Assembly Insurance Committee , Wednesday, February 18, 2026
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Assembly Insurance Committee California State Assembly
Follow its sittingsSpeaker 2
These are the fastest claim results claim handling results on record for a major California wildfire. But recovery requires coordination. Insurance cannot do it alone. And let me say this again. Insurance cannot do it alone.
Insurance cannot solely rebuild entire communities and cities. The Los Angeles wildfires made this clearer than ever. Insurance can must be integrated into the local, state, and federal rebuild strategy. When those systems are aligned, families recover faster. When they are not, survivor survivors fall through the cracks.
Smoke claims have emerged as one of the most significant unresolved challenges in the recovery. This exposed a major gap in California's insurance and public health framework, one we are now addressing through the smoke claims remediation task force and the CDI sponsor AB seventeen ninety five authored by assemblymember Mike Gibson, which will establish the nation's first enforceable science based standards for smoke testing and restoration. And here's the reality we cannot ignore. If the SIS had not been in place when the Los Angeles fire struck, California would have faced a far more severe insurance crisis. Without the SIS, more insurers would have paused or withdrawn from the market.
Non renewals would have accelerated. Rate filings would have stalled for more months or years. Companies would have not been required to expand underwriting, recovery would have been slower, more chaotic, and less accountable, interveners would continue to hold rate filings hostage instead because SIS was already underway, insurers stayed in the market, companies filed under new rules, approvals of major filings move faster than at any time in decades, commitments to write more policies in high risk areas became binding, the market stabilized at a moment when it could have collapsed. The lesson from the from LA is clear. Insurance is absolutely necessary, but not sufficient to solve all the recovery problems.
Recovery requires, like I said before, coordination across insurers, local governments, public health agencies, and federal partners. And it requires continued oversight and modernization to ensure families are not left behind. The department has been relentless in enforcing the law, holding insurers accountable, and pushing for faster, fairer recovery. The data shows that our actions are working and that California is moving in the right direction. Without with that update on Los Angeles, the disaster that continues to shape our work, I wanted to turn now to the broader questions before this committee.
How the sustainable insurance strategy is being implemented, what progress we've made since July 2025, and what remains ahead of us in 2026. When I announced the sustainable insurance strategy in September 2023, California was facing what we call the perfect storm, escalating wildfire losses, inadequate rates, outdated rules, and insurers pausing or withdrawing from the state. We already know this. You've heard me say this time and time again. We kept California strong consumer protections, but we also fixed what wasn't working.
We closed loopholes that allowed rate hikes without coverage. We required real commitments from insurers to start riding again. We modernized outdated rules to reflect today's climate realities, and this is what reforms look like, protecting consumers while restoring coverage. For the first time in years, insurers are stepping forward instead of stepping back. The sustainable insurance strategy is working, and the market is responding.
One of the clearest indicators that the sustainable insurance strategy is working is this. Major insurers representing significant share of California's homeowners market are filing, getting approved, and committed to expanding their underwriting. They're not retreating. This is the opposite of what happened of what happened after past catastrophes when insurers raised rates, paused new business, or simply withdrew from high risk areas with absolutely no obligation to return. So let's talk about who has filed under the SIS.
These are the approved SIS homeowner filings since we last met, and these filings include the number two insurer in the homeowner space, Mercury Insurance, the number three insurer, CSAA Insurance Group, the number twelve, thirteen, nineteen, and twenty four USAA group companies. The number nine eighteenth, Pacific Specialty. The number thirtieth, California Casualty. The pending SIS homeowners filings include the number fifth, sixth, and ninth, three major homeowners insurers. Pending SIS commercial multi peril filing, the number sixteenth, Mercury.
This is the level of participation across the top, middle, specialty segments of the market. It's really unprecedented following a major catastrophe. And let's talk about faster approval, which is critical to the recovery. Every approved SIS filing to date has been completed within the one hundred days of public notice, except for specific specialty approved within a hundred and thirty three days. This is the fastest, most transparent, and most accountable rate review environment California has ever had, and I challenge any insurer to question this fact.
And why does this matter for consumers? This approval these approvals are commitments to write more policies in high risk area ZIP codes, expand availability in wildfire distress communities, grow underwriting, and recognize mitigation for the first time in California's history. California is no longer in a cycle where insurers disappear after disasters. We are now in a cycle where insurers file, get approved, and commit to grow under the fastest timelines in state's history. A central part of restoring the stability of California's insurance market is modernizing the mechanics of rate review itself.
For years, delays in prop delays in prop one zero three process has created uncertainty for consumers and insurers alike, often driven not by policy disagreements, but by preventable administrative bottlenecks. To keep the market functioning, the insure the insurer and insure and ensure Californians continue to benefit from strong consumer protections, we are updating how rate filings move through the department. The next step in that work is to set reforms designed to bring greater speed, transparency, and predictability in that process. Over the past year, we have taken major steps to fix the root causes of those delays. Just last month, the department launched a new data reconciliation tool that insurers must complete before submitting a full rate application.
We developed this tool with early input from insurers and are conducting trainings to ensure smooth implementation. This system is already reducing incomplete filings and avoiding downstream delays. For insurers, the benefits are real. By reducing administrative delays in the rate reviews, we reduce the risk of unnecessary gaps in coverage, we support market stability, and we create more room for insurers to stay and actually compete in California. To make the improvements permanent, next month, I will release a draft regulation that will require the department's rate regulation experts to complete the rate review of the rate filing within sixty days of filing the public notice date.
After up to after up to a thirty day document extension, the department will provide the insurer or any intervener with a calculation of an estimated rate that complies with prop one zero three. This reform will significantly increase the transparency and speed up the rate review and approval in ways that benefit the consumer, the department, and our market. At the same time, we are strengthening internal capacity. My rate rate my rate regulator regulation branch is completing its first ever bottom up organizational assessment to better align staffing with the growing volume and, quite frankly, the complexity of these filings. We are also continuing to use actuarial and rate review consultants supported by your budget authority provided by the legislature and the governor.
So together, the steps are getting to are about getting the process back on track, moving filings more efficiently, holding all parties accountable, maintaining stronger consumer protections, and ensuring full compliance with prop one zero three while giving insurers the certainty they need to keep writing more policies in California. So let's talk about the fair plan. The fair plan's litigation, challenging CDI's authority and my authority, require a more comprehend to require a more comprehensive ownership. Homeowners policy remains pending. Recent rulings have affirmed my key aspects of our oversight.
Our market conduct examination of State Farm, the largest homeowners insurer in the state, is nearing completion. Findings will be relay released publicly this spring, so stay tuned for that. California, again, is also building the world's first public statewide wildfire risk model based on recommendations from our partnership with Cal Poly Humble and academic experts. This model will give California and eventually other states a shared transparent baseline for understanding wildfire risk and recognizing mitigation. Let's talk about mitigation for a second.
Mitigation is, as we know, one of the most powerful tools we have to stabilize insurance markets, reduce losses, and protect lives. But mitigation only works when every level of government is aligned, local, state, and federal, when the rules are clear, consistent, and enforceable. So since 2022, my safer from wildfire regulations have required insurance companies to provide discounts for home hardening and maintain defensible space. Defensible space includes having a noncombustible first five feet around the structure. You all know this.
