Homeowners join consumer advocates in assailing California insurance reforms

Jamie Court, president of Consumer Watchdog, Harvey Rosenfield, author of Prop. 103, Bruce Breslau and Gigi Bannister, whose policies were canceled and face large increases in insurance costs, listen to State Insurance Commissioner Ricardo Lara present reforms designed to rescue California property owners from an exodus of insurance companies before an Assembly Committee on Insurance hearing on Tuesday, Sept. 17, 2024 at Los Angeles City Hall. (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG)

Minutes before a top insurance regulator outlined reforms to stem an exodus of insurance companies from California, homeowners and consumer advocates assailed those plans as an attempt to undo the state’s landmark insurance law, Proposition 103.

Speaking on the steps of Los Angeles City Hall, two Southern California residents described how the state’s insurance crisis left them with reduced coverage and increased costs.

State Insurance Commissioner Ricardo Lara “isn’t doing his job,” said Crestline homeowner Gigi Bannister, 64. “He needs to hold the insurance companies’ feet to the fire.”

Also see: Southern California wildfires cast light on state’s home insurance crisis

In a city hall meeting room, Lara later defended those very reforms, saying that “by mid-2025 in California, we (will) have insurance companies running back in every corner of the state.”

Lara spoke Tuesday, Sept. 17, at the state Assembly Insurance Committee’s third hearing on his proposed regulations overhaul.

In recent months, Lara has been crisscrossing the state advocating for what he called the state’s biggest insurance reform in three decades. Climate change and massive wildfires kindled an urgent need to bring the state’s rate-review system into the 21st century, he said.

“Massive wildfires are burning just miles from where we sit, fueled by record-breaking heat waves and continued dry winds,” Lara told committee members on the 10th floor of City Hall.

Before the hearing, however, consumer advocates argued that the proposed reforms will gut Prop. 103, the 1988 citizen reform designed to keep California insurance rates in check by forcing insurance companies to publicly justify rate-hike requests.

Consumer Watchdog founder Harvey Rosenfield said the insurance industry spent 36 years trying to undercut Prop. 103, “and they finally found an insurance commissioner willing to do the dirty work for them.”

Rosenfield and others from Consumer Watchdog argued the reforms would allow insurance companies to keep their proprietary catastrophe modeling algorithms private. Another provision allowing for rate hikes to take effect 60 days after they are filed eliminates the ability of public “intervenors” to review the increases.

“Over the last 36 years, one elected commissioner after another (has held) the line,” Rosenfield said. “And now suddenly the dam has burst, and (insurers) are getting everything they’ve asked for.”

Increased risk from fire, floods and hurricanes sparked devastating insurance rate hikes across the country and around the world, Lara countered during the Assembly hearing.

Company filings for homeowners’ insurance rate hikes in California jumped from an average of 120-150 per year prior to 2019 to about 450 in 2022, state officials said.

Also see: Allstate gets California OK to raise home insurance rates 34% in wildfire areas

During the past 2 ½ years, insurance providers including Allstate, Farmers, State Farm and Travelers announced plans to stop underwriting new policies in California and deny renewal to hundreds of thousands of policyholders in fire-prone areas of the state.

Residents started getting premium hikes as high as 1,000%. Others have been unable to get traditional coverage and have been forced to seek policies from the state’s FAIR plan, which provides higher-cost coverage for customers unable to get traditional policies from private providers.

Lara noted that homeowners aren’t the only ones affected. Condo associations have been struggling to replace fire and casualty coverage, as have homebuilders and affordable housing developers.

The insurance commissioner cited a recent California Association of Realtors survey showing that nearly 7% of home sales fell out of escrow because of insurance issues.

“Insurance touches absolutely every aspect of our life,” he said.

Lara’s proposed reforms would streamline the process for insurance rate reviews and allow insurance companies to take into account cost increases for purchasing “re-insurance” from back-up insurance providers.

The reforms also would allow insurance companies to base rate hikes in part on computer-generated risk projections known as “catastrophe modeling.”

Lara argued that California is the only U.S. state to not use catastrophe modeling in rate-setting decisions.

Insurance companies applauded the proposed reforms, vowing to expand coverage in California if they’re adopted by the end of the year, as planned. Related Articles

“California’s outdated regulatory environment is in need of some fixing,” said Laura Curtis of the American Property and Casualty Insurance Association. “We support urgent action to streamline the rate-making process.”

Homeowners speaking before and during the hearing only know that they are suffering in today’s market.

Bruce Breslau, a resident of the Iverson Movie Ranch in Chatsworth, said his 290-unit homeowners association faced a 400% insurance hike for reduced coverage after Farmers Insurance terminated its coverage. The association had to levy a $4,700 special assessment on every property owner to pay for the new $1.7 million policy from various providers.

“We’ve got a diverse community, old, young, all persuasions, and we’ve got many people who are on fixed incomes,” Breslau said. “ … We need a law bringing these regulated insurers back into our marketplace for premiums that are reasonable.”

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