State Insurance Chief Probed Over 2023 Deal

Fire Survivors Challenge Taxpayer-Funded Travel Spending

As mountain homeowners are painfully aware, the insurance marketplace is in a state described by experts and observers as dysfunctional and unsustainable. A complex and interrelated series of long-term trends and governmental miscues have coalesced to engender a situation in which homeowners are unable to secure new policies, are having existing policies cancelled, or are presented with significantly more costly premiums. Countless fire victims are reporting their insurers are being unresponsive, are denying claims, or are offering payouts far too low to actually rebuild.

To their consternation, homeowners in California are now learning that the very same official in state government singularly responsible for looking after the public interest in these matters may not be as singularly focused on his mission as these challenging times demand.

California's current Insurance Commissioner is Ricardo Lara, who assumed office in 2019. Investigations recently published reveal that since then Lara has missed more than half of the state insurance hearings. Lara was reportedly absent for 8 of at least 14 state hearings. Most of the absences were with the Senate Insurance Committee, where the Commissioner was not present for 7 of the 9 hearings held since 2019. The Commissioner was reported to be traveling out of the state during at least four of those hearings. The nature, benefit, and costs of these travels is now the subject of intensive investigation.

CURRENT CONUNDRUMS WITH INSURANCE INDUSTRY

California is not the only state dealing with a crisis in homeowner's insurance. Florida, Oregon, Louisiana, Arizona, Colorado, Oklahoma, and North Carolina are among the states confronting an unstable insurance marketplace. The complex and interwoven reasons underlying the insurance crisis defy simplistic solutions.

Both long simmering and more recent trends and changes set the stage for this crisis. This includes things like population growth, climate change, higher density communities, more development along both urban/wildland interfaces and in coastal and flood plains, higher costs associated with natural disasters, inflationary rebuilding costs, labor shortages, and higher materials costs resulting from tariffs. A recent study by the National Association of Home Builders reports that new tariffs are adding approximately $11,000 to construction cost of an average home. This does not include the rising costs of appliances, most of which are now manufactured abroad.

All of which led to another underlying cause of the crisis – skyrocketing costs in the Re-insurance submarket which backstops risk for retail insurers.

According to industry analysts and published reports, these mega-trends were exacerbated in California by ill-conceived public policy decisions made by the state insurance commissioner.

WHY IT MATTERS

The criticality of these issues has become instantly manifest to tens of thousands of Californians who have lost their coverage. The numbers are staggering. Even before the devastating wildfires that ravaged Los Angeles county earlier this year, companies that insure the ever-growing number of homes perched in California's fire-prone foothills were threatening to abandon the state, declaring that the risks were becoming unsupportable. Analysis by the San Francisco Chronicle reveals that between 2019 – 2024, over 100,000 Californians suffered dropped coverage. Thousands more Southern California homeowners have been cancelled this year. And many of those dropped are learning no other insurers are willing to underwrite their home.

The scope of the problem extends far beyond the ability to protect our own homes; it's an existential threat to the California's real estate market and our entire state economy.

Longtime mountain resident Shari Eddinger has been engaged with the local real estate industry for over 25 years. As she explains, "People may not think about it, but insurance functions like a glue, helping the housing finance system stick together. Most home purchases that involve a mortgage can't even close without homeowner's insurance. So when the insurance market becomes unstable, it affects everyone — buyers, sellers, and the whole housing economy."

To put a dollar figure on that, last year a whopping $240 billion in residential real estate was transacted in the golden state.

THE INSURANCE COMMISSIONER

The job of our Insurance Commissioner is to protect homeowners by regulating the insurance industry to ensure fair practices, solvency, and market stability. The commissioner approves rates, sets standards for licensing, handles consumer complaints, and investigates insurance fraud.

In 2023, Lara's agency concluded a negotiated compromise with California insurers which was supposed to stabilize market ills while applying a tourniquet to the bleeding of policy cancellations. The promise was that insurers would be required to write policies in fire-prone areas at a rate equal to at least 85 percent of their market share across the state. But recently published investigations reveal that a series of loopholes quietly negotiated by the insurance industry have virtually eliminated that guarantee.

The deal was also an attempt to get homeowners off the state's overburdened last-resort insurance program, FAIR. That goal has proven illusory. Published studies now show that the number of residential FAIR policies has nearly doubled since the new insurance deal was announced –– rising from 320,581 to 625,033.

Ricardo Lara led the drafting of these new rules. Critics have suggested his arrangement was overly favorable to insurers, while hurting homeowners and exacerbating their problems.

In published media reports, Lara recently tried to defend his efforts, stating, "This is uncharted territory. Will this be perfect? Absolutely not."