We call that zone zero. The legislature also directed the Board of Forestry to establish statewide zone zero rules for homes. The original legislative intent and deadline was January 2023. Then after the alley fires in January 2025, the governor issued an executive order directing the completion of these rules by the 2025. I've submitted two letters urging strong zone zero standards because they are essential to the future of insurability in our communities, yet these rules are still not finalized.
We will continue to do our part to make our insurance incentives as clear and accessible as and as possible, but we need alignment. And I wanna urge this committee to respectfully but directly to join me in urging the adoption of the zone zero regulations without further delay. This is where we need clear science based standards that strengthen homes, reduce losses, and ultimately keep people safe. There are two bipartisan federal bills that are especially critical for California, the disaster mitigation and tax parity act and the disaster resilience and coverage act. These bills would reduce losses, improve insurability, and support the sustainable insurance strategy.
I would respectfully ask this committee to support these federal efforts so that California homeowners can receive full benefit of the mitigation investments, especially in a b eight eight eight. And now I wanna really move to the question I get not only from committee members, but from a lot of our constituents. When will consumers see relief? Committee members were and are hearing the same question, and I hear hear everywhere I go. Again, when will my constituents actually feel a relief?
And that's a fair question, and it deserves a clear, honest answer grounded in data. So early signs of the stabilization already visible. Like I said, insurers filing under the SIS, five SIS filings approved, faster rate filings approval, claims payments faster on record. So visible consumer relief, I will say twelve to twenty four months. More insurers reopening or expanding, more competitive options, slower nonrenewals, more predictable pricing, mitigation discount scaling with AB eight eight eight, a bill authored by our chair last year and sponsored by me for for the department and to provide grants for Home Harding, a more structural recovery according to Swiss Re to OECD and the experts who have seen, markets that are recovering from major climate catastrophes, structural recovery around three to five years.
Market stabilization over three or five years after major reforms. California, we're already a year into that cycle. Reinsurance costs should stabilize. Risk mitigation continues to accelerate. Fare plan exposure should plateau and then decrease, and the availability should improve in the high risk area.
So, again, three to five three to five years, we're already in that. And so the honest answer, we're starting to see the early signs now. More visible more visible relief should build over the next twelve to twenty four months. A structural healthier market is a three to five year projection, and we're already well into it, as I said. But every decision we make together will either shorten the timeline or lengthen it, quite honestly.
So California's insurance challenges are not confined to any single problem. Survivors, homeowners, and communities have been clear about what isn't working. We hear it every day. And my twenty two weeks legislative package advances and opera operationalizes the sustainable insurance strategy by strengthening consumer protections, reducing avoidable delays, and modernizing the system that underpins California's insurance market. Each bill carries forward a core element of the SIS, improving claims handling, creating clear standards, reinforcing markings market stability, and ensuring the regulatory process works effectively for both consumers and insurers.
So the strategy's commitments remain real, measurable, and reflected in people's day to day experience. So SB eight seven six, authored by senator Padilla, responds directly to what survivors have been asking for. For the past couple years, after several fires across California, faster payments, fewer delays, and an end to the runarounds by insurance companies. Key provisions requires insurance to insurers to maintain a disaster recovery plan, doubles penalties during declared emergencies, requires direct restitution to policyholders, requires status reports within five days when adjusters change, expands additional level living expenses by a 100% in a declared disaster, requires up to front upfront payments for actual cost value and replacement cost, requires insurers to offer extended guarantee replacement cost, applies building code upgrade cost coverage at the rebuild, not at the loss. And so SB eight seven six will help families recover faster, rebuild safer, and avoid the bureaucratic maze too many survivors have faced.
AB seventeen ninety five, authored by senator Mike Gibson, the Smoke Damage Recovery Act, the Los Angeles wildfires produced historic levels of smoke contamination, Survivors reported severe health symptoms, conflicted experts conflicting experts' assessments on safe living conditions and insurers denying or minimizing claims. Key provisions establishes science based standards for smokes testing and restoration, creates uniform claims handling practices, provides immediate relief for the current folks facing these issues in the alley fires by allowing survivors to rely on local public standards while we develop the statewide standards, develops health based guidelines for reentry, and designates state and local agencies to implement and enforce those standards while we take our time to develop those statewide standards. So a b seventeen ninety five develops immediate relief while building the long term science based framework Californians deserve. A b sixteen eighty, authored by chairwoman Calderon, the Make It Fair Act, CDI's comprehensive examination found the fair plan failed to comply with 17 critical recommendations to financial condition, corporate governance, claims handling, and consumer protections. The key provisions requires a comprehensive homeowners policy, requires increased staffing and improved claims handling, fixes a clearinghouse program to help policyholders return to the regular market, is in line with what the legislature had intended, requires a three to five year strategic plan, something that insurance companies already required to do, requires public access to governing committee meetings, requires an annual report with key metrics, requires a climate risk assessment, requires a capital and liquidity management plan, and a b sixteen eighty requires, authored by the chair, ensures that the fair plan finally delivers real coverage, real accountability, and real help for wildfire survivors.
Let's talk about intervener reform regulations. These reforms modernize California's intervener and administrative hearing bureau process to increase transparency, improve efficiency, protect consumers' money, and ensure meaningful public participation. The key provisions, provide prospective applications for fairness, replaces vexatious and, with objective wasteful standards, strengthens scrutiny and excessive billing, requires timely online postings of all documents, establishes firm timelines and l l ALJ status updates, streamlines hearings, and reinforces the commissioner's authority. These reforms uphold the core purpose of prop one zero three while ensuring the process remains efficient, balanced, and focused on consumer benefit. I wanna talk about California in the national and global context because we're not going through this alone.
Insurance is connected nationally and globally. As I said, California is not alone. States like Florida, Louisiana, Colorado face similar pressures. Australia, Canada, and Greece face similar climate related insurance issues as our market and are similarly as or similarly as, as our market. But unlike many jurisdictions, California has a comprehensive regulatory strategy, forward looking catastrophe modeling, mandatory mitigation discounts, a public wildfire model in development, a fair plan modernization plan, and insurers returning, not retreating.
We are not immune to global pressures, but we are leading in a way in in a way and responding to them appropriately. So let me close with this. California is facing a generational challenge, but we are meeting it with generational reforms. We are enforcing the law, modernizing outdated rules, strengthening consumer protections, and restoring stability to a market that millions of families depend on. We are not declaring victory by far, but we are moving decisively, transparently, and with measurable progress.
And the world is watching what California is doing next. And I want to add something personal. From the beginning of my tenure, one of my core goals has been to leave the next insurance commissioner with the tools, the data, and the modernized regulatory framework needed to confront the challenges ahead, not just the ones that we inherited. For far too long, California has tried to manage twenty first century climate disasters with twentieth century insurance rules. Today, because of the work that we have all done together, that era is ending.
