California's effort to stabilize the home-insurance market could take a sharp turn under Jane Kim, the insurance commissioner-elect, who has proposed a state-run program to cover wildfire losses and leave other homeowner risks to private companies, the Press Democrat reported, in a Bay Area News Group story.
Outgoing Commissioner Ricardo Lara has tried to draw private insurers back by giving them more flexibility in pricing, including faster rate reviews and permission to use forward-looking wildfire models and certain reinsurance costs. In exchange, insurers using the new rules must commit to selling more coverage in high-risk areas. Kim's approach is different: she would have the state take on wildfire risk itself. She has pointed to a similar program in New Zealand but has acknowledged that her proposal would require further study. It has not been adopted, and this account does not treat it as law.
Why the market is still strained
Insurers have dropped or declined to renew policies in high-risk areas over the last five years, the newspaper reported, blaming state rules they said kept them from pricing wildfire risk. Many of those homeowners were pushed onto the California FAIR Plan, a state-established, privately run high-risk pool that covers fire and related risks, generally at higher cost than a standard policy. Lara's Sustainable Insurance Strategy grew out of a September 2023 executive order from Gov. Gavin Newsom. Insurers have begun offering some new policies, though consumer advocates argue the rebound has not gone far enough.
The political fight ahead
Ben Allen, a Democratic state senator from Los Angeles, conceded the commissioner's race on Friday and had campaigned to expand Lara's strategy rather than pursue a public wildfire program. Insurers say they want to work with Kim, Gov.-elect Xavier Becerra and the Legislature to keep the current reforms. "While recent reforms are beginning to stabilize the market, the insurance crisis is far from over, and a full recovery will take time. Protecting this progress is critical," Denni Ritter of the American Property Casualty Insurance Association told the newspaper. She warned that "costly new mandates or regulatory actions that drive up costs or limit coverage options risk reversing this progress."
Steven Maviglio, a Democratic strategist who has worked with the insurance industry, said Kim "wants to turn the applecart upside down." Some consumer advocates who viewed Lara's changes as industry giveaways still expect Kim to be a tougher voice for policyholders, even if the public-insurance idea faces obstacles. "Maybe they'll realize it's a privilege to do business in California," Consumer Watchdog founder Harvey Rosenfield said.