The wildfires that ravaged communities like Altadena and Pacific Palisades in the Los Angeles area have amplified California’s ongoing insurance crisis, prompting state lawmakers to introduce a series of bills aimed at addressing both the immediate fallout and underlying issues within the insurance market.
One central focus of the legislative efforts is the FAIR Plan, the state’s “insurer of last resort.” This entity is mandated to provide fire insurance to property owners unable to secure coverage elsewhere. One proposed measure would place California’s top two legislative leaders on the FAIR Plan’s governing committee, aiming to improve its operations and customer service. Assembly Bill 234, introduced by Assemblymember Lisa Calderon, highlights the need for increased transparency within the FAIR Plan, which has become increasingly crucial as major insurance companies have reduced their offerings in the state.
The FAIR Plan has faced scrutiny. Critics argue the plan has too many operational errors. For instance, Betty Ryder, a Los Angeles-area homeowner detailed her struggles with the plan after discovering her policy had been canceled due to an administrative error. Despite paying premiums, she was left uninsured during a period of high fire risk, underlining the importance of reliable service from the state’s safety net. “I was in tears,” she recounted, describing the stress of navigating the situation.
Beyond financial stability, lawmakers are aiming to improve the consumer experience. Senate Bill 495, proposed by Sen. Ben Allen, would make California the first state to require insurers to pay claims in full without requiring itemized inventories from policyholders. This aims to ease the burden on those who have lost everything. This initiative is particularly important given the experiences of people like Ryder, who faced numerous challenges trying to receive proper coverage.
Another bill, Assembly Bill 226, seeks to bolster the FAIR Plan’s financial capacity by allowing it to spread claims payments over time through bond financing. Assemblymember David Alvarez, a co-author of the bill, stated that the goal is “to make sure if there was an event of (the LA fires’) magnitude, insurance companies wouldn’t use that as a reason to not cover California.”
Additional legislative efforts target other aspects of the insurance landscape. Assembly Bill 1354 would offer California taxpayers the ability to write off the rising costs of their fire insurance premiums for the next five years. Assemblymember Heath Flora believes that the bill will provide some financial relief. However, Amy Bach, the executive director of United Policyholders, suggests that this relief should have some conditions tied to it that encourage insurance companies to issue more policies.
Senate Bill 222 represents a broader effort to address climate change, allowing insurance companies and individuals to sue fossil-fuel companies over damages from climate-related disasters. The bill’s supporters, like Sen. Scott Wiener, argue that increased frequency and scale of disasters are “not random” but rather because of climate change. The bill’s potential to hold the fossil fuel industry accountable may offer an alternative to simply raising insurance rates.
The wide-ranging legislative proposals are expected to shape California’s approach to insurance in the coming years, reflecting the state’s ongoing struggle to balance risk, affordability, and consumer protection in the face of increasing fire danger and market challenges.