We are building a system that can withstand the climate pressures of the future, not just the crisis of the past. A system that gives consumers clear protections, gives insurers clear expectations, and gives the next commissioner a stronger foundation than the one I walked into. A commitment my commitment has always been to leave California better prepared to face an uncertain future, and through the hard work, partnership, and persistence, we are succeeding in that goal. I'm committed to working with each and every one of you to ensure that every Californian, no matter their ZIP code, has access to fair, reliable, and affordable insurance. So thank you, chairwoman Calderon, vice chairman, Wallace, and members, and I look forward to your questions.
Thank you.
Speaker 1
Thank you, insurance commissioner Lada. We really appreciate that very thorough and comprehensive update. So now I'm gonna bring it back to, the committee members for questions. Semmelman Herabidem? Thank
Speaker 3
you, madam chair. Mister commissioner, good to see you. Thank you for being here, and thank you again for your continued work and everything you're doing in this space, especially for wildfire survivors. And some of the bills that you highlighted that you're running this term, I think, are really important. So appreciate all your work.
And I have a few questions, and some of this you might not even have the answers to, follow-up. But, really, a lot of it's just focused on sort of on the ground, what we're seeing in the distressed areas. And we get we get anecdotal kind of reports about what's going on, and I just was wondering if you or the department have any additional data. So I'll ask a few, and and it's okay if we don't have these answers right now. The moratorium that you put in place ended a a few weeks ago, and we are hearing anecdotally in Altadena and The Palisades that a number of people are being nonrenewed.
I don't know if you have any sort of aggregate data or we know how many wildfire survivors have been nonrenewed since the moratorium ended, but I would I would be interested to know if we know what those numbers look like. How many folks are now moving over the fair plan versus staying on original plans that they had?
Speaker 2
Yeah. We we can definitely get that data, and I'll have Mike our our from our climate branch. But we have seen a slight increase in the fair plan. Nothing overwhelmingly that would justify people overwhelming being moved to the fair plan, but we could certainly get that data. But Mike is earning and inter introduce yourself for the record.
Speaker 4
Yeah. Thanks for the question. Mike Peterson, senior deputy on climate and sustainability at the Department of Insurance. I I think what I what I'd say is that the when the moratoriums end, that tends to impact the adjacent zip codes, but those that who are actually wildfire survivors, once the governor's declared a state of emergency the first time, there is a a two year window in which not those folks wouldn't be nonrenewed. So I think we can check into the data, but I do think that that there are
Speaker 4
Right. It's it's helpful to think of this in two categories. Because we don't get, you know, immediate notification of the nonrenewal, it'll take some time before we get better data on that issue, but it is something we're watching carefully. Just like we do after every moratorium ends, we watch for surges in nonrenewals. Over the past three years, we haven't seen that happen in particular areas.
But as the commissioner said, this is an event that is quite is unprecedented and sort of is sort of reshaping a lot of thinking. So I'll get back to
Speaker 2
you. Yeah. We we can we can we'll track it because if you have a total loss, you have twenty four months, so it's a total of two years Mhmm. Before you get nonrenewed. So but we can start looking if there's any anomalies now, and we'll we'll try to track that data for you.
Speaker 3
Super helpful. Thank you. That's that would be perfect. And then are we tracking claim handling timelines and complaints in the wildfire impacted areas in real time, or is it I guess, just how does the reporting work to to know what's going on?
Speaker 4
So do we have two source thanks again for the question. We have two sources of information. That one is the complaints that come in that the department gets, how quickly those are resolved. And so that gives us one indicator of issues that go from being an outstanding issue to a resolved issue. The other piece of information we have is through our claims tracker.
We are getting approximately quarterly data on the number of claims and those that are partially paid, fully paid, and in what status they're in. And so we do get more information on a more quarterly basis. And so we try to blend that information in sort of how we understand which issues are still outstanding, which are being resolved.
Speaker 3
Perfect. I sent a number of other just kind of related questions that we can follow-up with in conversations. But I I will just say that, you know, I think that the sustainable insurance plan, you know, strategy is is great. And I do think it's gonna take time to to work, obviously, and I appreciate you highlighting that. And we need we need some patience.
And, obviously, we need to your point, we need the more insurance companies able to write policies here in the state. And I think we're on this side of it, we're trying to figure out that balance. Right? We're trying to help you and everyone involved strike that balance. And so I guess on that note, is there anything that we can do?
The bills that you highlighted are great. Number of us have other bills. But is there anything that we can do to help with, obviously, consumer protect protections for all the reasons that we've highlighted, but also bring people back into the fold, make sure that they stay here. Is there anything that we can do additionally legislative legislatively wise or or otherwise?
Speaker 2
Yeah. I think, you know, in in the testimony, highlighted some of the things that we need to work on immediately is the mitigation and making sure that we could do everything we can to stand up the mitigation programs as quickly as possible. There's two federal bills that would, again, alleviate and remove some of the federal taxes that are important so that people get the majority of the money tax free. Additionally, ensuring that remove that we create just universal systematic mitigation standards so that there's no confusion within the consumer, and that we also look at the this issue around Zone 0. And then we've also seen what IBHS studies specifically in Eaton that has said that if we invest what is it?
2%? Was it, Mike? Was it 2%? Around two to 3%?
Speaker 2
Two per two to 3% of the cost of the homes that were lost. And we fortify each of those homes, which roughly cost, what was it, like, $5,000 per home?
Speaker 2
Between 5 and $9,000 per home, we could fully fortify the homes that we lost. And so that is a very that's a great study by IBHS because now we put a dollar amount to what fortification would cost to every home in Eaton. And as we talk about, you know, foundation money and all the money that's being raised, and that's really two to 3% per home, at least we have a figure that we can work with, and we could help neighbors and homeowners actually invest some of that money that we put together to to help them fortify those homes that we know go a long way, especially for those ember driven fires. So we we can give you a fact sheet on on what we feel is critical and how the the legislature can can really help us on on these things. Because that report from IBHS, specifically on Eaton, was really telling for us.
Speaker 3
Yeah. Appreciate that. I both of the all of that are great ideas, and let us know we can help. Thank you again for being here. Thank you for all the work, and look forward to talking to you again.
Speaker 5
Thank you, madam chair. Thank you, commissioner Laura. I appreciate the significant work you've put in over the past couple of years to develop the sustainable insurance strategy regulations. I know it comes from a place of wanting to strengthen the market for all Californians, and I I think we share that goal, more stable and reliable property insurance market. That being said, I am a little concerned about the timing and volume of some of the new legislation.
We've already seen a wave of new bills. You mentioned a few of them. It seems to me they'd add substantial new requirements around coverage, claims processing, and other mandates on insurers. At the same time, these companies are just now only starting to navigate the new rate filing process under the SIS. So I just wondered, do you worry that layering on these additional costly requirements could unintentionally set us back destabilizing the market that we've been working so hard to study?
And what are your ideas on how we would best balance addressing these real constituent needs without making the current challenges on insurers even tougher tougher.
Speaker 2
Vice chair Wallace, I think you bring up a a really interesting point, but I wanted I wanted to have this honest discussion in the legislature because I think, you know, when we go home and and and consumers, you know, and and and kind of I don't know how to say this, but I wanted you all to experience the the daily challenge that the insurance commissioner faces. Right? Trying to balance the consumer protections and the and strengthening the market with trying to entice insurance companies to remain in this market, right, which is challenging and in a hardening state, but also have those those honest conversations about what these reforms cost. Right? And so let's have these conversations in a public setting in the legislature so that when we talk about these bills, we also have an honest conversation about what this costs and how this impacts the market and how this impacts potentially insurers' appetite to grow in California.
