioner to take steps to stabilize and improve the property insurance marketplace in the state.
This call comes as climate change continues to impact California communities with more wildfires, floods and droughts, and other extreme weather events. It is not a problem that is exclusive to California as state insurance markets throughout the country have faced significant disruption.
It has gotten to the point that some insurance companies have already announced they will stop issuing new policies in California, while others are limiting policy renewals.
This is why Newsom issued an executive order calling on Insurance Commissioner Ricardo Lara to take action to help stabilize the state’s marketplace while maintaining consumer protections and fair rates.
“This is yet another example of how climate change is directly threatening our communities and livelihoods. It is critical that California’s insurance market works to protect homes and businesses in every corner of our state. A balanced approach that will help maintain fair prices and protections for Californians is essential. I look forward to continuing to work with Commissioner Lara and others to strengthen our marketplace and protect Californians,” Newsom said.
Specifically, the executive order requests that the commissioner:
- Expand coverage choices for consumers, particularly in underserved areas of the state, while maintaining the long-term availability of homeowners and commercial property insurance coverage;
- Improve the efficiency, speed, and transparency of the rate approval process, and tailor it to account for all factors necessary to promote a robust, competitive insurance marketplace;
- Maintain the solvency of the fair plan to protect its policyholders and promote long-term resiliency in the face of climate change, including by identifying mechanisms to reduce its share of the overall market in underserved areas and move its customers into the admitted insurance market; and
- Direct the Department of Finance to consult with the California Department of Insurance to support the rulemaking process and help accelerate the implementation of potential regulations.
The American Property Casualty Insurance Association (APCIA) applauded the governor’s executive order.
“We want to thank Gov. Newsom for his executive order outlining needed reforms to address California’s insurance crisis. We also want to commend Insurance Commissioner Ricardo Lara for his commitment to regulatory reforms. We urgently need to begin enacting reforms to try and repair the insurance market and protect consumer access to coverage,” Denni Ritter, APCIA department vice president for state government relations, said.
Ritter said California’s regulatory system is outdated, cumbersome, and doesn’t reflect the increasing catastrophic losses consumers and businesses are facing from inflation, climate change, and more residents living in wildfire-prone areas. This executive order is a good first step to addressing the deterioration of the insurance market.
“Everyone understands that California’s insurance market is in a spiraling crisis that requires immediate policy solutions to protect consumer access to the coverage they need,” Ritter said.