The California insurance commissioner is being criticized for his ties to the industry amid a statewide crisis.
What's happening?
Ricardo Lara, elected in 2018, wants to work with companies to increase coverage in the state, but consumer watchdogs and others are skeptical of the approach, as the Los Angeles Times reported.
The state is reeling in the wake of Los Angeles-area wildfires that made up the costliest disaster in California history. Even before those January blazes, though, insurers had stopped writing and renewing policies because of wildfire and other risks caused by rapidly rising global temperatures.
These increasingly frequent and severe extreme weather events are caused by the burning of dirty fuels for energy, which emits heat-trapping gases into the atmosphere and leads to human health problems, biodiversity loss, and more.
The Times reported that claims from the Palisades and Eaton fires as well as others could reach $20 billion. Lara denied a request from State Farm to raise its rates by 22%, though a meeting was scheduled for Wednesday.
Some are worried because Lara received $270,000 in campaign contributions from insurers and has "held closed-door meetings with them as he hashed out his reforms," per another Times report.
Why is this important?
That's not the only reason. While Lara has worked to push companies to lower rates and write more policies, his "carrot-and-stick approach … gives insurers financial and policy concessions," the Times' Laurence Darmiento wrote. Under 1988 legislation, Lara has some power to force companies to cover homeowners, but he has said he lacks leverage and doesn't want companies to leave California.
"His regulations and his policies are clearly ones that the insurance industry wants," state Rep. John Garamendi, who was twice the state's insurance commissioner, told the Times. "Your job is to hold the companies accountable, and he seems to be doing the exact opposite, and that is giving the companies whatever they want."
What's being done about insurance coverage in California?
Insurance companies have profited on homeowners insurance policies in eight of the last 10 years, the Times reported. But rising rates, a lack of coverage availability, and the overburdened state FAIR Plan — whose enrollment skyrocketed about 250% from 2018 to 2024, per the Times — have the industry teetering.
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Definitely 🙁 Insurers have to hold policies in fire-prone areas that are equal to 85% of their market share, but they can also now pass on the cost of reinsurance to consumers and use catastrophe modeling to better gauge risk. The companies can hike premiums if the FAIR Plan becomes insolvent too.
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"Basically, insurers hold the state hostage to their demands, and Lara pays the ransom, giving them everything they wanted," Consumer Watchdog founder Harvey Rosenfield told Darmiento. "Suddenly we have these terrible fires — and now what? That's the problem we are facing now."
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