And so where where best can we have this conversation but in through the legislative process. And as we weigh in all those different dynamics that you talked about, I feel that through the legislative process in the end, we will come up with a balance, which is what we've always tried to strike, which is the consumer protections enhancing consumer protections, but also looking at balancing that with the need to continue to strengthen our market by incentivizing more insurers to enter our market. Right? And so we're gonna have those discussions. We're just in the beginning, and this is why I think this is the best place to have these conversations through the committee process, through the deliberative process.
But you are gonna engage in what we've been engaging since 2019, since the first fire that I was able to experience in paradise. And so we're gonna have it through a deliberate process with consumers engaged because I think it's important for them to also understand that in order for us to have a strong market, we need to have insurers writing. Mhmm. And so we're gonna have that through the legislative process.
Speaker 5
Thank you. I appreciate that and appreciate the presentation and you being in here to have this discussion with us. That's all I have.
Speaker 6
Good morning, commissioner. Thanks so much for your presentation and for being here with today. Thinking about the vice chair's question and also your testimony earlier about I think you said there was a 27% case closure reduction time amount. And I'm interested in the context of that, you know, in terms of that timeline and also how you think this bill package would impact the the, you know, the decrease that we've seen, which is a good thing. Yeah.
But concerned that the claim process additions could could reverse the the the ink the the decrease that we're seeing.
Speaker 2
Well, let me add a little more flavor to that because we were operating again, when I say we were operating with, like, you know, twentieth century regulations, I mean, we were still working with binders when I got here. Right? And so I literally got a binder my first day as insurance commissioner. So we've now modernized our systems. We are now operating with technology where insurers and the department are operating with same datasets, for example.
Right? So that was a big issue where we were operating with different datasets. We we we reconciled that. And a lot of that, I would say 80% of that, was just trying to figure out what what data we were working with. We've already hired folks.
We've hired outside consultants to help, you know, our staff staff up. We've we're we're dealing with all that kind of red tape bureaucracy. And so we've we're dealing with all the internal stuff. And then, you know, to keep us to the letter of the law within prop one zero three and then we're reforming the intervener process. Right?
So interveners can no longer hold these rate filings hostage and use other issues that are not germane to the intervener process, which is unique to California, by the way. And so we're in we we've done we're we're introducing that regulation. And we're and to hold our own department accountable, I'm gonna inter I'm I'm gonna introduce a regulation to hold our own staff accountable because the last thing I want is when I leave that things go back to the status quo. Right? So we're gonna put this in a new regulation.
So we're gonna be introducing that next month. So I'm I'm also trying to leave all this done. And so, again, once we enter when all these cadre of bills are introduced, because we we expected that, right, and Department of Finance and and and your very able committee staff start reviewing this, all that's gonna be taken into consideration. And I want that. I want you all to have that available to you all.
And so as you look in you look at at what's being proposed, you all now have a sense of how you're gonna determine what moves forward and how the market's gonna react to some of these changes. And and and, you know, not only are are we being looked at, but, you know, it's being looked at internationally because these decisions are made from abroad as well. And so but I think it's important for you all to look at all this as a whole. But I think the department and I've done over the last couple years left the internal processes in a way where we've we've done all what we've cut, we've can. Now let's talk about what these bills are and how they're gonna impact the overall market.
But there's still things we need to do to further protect consumers, especially during these catastrophes. Right? We're not saying let's put these in place, you know, year round. Let's just do it when they need it the most during the catastrophe, and then they go back after it's done. Right?
And maybe that's where we find some common ground. But but we can have those discussions during the the deliberative process.
Speaker 1
Commissioner Laura, we've had several, assembly members join us. And so, before I go to them for questions, can and and you've gave a very thorough, update, of kind of exactly where we are, and you gave a lot of data. Can you just repeat when people will see relief and also talk to a little bit about the structural recovery for those members that just got here late?
Speaker 1
I think you'll wanna hear it. It was towards It the was towards the end after you went through the bills.
Speaker 2
Right? Because because it's all about RVK right here. Okay. Okay. Good.
Okay. So we were talking about when we will see some signs of of recovery for consumers and the overall structure of the market. And so so we're seeing early signs of stabilization. So we're already starting to see this. I went through this earlier.
Insurers already filing under the SIS. We have five SIS filings approved, the fastest rate filings in state history. Claims payments are the fastest on record. So visible consumer relief, we're thinking according to the experts who who examine markets that are in similar situations around the globe, twelve to twenty four months, more insurers are reopening and expanding, more more competitive options for consumers, slower nonrenewal new renewals, more predictable pricing, mitigation discounts, scaling up AB eight eight eight. And so we're seeing all that starting to happen.
So we're thinking two years, which we're already kind of in. More structural structural recovery, we're thinking three to five years, market stabilization after these major reforms. We're already into that one year cycle of the implementation of the SIS, so we're gonna start seeing reinsurance costs should be stabilizing. Those are the signs that we're looking at. Risk mitigation con continues to accelerate all the money that we've put into risk mitigation.
Fairpen exposure should start to plateau. We're starting to see that. We saw a little minor increase, but we should start seeing that plateau and then decrease. And then availability should improve in high risk areas. That's one of the things that we're looking at, particularly in your district.
And so the honest answer is early signs are early signs are are starting to we're starting to see those. So more visible relief should build over the next twelve to twenty four months and more structural healthier market closer in a three to five year project, which we're already already well in. And so why senator Crowell was asking and vice chair Wallace is because every decision we make and the bills that we're looking at in as a whole can make it either shorten the time line or lengthen it because, you know, it all depends. So that's that's is that what you wanted me to to look at?
Speaker 1
I that's I wanted you to just repeat that. Thank you. So do we have any questions from this side of the day? As Assemblywoman Barakahan.
Speaker 8
Well, since we already started our conversation with Krishna, let's continue. No. I appreciate that, and I think I probably, more than most, understand the delicate balance you're trying to strike here and, the hard work that has gone into this. As most people know, I was nonrenewed. I am now I think last I checked, the only of the 120 members on the fair plan.
And when I called my broker recently, because I'd read some of the news articles, I think the chair even shared with me about, people reentering the market, my broker literally laughed at me and said, well, not where you live. That's never gonna happen. So, I mean, I appreciate that we're sitting here worried about the insurance market, and that is critical. I was saying long before my nonrenewal, frankly, because I was hearing from my constituents, we know we live in a higher risk area. We're willing to pay more.
We understand that. Why doesn't the market work? Why aren't we letting the market work? And so I wanna say that I am a believer that the work we're doing to make the market function is critical. I also think that the commitment that was made years ago when we started this process that we were gonna allow insurers to start to do risk modeling and raise the rates beyond the approved rates if they were willing to take on some of the risk is the commitment I understood we were making when we went to risk modeling.