Examinations of the 2023 deal led to questions about Lara's conduct in office. Critics have suggested that the singular focus required to tackle an existentially critical public policy challenge described as unchartered territory has been sorely lacking in Lara's performance. Lara's extensive travels and related expenses have now precipitated several investigations.

Lara — the official responsible for advocating for everyday homeowners and preventing insurance industry abuse — is under scrutiny after allegations that he has neglected key duties while spending exorbitant amounts of taxpayer dollars on questionable travel and expenses. Following numerous media reports, the California Fair Political Practices Commission, a bipartisan independent oversight agency, is investigating allegations of excessive travel for unclear reasons, and related dubious expenses.

As reported in major media outlets, Lara took at least 48 trips across the US and the globe since he took office in 2019. During this same period, Lara was reportedly absent for 8 of at least 14 state hearings. Most of the absences were with the Senate Insurance Committee, where the commissioner was not present for 7 of the 9 hearings held since 2019. The commissioner was reported to be traveling out of the state during at least four of those hearings. Many questions about the nature, purpose, relevancy, and value of these travels remain unanswered. Critics suggest the commissioner's travels indicate a focus on matters without direct connection to his mission in service of California homeowners.

And the reported list of destinations is prodigious, including: Alaska, Hawaii, New York, Scotland, Egypt, Chile, Costa Rica, France, Switzerland, Columbia, Singapore, Ireland, Guatemala, South Africa, and Bermuda.

Travel for a variety of legitimate reasons (e.g., education, advocacy, professional networking, etc.) is common in government. Generally, all California state agencies are required to identify a clear established need to travel. And for trips abroad, a "mission critical" purpose is usually required. But preliminary reporting on Lara's travels and expenses make them appear questionable and excessive by any comparison. The lack of transparency in response to questions has generated additional criticism.

For comparative perspective, travel records for members of the state insurance committees whose travel priorities align with the commissioner show a significant disparity. For example, Chair of the Assembly Insurance Committee Lisa Calderon averages just under $19,000 annually for all her taxpayer-funded trips over the past five years. Compare that to Lara's records, where security detail costs alone for a single trip amounted to $33,000.

And some trips have generated outrage. Despite months of questioning, reports state the commissioner has been unable to justify a whole series of trips –– including a five-star hotel stay in New York City for PrideFest that cost taxpayers more than $11,600. The four-day trip listed no insurance-related meetings on his calendar, but did include a VIP rooftop event with "DJ Kitty Glitter."

Similarly, a five-day trip to Bogota, Colombia for an "LGBTI Political Leaders Conference" cost taxpayers more than $24,000. No insurance-related meetings were listed on Lara's calendar, according to reports, but receipts show he spent more than $7,000 on "taxi fares." It turns out a private security firm was hired to accompany him at the conference.

The security for just two of Lara's 2019 trips cost taxpayers more than $16,400. Those charges are in addition to a $260,000 contract Lara had with California Highway Patrol that year to provide protection services.

"That's concerning," said California State Assemblymember Greg Wallis, who serves as Vice Chair of the Assembly Insurance Committee. "If you were to ask my office the purpose of government travel, we would be able to identify every single benefit that came from these trips."

Congressman John Garamendi, the state's first elected insurance commissioner, issued a statement saying: "As insurance commissioner, my job was to always put consumers first. Clearly, this value hasn't continued."

This is not the first time Lara has been publicly criticized for his spending. A report from the San Francisco Standard in April detailed that the commissioner used $30,000 from a shell campaign committee at upscale restaurants and bars, in some instances alongside the heads of the state's top insurance groups. The report stated that Lara listed a third of those receipts as "campaign meetings," but that it was unclear what office he was running for.

Thus far, no allegations of malfeasance against Lara have been sustained. Michael Soller, deputy commissioner of communications and press relations for the department of insurance has defended Lara's travels and expenses. His responses to media inquiries on these concerns have included: "Any personal excursions are paid for by the commissioner personally, not by the department. We follow the law. We have provided you, to the best of our ability, documentation in accordance with the law. We will not go outside the scope of the law. And to be clear, historically, under every Insurance Commissioner, the Department of Insurance has deferred to CHP's expertise in security."

The growing anger of wildfire victims remains understandable. While a rising number of California victims face the prospect of being unable to rebuild their own homes, their state insurance commissioner attempts to defend an astonishing travel itinerary which many Californians find indefensible. At the very least, victims say, their plight – and the complex challenges of the insurance crisis – demands an insurance commissioner who is wholly focused on his mission, their needs, and these issues. Last week, many of them gathered at an Altadena press conference to call for Ricardo Lara to resign or be impeached.