Newsom and Lara insurance reform moving forward

Near the end of his revised budget presentation last week, Gov. Gavin
Newsom described two major legislative initiatives that his
administration is preparing.

One is an effort to limit the appropriation of expected higher revenue
until it is collected and the State assured of its availability. This is
intended to avoid expansive budgets which later need to be trimmed
because capital gains were not as great as forecast.

The second legislative proposal will be an effort to effect changes in
the States regulation of insurance companies before the end of 2024.
Insurance Commissioner Ricardo Lara announced a package of reforms last
fall and this winter. His goal for implementation is December.

At the budget conference, Newsom said, “It’s been 30 years without much
reform in this space. We’re mindful of voter approved constraints,
mindful of the challenges and burdens placed on the FAIR Plan, and
deeply mindful of the reality of getting a notice that your insurance
many not be renewed. . .”

After acknowledging that the State needs to modify its insurance
policies, Newsom said he and Lara have been working on achieving this
goal. Consequently, he was going to work with the Legislature to
introduce a trailer bill to the fiscal 2024-25 budget to enact reform
sooner than December.

This would expedite the rule-making process, reducing it to 60 days.
Now, when a company requests an increase for their rates, it can take
months to a year or more for approval. Steps are occurring that indicate
this will be part of the budget bill next month.

“This is the most important thing to do now,” he continued. “December! I
don’t think we have that much time. . . We have to send the right
signals and the insurance Commissioner knows that.

Later that day, after Newsom’s press conference, Lara posted on his X
account (formerly Twitter), “Newsom is right: time is of the essence. I
appreciate his support of my Sustainable Insurance Strategy. Our
partnership with the Governor and Legislature are essential to
stabilizing our market. We’ve taken significant steps forward, but there
is more to do.”

On Wednesday, Politico reported that the State Senate will be forming a
Wildfire insurance working group to begin this process.

Karl Sussman, a veteran insurance agency owner in Southern California
representing Travelers Insurance, said online, “. . . to hear from the
Governor that not only does he understand that this is problem but that
he even realizes the urgency factor . . . is very refreshing.

“If all of these things happen the way they’re supposed to happen, [the
companies] are ready to go. They’re starving to write business,”
according to Sussman.

On May 15, Lara testified before the Assembly’s Committee on Insurance.
He started with, “I stand with our Governor’s remarks at his news
conference — that time is of the essence. I appreciate his strong
support of my strategy and his continued commitment to ensure my
Department has the support and resources. . . “

Lara emphasized that he wants to reduce the time of the approval
process. The goal is to thoroughly review rate filings within a 60-day
timeline.

He then agreed with Newsom’s trailer bill proposal. “Last Friday, the
Governor announced a new legislative proposal that would help expedite
my Department’s insurance rate filing process. This proposal could be
done more quickly via statute than a regulation. I look forward to
partnering with you all and thank the administration for working with me
on this important accountability element of my strategy.”