I'm concerned we're not fulfilling that commitment, frankly, and that's how I come at this, and that is because my own broker laughed at me. And I I when I read what had happened in the regulations and I wanna really dive into the distressed areas question, because my understanding was that they were gonna have to write 80% of their policies in distressed areas. Frankly, that seemed high to me, but great. I'm in one of those areas, so that was beneficial. And then when I started to read what actually happened, I have questions.
How did we decide what a high fire zone was? How does that overlap with these distressed ZIP codes? I understand my ZIP code doesn't even count despite the fact that we had the highest number of nonrenewals in the state, so that's confusing to me. And how are we gonna then depopulate the fair plan? Because as we saw in LA, ratepayers bailed out the fair plan.
That's what happened because it couldn't withstand the risk that it had borne. And when we talk about depopulating the fair plan, part of the reason we're doing that is to make it work for consumers across the state. And, my fair plan cost just went up, as I'm sure many people did. And I still don't think that if there is a wildfire in my neighborhood, the fare plan will be able to withstand it because so many people have now been put on the fare plan. And then I learned that we're not even covered in this 85%.
So how is that all make sense to you, and how does that mean that we are going to make the fare plan function the way it was originally intended as an insurer of last resort, not the main insurer in areas of risk? And how do we make sure that people in those communities can get back into the admitted market?
Speaker 2
Perfect. Great great questions. And so we'll talk about the New York Times article that you're talking about, and that's great because they got it all wrong. So let me explain to you how we the early part of my testimony is that we are now moving into the implementation of the sustainable insurance strategy this year, which was always the case for us. So we are just implementing what we passed the year before.
Speaker 2
No. No. We're implementing it now, and so the report today is letting you know what insurance companies' SIS filings were just approved to show you the commitments that are now gonna be input that they just got approved to meet those numbers. And then I'm gonna explain to you the wildfire distress areas.
Speaker 2
And then I'm gonna, off the record, off this meeting, get your ZIP code and exactly tell you why you may or may not, that ZIP code, not qualify as a wildfire distress area right now and why that may change because we're we're always updating those numbers.
Speaker 8
Well and I guess I should also say that when you started the regulations, we looked, and I did qualify. And as the regulations progressed, we fell off the map.
Speaker 8
No. We've increased. We have not decreased. The regs changed. Regs have not changed.
Speaker 2
So but we'll we'll so since now that we've approved so since we finally now moved into the implementation, we have a big a big market share of California riders that are now approved with the guarantees under the SIS to grow in the welfare distress areas. So I mentioned this earlier. The number two largest homeowner in California, Mercury Insurance. Three, CSAA Insurance Group. Twelve, thirteen, nineteen, and twenty four USAA group companies.
Number 18, Pacific Specialty Group. Thirtieth, California Casualty. There's three pending approval. Number five, six, and nine, these are three major homeowner insurers. And then there's pending a commercial multi peril filing number 16.
This is the kind of across all top, middle, and specialty segments in the market. And these are all have been every of these filings to date have been completed within the hundred and twenty days, which is the fastest, most transparent, and most accountable rate review in cal that California's ever had under the rate filing, which is, as you remember, one of the biggest issues Huge kudos to
Speaker 2
wanna say. For sure. So we we're able to get that done. So now now that those are approved, those go into effect. Yep.
And now we're gonna start tracking where they start growing, so we're gonna start to see those. And that was the report because now we finally got those done, and we have more more of those companies in the pipeline. And then how we came up with the distressed areas that these the and these regs have not changed whatsoever. So, again, there's three there's three criteria. Again, fair plan policyholders with moderate to very high risk state high risk, not statewide.
There's ZIP codes with greater greater than 15% fair plan penetration rate or high or very high hazard. And then counties that have above 50% percentile of structured risk scores. And so that ensures the relief reaches the areas with the highest concentration. And so I know we did an update of those maps, and that kinda slightly changed. So I don't know if that might have kind of changed that one specific ZIP code because I know we got we got questions from a couple of other assembly members, but I don't know if you wanna further elaborate on that.
Because the the criteria, I know, has not changed, but I know how often do we update that data?
Speaker 4
So, again, Mike Peterson. I'm our senior deputy at the Department of Insurance on Climate and Sustainability. So the I think that just as a starting point, if you are in the fair plan, you have fire risk, you're eligible under the as as part of the distressed areas. So that is where we want insurance companies looking for policies. That's the incentive to do that.
We updated
Speaker 8
But can I just ask a follow-up question? Nothing in the regs requires them to take people off the fair plan. It merely requires them to have 85% in the distressed area maps as you define it, is my understanding.
Speaker 4
The in the regs, they have to make a commitment that can be to write 85% or to grow 5%, and then it's who counts towards that growth or maintenance. So as a fair plant policyholder in a moderate to high fire risk area, that counts as a policy. So that is one of those policies that would go into those commitments. We make the insurance companies keep the data, and so we hold them to those commitments.
Speaker 8
So Fair Plan, no matter whether you're covered by the maps, if you're on the Fair Plan, you count towards 85%?
Speaker 8
Yes. And those maps, the fire maps, were not Department of Insurance maps. I assume you're relying on somebody else's fire maps, or are they your fire
Speaker 4
No. There's so for that Fair Plan policy, that's the risk score for the the Fair Plan policy.
Speaker 4
Used, like, by many companies all as well, not the Fair Plan itself, but the the risk score system that they're using.
Speaker 4
And and and if I could just add one more thing, it's important because the the challenge of California is we have big cities, small towns
Speaker 4
And so the population centers can wash out or dilute Yes. Any effect. If you said, you know, this area, city a, is distressed and there are a million policies in it, insurance companies aren't necessarily gonna be able to find the needles in the haystack of the Fair Plan policies. But if you say every Fair Plan policy with fire risk is eligible, then they can target those policies either by looking at their differences in conditions, policyholders, or else or elsewhere. So it's it's sort of our way of trying to reach those areas that don't match the the maps as perfectly as other areas might.
Speaker 8
Got it. So I appreciate that. But okay. So let's use the example of Berkeley or Oakland, right, which has very high fire risk hills Right. And also some flats where the risk is negligible.
My understanding is that the entire ZIP code, despite whether you're in the high fire part of the city or the low fire part of the city, would be covered by that 85% because it's in the ZIP code. Am I right or am I wrong?
Speaker 2
I mean, that's one of the criterias. But if they are in the fare plan and they have a high risk area in high risk number, they're covered.
Speaker 8
Right. But if I'm an insurance company and I'm trying to maximize profit and reduce risk, and the people who are in the low fire areas in those ZIP codes, in the flats where there's less fire risk in Downtown Oakland, for example, versus the Oakland Hills, I can count that towards my 85%, which is the choice I would make because it's less risk. That's a logical business decision, and that would count towards my 85% because it's in the zip code. I think that's what the New York Times was saying, and that's my understanding of the regulations. Am I wrong?
Because I would love to be wrong.
Speaker 4
I think I think that the particular example isn't is not accurate because the Oakland Hills are not in the ZIP codes that are covered. So that's the it's the fair plan policy holders in the Oakland Hills that would be eligible, but we don't have those ZIP codes covered for that very reason, is that that the the greater population than in the lower risk areas would wash out the effect. So this So so that's that's why we designed it this way. Is that exactly
Speaker 8
So the number of ZIP codes in the distressed areas is almost a quarter of California ZIP codes, 600 and something, which is a quarter of.
