California Lawmakers Propose Bills to Address Home Insurance Crisis
The recent wildfires in the Los Angeles area have intensified the home insurance crisis in California, prompting lawmakers to introduce a series of bills aimed at providing relief and reform. These legislative efforts seek to address issues highlighted by the Eaton and Palisades fires, which have left many homeowners struggling to secure and afford insurance.
Several bills target the FAIR Plan, the state’s insurer of last resort. One significant proposal involves placing the state’s top two lawmakers on the governing committee of the FAIR Plan. The aim is to improve its operational efficiency and customer service. Concerns have mounted that the FAIR Plan may struggle to meet its obligations, especially after the Los Angeles-area fires. The FAIR Plan requested a $1 billion lifeline due to these claims, and its member insurance companies could try to pass a portion of this cost to their customers. The plan has become increasingly important because many insurance companies have stopped writing new policies in California. Assembly Bill 234, introduced by Assemblymember Lisa Calderon, emphasizes the need for increased transparency within the FAIR Plan, noting its financial capacity to pay claims following catastrophic events is under pressure. Calderon’s bill would make the Speaker of the Assembly and the chairperson of the Senate Committee on Rules non-voting members of the FAIR Plan’s governing committee.
Another bill, Senate Bill 495, seeks to make California the first state to mandate that insurers pay claims in full without requiring itemized inventories from policyholders. The bill also increases the time consumers have to provide proof of loss after a declared state of emergency. The goal is to reduce barriers for people who have lost everything in a disaster. Senator Ben Allen, who represents an area hit hard by the fires, supports this bill, believing it will remove a significant hurdle for many during a difficult time. “A lot of insurance companies have already been doing this,” Allen said in an interview with CalMatters. “It’s a hassle for them to go through all the [inventory] lists too.”
Additional measures address financial stability and affordability. Assembly Bill 226 aims to allow the FAIR Plan to manage claims payments over time through bond financing. Assemblymember David Alvarez, co-author of the bill, stated that the legislation is a tool to “maintain insurers in California, and get claims paid in a way that doesn’t cost consumers.” Furthermore, Assembly Bill 1354 proposes a tax credit for fire insurance premiums, allowing Californians to write off the increasing costs of their premiums for the next five years. This credit would be based on the difference between current premiums and those from 2023, for individuals with annual adjusted gross incomes not exceeding $150,000, and $300,000 for joint taxpayers. Assemblymember Heath Flora noted the need to provide relief, stating, “Our insurance industry is in shambles right now. For the next few years it’s not going to be great. If we can allow our constituents to write off some of that increase, maybe they can get some sort of relief.”
Some legislators are taking different approaches. Amy Back, executive director of the consumer advocacy group United Policyholders, suggests that if taxpayer funds are used to benefit insurance companies, the state should seek concessions from them. Bach, suggested that there should be tax credits for mitigation expenses.
Senate Bill 222 seeks to allow insurance companies and individuals to sue fossil-fuel companies for damages resulting from climate-related disasters.
These legislative proposals reflect a broader effort to tackle California’s insurance crisis, particularly concerning the rising costs and availability of home insurance in the face of increasing wildfire risks. Lawmakers aim to establish consumer protections, improve the solvency of the FAIR Plan, and potentially hold industries accountable for their contributions to climate change.
