Gavin Newsom, California officials to take action on fire insurance crisis for homeowners [The Sacramento Bee]

After years of insurance woes for California homeowners living in wildfire-prone areas, Gov. Gavin Newsom and state officials will move to stabilize the market for providers and Golden State residents.

Newsom on Thursday signed an executive order asking Insurance Commissioner Ricardo Lara to take “prompt regulatory action” to shore up the state’s homeowners and commercial property insurance framework.

Lara was scheduled to announce his office’s plans for a “sustainable insurance strategy” at a 3:30 p.m. news conference.

The governor’s order requests Lara expand coverage choices for consumers, improve the California Department of Insurance’s rate approval process and maintain long-term insurance availability.

Newsom also asked Lara to build a rate approval process with the elements of a competitive insurance landscape, including “potential revisions to the way catastrophe risks and insurer costs are accounted for.”

In addition, the governor pushed Lara to address issues with the California FAIR plan, which is considered the state’s “insurer of last resort” and has become the only option for some homeowners looking to insure their homes from fire damage.

Newsom’s order says the state should try to “reduce its share of the overall market in underserved areas” and find ways to transition customers insured under the FAIR plan into the regular insurance market.

“A balanced approach that will help maintain fair prices and protections for Californians is essential,” Newsom said in a statement. “I look forward to continuing to work with Commissioner Lara and others to strengthen our marketplace and protect Californians.”

California insurance crisis

The governor’s order is meant to serve as a blueprint, laying out steps the state should take in the coming months and beyond.

The moves come just weeks after Lara and the governor failed to secure an eleventh-hour deal with lawmakers to stop California insurance providers from fleeing the state.

California’s insurance crisis exploded after a wave of devastating wildfires in 2017 and 2018 caused billions of dollars in damages. Insurance companies dropped tens of thousands of mostly rural homeowners, who were then required to pay two to three times as much for alternate coverage.

Since then, two of California’s largest insurance providers, Allstate and State Farm, stopped selling new policies to homeowners across the state, regardless of whether they live in fire-prone areas. And Farmers Insurance announced it would start capping the number of new policies it writes.

In some rural parts of the state, homeowners can get insurance only through the state’s FAIR plan. This drives up costs significantly because homeowners then need to acquire separate writings for burglary and other risks.

Sean Lomen, a Colfax city councilman and retired fire captain, said many of his friends and constituents who were policyholders for more than 30 years were dropped by their insurance providers in recent years.

“It seems insurance companies have drawn an arbitrary line at about 2,000 feet of elevation in the foothills and Sierra (Nevada) and are canceling policies,” he said. “They’re just taking their money and running.”

The city of Colfax adopted a defensible space ordinance last year that requires homeowners to remove hazardous debris and vegetation within 100 feet of a structure. Lomen said he’d like to see more insurance companies look at properties individually and take those proactive steps into account before making blanket decisions to drop homeowners in certain parts of the state.

“All of us in urban interface areas that bump up against U.S. forestland or state parks are kind of faulted for being close to these under-maintained areas, it seems like,” he said. “I think current measures taken by community members should be the heavier weight when looking at considerations on coverage.”

After the legislative deal imploded, Assembly Speaker Robert Rivas, D-Hollister, said that lawmakers would hold a series of public hearings this fall focusing on access to insurance coverage.

“Our mission has always been to ensure homeowners and businesses across California can access and retain comprehensive insurance coverage,” Rivas said in a statement.

©2023 The Sacramento Bee. Visit sacbee.com. Distributed by Tribune Content Agency, LLC.