Speaker 8
I mean, I just looked at how these ZIP codes are in California, it's about 2,600 of them. That's accurate.
Speaker 2
with the ZIP the challenge with the ZIP code is because they were made for, like, postal.
Speaker 2
We yeah. We were trying to come up with some sort of hybrid system that would capture the ZIP codes, but then capture this whole big city issue. And and look. At the end of the day, senator Bauer Cahan, we're try we're gonna have the data to monitor how the insurance companies are reacting to to to the wildfire distress areas, something we didn't have before as we're as we're attempting to launch these first ever regulations. And then, quite honestly, we're like I told the times, we're expecting them to try to, you know, look find loopholes.
Speaker 2
I said. Right. But but we're but name one regulation and one bill that that, you know, were that has been perfect from the get go. We're gonna we're gonna constantly be monitoring it to try to tweak it so that we capture these anomalies. Right?
And that's what I kept telling The New York Times. Can you come back a year or two when this is actually implemented and then help us, you know, look at these loopholes? Why are you already, you know, looking at these, you know, potentials when we haven't even implemented any of this stuff? So we're we're we're we've been trying to come up with these formulas to try to capture all these different scenarios, but we haven't implemented any of this until this year.
Speaker 8
Right. No. And I appreciate that. I do think look. I'm not gonna throw a shade at the journalists who are trying to keep us honest.
I think it's important.
Speaker 8
And I do hope they come back, to your point. Yeah. I think they should continue to the journalism and continue to maybe admit they're wrong if they're wrong, which is why I said I invite you to say I'm wrong. But, so I guess I mean, the example I gave you is a is a regional example where I am, obviously. But they gave an example in that article of I think it was the Sacramento area where a similar thing would happen, where they could concentrate in, low lower fire risk and get their 85%.
You think that's not true? I mean, is that what you're telling me? Because I
Speaker 4
I I think so. So I can't speculate as to everything that will happen. Right? But let's say that 10 companies decide that that's what they're gonna try to do. They would be competing for that business, and that would drive other companies into the other areas for if if we are able to get all a 118 companies to participate in this, collectively, they are going to have to reach all of these areas.
And so I think that's the key, is one company can try to find a path, but all these companies together are going to have to write in more than just the flats in order to meet the commitments that they are making and that we're holding them accountable to. And and and like the commissioner said, if we're tracking this through data, we're gonna figure it out, and we will update the distressed areas once a year. So if or at least once a year. So if we do see that there is a pattern that's emerging, we we can address it.
Speaker 8
And then the quest so you mentioned, which I was gonna ask about, so it's 85% or 5% year over year. What are I mean, what would that entail for the companies you've already approved? Like, what percent are they currently at in distressed areas? Do you know?
Speaker 2
We don't know because we are just implementing this as we speak. We're this is why we're giving you an update today.
Speaker 8
That wasn't in the rate we approved there. So I just thought maybe that was in the rate Yeah.
Speaker 2
And we're just about to launch we're we're now in the implementation the beginnings of the implementation stages of the SIS.
Speaker 8
Okay. So we don't know how many years it would take for some of these companies to get to 85% if they did five year over year?
Speaker 2
No. The plan is to get as many companies as possible to start getting the rate file rate files in. And so so today, we're again, this is why we're saying we're we're speeding up our rate file process so that we can get these done as quickly as possible so that we can get as many companies to submit the rate files, get them approved. And we're starting to see that the companies the worst case scenario, which I would always tell the chair, is we set up all this system and nobody comes to play. But we're seeing that companies are coming in, and, actually, some of the biggest writers in the state are are coming in and making these commitments.
So now we're, you know, we're we're gonna start seeing.
Speaker 8
Well and and it's gonna raise rates. I mean, let's and I you know, like I said, my constituents for a long time have been saying they want the market to work. And in order for the market to work, we need to be paying for our risk. And so, you know, I understand why they're coming to play, but we've gotta make sure that we're fulfilling the commitment of ensuring California is a result of that.
Speaker 2
What would be the other option as a member that we actually hide the actual true cost of climate or that we defer the cost and then we have another massive climactic disaster in the state, and then we go insolvent. And then that really harms the the consumers. And so I could sit here and do what's politically expedient or do what's hard and then ultimately get more insurance companies to come and then eventually drive the cost down of for consumers. And, you know, you just gotta open the paper and see how, you know, how climate change is changing our our our our market here. And so I could do what other commissioners have done in the past and just hold on to the rates and and wish for the best, but I can't do that.
And so we're all in this together, and and the rate has to reflect the risk. And we all have to pay for, you know, for fair rates and for where we we live. And and and that's the the the hope. And so but by getting more companies to come in, we'll eventually get the rates to come down, and this is what we're saying. It'll take us, you know, three to five years to hopefully stabilize the market.
Speaker 8
When I was saying I was not suggesting that we not do this, I've been supportive of
Speaker 8
As you know. And, also, I will say the status quo was not keeping things affordable. My insure when I got dropped, my cost went up 300 percent. So Yeah. Truly.
Not having insurance was not a liability scheme. Let me just clarify that, for people like me in California. So I think so last question. So you I appreciate what you're saying about tracking the 5% to 85%, whichever they choose, and really seeing how that works. What kind of transparency will there be around that?
Speaker 2
Yeah. I know. Our plan is to make sure that when when we have when we have these updates, we're gonna be posting it on the website. And do you wanna clarify on how we're gonna because we absolutely wanna make this transparent, and we wanna make sure you all know and that we use this tool. Again, this is also important as we're developing the public wildfire model so that local governments know how to use the tool.
Mhmm. We know how and this is this is gonna inform local planning issues, how we build, where we build. Mhmm. So go ahead, Mike. This is a good that's a great question.
Speaker 4
Yeah. No. No. It's a it's a thank you for the question. I I think there's two areas of transparency that are good to note.
One is that in the rate fines themselves, you'll see a that we designed a template for the insurance companies to make their commitment. So you can see we're gonna grow 5%, and we're gonna do it in these ways, and this is the you know, where we're where we're headed. And then in our data collection, that'll we'll be able to kind of show two things. One, the distressed areas, as they change, you'll see whether certain zip codes continue to increase in their fare plan percentage or decrease. And so that'll show where some insurers are writing.
The second thing is that as we look statewide, the number of fare plan policies in any given area will go up or down as well. And so
Speaker 2
And then we will be able to take that data and show that to you by district, by your ZIP code. Right? Or by your county.
Speaker 8
Yep. So you said in the rate filing, lay out how they're gonna meet the commitment. Yes. And then do they have to come back at some point and show that progress?
Speaker 2
Yes. And we Post approval, obviously? Correct. And we will and we have already the statutory we already have, you know, the the authority to be able to go after them legally if they don't meet the requirement.
Speaker 8
Got it. And so you'll be tracking sort of where they're doing that, and and that will also be transparent?
Speaker 8
Fair. Fair, commissioner. You're like, I'm gonna retire. But so that will also be transparent is the vision?
