California governor seeks swifter action to quell insurance crisis

(Bloomberg) — California Gov. Gavin Newsom said he wants lawmakers to expedite the approval process for insurance companies seeking to hike rates, saying an overhaul of the state’s market is taking too long.

Newsom, speaking at press conference in Sacramento on May 10, 2024, announced his push for legislation mandating the Department of Insurance to complete rate-filing reviews within 60 days. The governor’s urgency to tackle the crisis is underscored by his plan to expedite the bill, ahead of Insurance Commissioner Ricardo Lara’s comprehensive overhaul that’s supposed to conclude by year-end.

“We’ve got to move this process along,” Newsom said. “We can’t wait until December. We can’t.”

The initiative comes as insurers have been limiting or withdrawing coverage after devastating fires, leading to a reliance on the state-backed FAIR plan, the last-resort insurer that’s now facing $300 billion in exposure. Lara’s agency has been spearheading a revamp to stabilize the market, aiming to grant insurers greater freedom to adjust their premiums in exchange for maintaining coverage in wildfire zones.

While Newsom said he is “deeply mindful” of how difficult the task is to reform existing rules, he expressed frustration over the slow pace of implementation.

“It should not take this long for emergency regulations,” he said. “I almost have the temptation to do an additional executive order, but under the circumstances, I think working with the legislature on a trailer bill is more appropriate.”

In a social media post, Lara acknowledged that “there is more to do.”

“Time is of the essence,” he wrote on May 10. “We are working together with Governor Gavin Newsom and the 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.”

The insurance industry has long lamented about the length of the rate approval process in California, which can take as long as a year or more, according to Seren Taylor, vice president at the Personal Insurance Federation of California, an industry trade group.

“The tools have to be paired with a timely approval process,” he said. “Wildfire risk is insurable, but we need a system that moves in real time with the risk of changing factors on the ground.”

Related:

• How California homeowners can protect their assets in 2024
• Allstate will insure California homes again, under one condition
• How surplus lines can help California’s troubled home insurance market

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