California Lawmakers Introduce Bills to Fix Insurance Market Problems
Recent wildfires that devastated neighborhoods in Altadena, Pacific Palisades, and other Los Angeles areas have brought attention to California’s insurance crisis. In response, lawmakers have proposed several bills to address these issues, some of which would be the first of their kind in the nation.
Oversight of FAIR Plan
One proposed measure would place California’s top two lawmakers on the governing committee of the FAIR Plan, the association of insurance companies required by law to provide fire insurance to property owners who cannot obtain it elsewhere. The FAIR Plan recently warned that it was at risk of running out of money due to claims from the LA fires and requested a $1 billion lifeline. Assembly Bill 234, introduced by Assemblymember Lisa Calderon, aims to increase transparency and improve the FAIR Plan’s governance by making the Assembly Speaker and Senate Rules Committee chair non-voting members of the governing committee. Insurance Commissioner Ricardo Lara supports this bill.
The FAIR Plan has faced criticism for its customer service and error handling. A couple from Tujunga, Betty and William Ryder, experienced issues with their policy, discovering they were uninsured for a period despite paying premiums. The FAIR Plan eventually corrected the mistake but the Ryders were left with duplicate payments for the year.
Insurance professionals have also reported persistent problems with the FAIR Plan, including billing errors and difficulties in resolving issues. Lili Thompson, an insurance agency account manager, submitted a complaint to the Insurance Department in January, highlighting recurring problems with billing, renewals, and cancellations.
Financial Stability Measures
Assembly Bill 226 aims to enhance the FAIR Plan’s financial stability by allowing it to obtain bond financing through the California Infrastructure and Economic Development Bank. This would enable the FAIR Plan to spread out claims payments over time, potentially preventing insurance companies from using large payouts as a reason to stop covering California properties.
Insurance Claims Process
Senate Bill 495, introduced by Senator Ben Allen, proposes that California become the first state to require insurers to pay claims in full without first seeing itemized inventories from policyholders after a declared state of emergency. The bill also extends the time for providing proof of loss from 60 to 180 days. Insurance Commissioner Lara supports this measure, and several insurance companies have already agreed to pay at least 75% of contents coverage without detailed inventories.
Tax Credits for Insurance Premiums
Assembly Bill 1354, introduced by Assemblymembers Heath Flora and Greg Wallis, suggests allowing California taxpayers to write off increases in fire insurance premiums for the next five years. The tax credits would be based on the difference between current premiums and those from 2023. Critics argue that this could benefit insurance companies at taxpayer expense without ensuring they write more policies.
Holding Fossil Fuel Companies Accountable
Senate Bill 222, introduced by Senator Scott Wiener, proposes allowing insurance companies and individuals to sue fossil fuel companies for damages related to climate change disasters. The bill aims to provide an alternative to insurance companies simply raising their rates and potentially holding the fossil fuel industry accountable for some disaster costs.
These legislative proposals aim to address various aspects of California’s insurance crisis, from improving the FAIR Plan’s governance and financial stability to changing how insurance claims are processed and potentially holding fossil fuel companies accountable for climate-related damages.