Speaker 8
I appreciate that. And, if you wanna follow-up on our ZIP codes, I know there's a lot of concern in my district that this will not be benefiting the areas that are most distressed. And, honestly, I mean, I I do know that, you know, we do have concentrations even within ZIP codes, because I'm sure you're aware, like the Palisades was, where if there is a firestorm, the fact that another part of the ZIP code didn't have a high fare plan will not help save
Speaker 2
And we could we were we'll be more than happy to to talk to your staff or your your constituents and dive into the formula of how how we did the formula and how we could address. Because I know there was a lot of discrepancies within the the New York Times article. I just wish they would've we we sat with them for months. This article, they just didn't come out of the blue. We we sat with them and met with them to really go through the data.
I just wish they would have allowed us to implement it to actually showcase what we were trying to do. Again, we don't we welcome the scrutiny, but I just wish they would have allowed us to implement it first. And we were just saying, name a regulation that we're we're starting from zero to fully implementing this. We've never done this before. And so is it gonna go right a 100%?
We have no idea. But we have the data now to track it and to be able to mold it as we go. And so that's the plan.
Speaker 8
But I do think that our, I mean, our regulations and the models need to be defensible and show that the plan is going to be implemented as the promise was. Again, that we would allow them to do catastrophic modeling, that rates would go up, but that the market would continue to work, and we would depopulate the fare plans so people don't get hit like they did after the last change happened.
Speaker 1
Thank you. And and this is the sixth time that you've been before my committee. And so I hope that you will come back later this year and give us another update because this is very helpful for for me and for the members to have this discussion and dialogue in a very transparent public way. So Absolutely. I appreciate that.
Someone For army k any day. We'll invite her back too.
Speaker 1
No. But she's she's like a, you know, ex ex officio member. She's a member. Asama Woman Schiavo, you have a question?
Speaker 7
Thank you. Thank you. I'm also sitting in. Thanks for making space. This is a huge, as you know, huge issue for our community, the Santa Clarita, San Fernando Valley, and Castaic area where the Hughes fire was a year ago.
We are riddled by fires in the hills that surround our valleys and have a lot of high high risk areas. My insurance where I live, our whole HOA of over 700 units was dropped years ago. We've had to get catastrophic insurance and suffered multiple thousand dollar assessments and had to expand our own personal insurance to cover for what our HOA is not covering anymore. So, you know, in the boat of RBK over here, we're there's a lot of us suffering. Off this Right.
Yes. We went off the boat. And and it's an issue that I hear in my community, you know, every time I'm out and about in the community, someone's talking to me about insurance. So I am incredibly grateful for all of the hard work that has gone in to address it because I know, you know, legislatively, the chair has been working on, you know, was working on this through the legislature, and then you kinda took on doing it through the regulations. And, you know, we saw that it was a a crisis in front of us that we could not ignore.
And and I know it's still in its infancy and just getting started. I am hopeful because I think we are all hopeful because we need this to work. Right? And I also wanted to thank you because I know after the fires last year, you put in, you know, the moratoriums that folks couldn't get dropped and included the area around the Hughes fire, which was so critical for people in my community in the Castaic and Santa Clarita area. But it's a year later, I think, assembly member Hara Bidion asked about that.
I'm really concerned. I'm gonna start hearing from constituents that their insurance is being dropped. And I I still am hearing, you know, from realtors, especially, are telling me the stories of how they have folks who are trying to buy homes and can't get insurance policies. And so can you tell me a little bit about are there is there any relief in there for folks who did have this moratorium? And then, you know, once a year is up, they could just be out of luck and get dropped.
Speaker 2
Well, there's it all it all depends on the the amount of the damage. So if they had a total loss, you know, there's a there's a two year window.
Speaker 2
So what what we could do is let us let us go back, and we'll have Mike run some numbers to see if we could see if there's any anomalies in those ZIP codes, and we can get back to you Mhmm. And make maybe do an analysis for your district and see if we've seen and see who are the riders there, see if there's any uptake on the fare plan. Again, we haven't seen any big upticks of the fare plan. And but if we can catch anomalies there, we can look at it and maybe do an analysis. Mhmm.
That maybe that could be something we could do for her for her district, and and we could do a follow-up. Thank you. Again, the and we've been working with the realtors, as you know, on this plan, and they support it because they obviously, we understand how important that is and especially for the local economy. You can't build, you can't sell a home. It just impacts the local economy, has that domino effect.
So what if we can if we can do that and we can schedule a meeting with you that we can go over
Speaker 7
Yeah. That would be wonderful. Thank you. I appreciate that. And so for folks who you know, I certainly have folks in my district who are on the fair plan or whose rates are going up, and you what I hear you saying is that you've in the next twelve to twenty four months, there should be some relief that people are feeling, or is that
Speaker 2
Yeah. We're we're seeing, you know, visible consumer relief builds over the twelve, twenty four months, and kind of bigger structural stability will take, like, three to five years consistent with kind of global reinsurance cycles. And that's what we've seen with, like, kind of Swiss Re Munich Re, which are kind of the big global reinsurers Mhmm. That look at this. And and with Wharton School at University of Penn who all show that catastrophe exposed markets tend to stabilize over three to five years, and California's already in the two year cycle into that.
But, again, it depends on the bills that we pass, depends on how we react, and, of course, mitigation is key to that. And and we've we've studied Swiss Re Munich Re, Wharton, and OECD, and the SIS is the SIS is really built into what they've recommended we do, so we didn't just kinda think of all this stuff, you know, out of thin air. And and, really, it's it's really grounded on on global research and on data, not opinion. So that's what we're kinda tracking, and they've been tracking it with us. Mhmm.
And so they still feel hopeful even with what's happened in LA, and this is why I spent the the earlier part of my testimony on what would have happened if we didn't have the SIS and we had the LA fires. So they feel we're still on that trajectory. Again, it depends on what we passed this year. We did build in some a couple months to understand that, you know, the legislature was gonna have some eagerness to build some to pass legislation around this that could impact how the market kind of responds. But we're like I said, we're starting to see insurers already coming back into the market.
And one of the biggest questions as the chairwoman kept texting me is when are these gonna get approved? When are we approving this? We need to get these, you know, rate files approved as quickly as possible and why Mhmm. I'm I'm gonna be introducing this regulation to make sure that when I'm gone, we keep to the letter of the law and get these rate files done as quickly as possible so that we get insurers writing back with the commitments so that, you know, your the wildfire distress area gets, you know, those insurers writing back again and get them out of get your your consumer your your constituents out of the fair plan.
Speaker 7
And have you and and I'm sorry I was late. Have you you've already started approving some of these rate filings?
Speaker 2
and we have a big we have a significant we have a significant chunk of the market and some of the biggest players already. Mhmm. So we have the the second largest homeowners insure Mercury Mercury Insurance has been approved. That's the number two. Number three, CSAA Insurance Group.
The number 1213, 19, and twenty fourth, USAA Group. Number 18, Pacific Specialty was approved. Thirtieth, California Casualty. And then pending, five, six, and nine, those are three major homeowners insurers. And we continue our department continues talking to to others.
So, again, it shows that the reforms that we did are welcomed by the insurers. We've worked with all of them. And, you know, to tell you that, you know, all the heat that I got for, you know, meeting with the insurers, all this was built with talking to everybody. And the last thing we wanted to do is build this new system and not have insurers respond. And so they've responded, they filed, and we're trying to and and and, again, the level of participation across is top, middle, and specialty segment of the market is what's what we want.
What we don't want is what has occurred over the last couple years all over the country where you have one insurer who is the largest insurer across every state in the country. And so now we're in a situation where if that insurer something financially goes wrong with them, what happens to the entire country? Right? Mhmm. So we don't want that to happen.
We want a mix of of insurers riding in your district. We we want small, medium, and large in your district because if, god forbid, something happens, that diversification is what's gonna protect your consumers.
Speaker 7
Yeah. Right? Just one last question. So how I have been explaining it to people in my district who are worried about their, you know, high cost of insurance or inability or getting dropped is, you know, how we're addressing it in California is that because of the high cost of disasters in this state and California doing an amazing job at keeping cost of insurance down, the, you know, insurers have not been able to keep up with the cost of the the increased cost of covering these disasters, right? And so we had to change that to be able to allow them to cover the costs, and that means that rates are gonna go up, but it also means that people are not gonna be pushed into the fare plan as much because where their rates are going up 500%.
Instead, it's gonna go up, what, 40%? What is what is the percentage that
Speaker 2
you think people are gonna be seeing increase? Specific numbers. I think as of today, I will tell you what you could tell your constituents is tell them that help is coming. You could tell them that the market is already showing signs of stabilization.
Speaker 2
You could tell them that more options are on their way, as I told you, and I can give you I can give you a a fact sheet on what's happening. You can tell them that that every that every reform we pass that we've passed shortens the time of relief, and and I can give you what's happening, what we're seeing. I think consumers want to know that insurers are not abandoning the state.
Speaker 2
Right. And if we show them who's committed and that commitment to write in the in the state, that's the big difference. Right? Other states don't have this commitment. Coming back, and and we can show you who's coming back.
Right. And that their area is under these new rules is a priority, and that it's gonna take, you know, it's gonna take a couple months for them to come back and and get them out of the fair plan, I think that just brings them a sense of relief. It's that fear that they're gonna get either put back or stay in the fair plan and that we're reforming the fair plan, right, to get them out of there as quickly as possible.
Speaker 7
Yeah. I mean, certainly, hear from people that they'd rather pay an increase that they can afford versus something more catastrophic or, the fair plan or not have insurance at all. Right? It's a little bit of a rock and a hard place situation, though. Nobody is, like, thrilled about it, but it's better than what we were facing, obviously.
What are so what are the rates at which you so far, the people who have gone through this process of of the rate, you know, increases, what kinds of increases are they So
Speaker 2
the the that's a great question, and and I'm happy you asked that because that's another thing that the media almost also rep misrepresents. The the rate increases have been around six point nines, and that coincides with if you look at the previous years, have been, I would say, thousands of six point nines.
Speaker 2
Well but the the the difference, though, is that if you look at my predecessors that have approved rate fines around this time time of year, it's been successive six point nines. Mhmm. But the difference under the SIS is that now under the new rules, the requirement to write in high risk areas is binding. So that is the big difference and the requirement that no other state has but us under the SIS. And that's a big difference.
Right? And that is the commitment where, I said earlier, insurance companies are now filing knowing that that is the requirement, so they're no longer abandoning these communities. Right? And so they're demonstrating that. They're acknowledging that in the rules.
So they're commit they're recommitting to California, which is different.
Speaker 7
And the and, I mean, it it means it it must be enough if they're doing that, I assume. And it's moving
Speaker 2
more quickly and they're testing the waters to see if we're gonna get these rate filings actually done on time Yeah. And see how the rates are gonna be how the
Speaker 7
because that was one of the problems before. Right? Is that the rate filings were taking so long Correct. That by the time it was approved, they already needed to go up again.
Speaker 2
And by the way, all these rates all these rate filings were approved within under under the 120 rule. Only one of them was a hundred and thirty three. Days. Hundred hundred and thirty three days. Right.
Which one was a test run for our staff, one that we were fully staffed, that we were understanding these much more complex rate filings. Right? Because now we're operating under the new rules with the cost of reinsurance, with the with the complex modeling rules now. And so these are all kind of test runs. So I think insurance companies are also testing us to see if we're actually we know what we're doing and that and how we're gonna implement the SIS.
So I think everybody's kinda, like, trusting but verifying. Mhmm. But and we're in that space together. And I that's why I said, I wanna make sure before I leave that we also leave this within in stat statute and that the regulation we're introducing next month is that we also hold ourselves accountable, that that a hundred and twenty days has to remain. And by the way, that was already law within prop one zero three, but somehow we got away with that.
And, you know, if you look at the average, it took years. So that's that's also you know, we can't do that anymore, not in the age of climate change.
Speaker 1
Alright. Thank you. Insurance commissioner, thank you so much for coming back to be with us for the sixth time. And like I said earlier, I hope you'll come back later this summer. And now we're going to take public comment.
So please state your name, organization, and provide a brief remark.
Speaker 9
Thank you very much, chair and committee members. My name is Will Abrams. I'm with the Utility Wildfire Survivor Coalition. And, I was around in 2019 when, commissioner Lara came on, and I appreciate, his presentation. We don't share the optimism.
We're seeing a lot of the same on the ground issues that we saw in 2019 after the Camp Fire. SCE is per looking to pay the least amount of people, the least amount of money. Commissioner Laura identified mitigation as the primary way we are gonna drive insurance rates down. When we're paying victims 50¢ on the dollar after attorney's fees and after utilities try to pay them the least amount of money, they're not gonna have that two to 3% to be able to address mitigation. We need to make sure we we see each time there's a utility caused wildfire.
There's a spike in the reinsurance rates. These things are tied together, and we need to make sure that we're doing comprehensive mitigation. That's the only way that we're gonna have insurability in the state. One last point. Commissioner Lara talks about legislation in terms of streamlining interveners.
And I would just point out streamlining for whom? Streamlining for the insurance companies. Great. But this means less participation from the public and less engagement. We need to be making sure that fire victims are fully compensated for their losses.
We cannot wait around for SB two fifty four study to get after that. Victims are suffering on the ground. I I urge the committee to consider those issues, those underlying issues of how victims are going to be able to recover because otherwise, we will not have insurance in the state. Thank you.
Speaker 11
Good morning, chair and members. Kim Stone of Stone Advocacy on behalf of Consumer Watchdog. Thank you for the hearing and the opportunity to make comment. Consumer Watchdog, urges consideration of policyholder and consumer issues at the same time that we consider sustainable insurance strategies. We believe that insurers should respond to claims in a timely fashion, that insurers should communicate, fully and transparently with policyholders about documents and about decisions.
And we question if the sustainable insurance strategy is sufficient to address the crisis that California, faces. Insurance companies have dropped three times as many policies in distressed areas as they have committed to sell, by 2028. So under the sustainable insurance strategies, we urge the legislature to consider doing more, in order to keep California insured. We urge, insurers who sell in California to, offer insurance to everyone who, needs it, who also hardens their home to, state fire standards as one possible way to depopulate the fair plan and provide insurance to people who need it and keep us all safe. Thank you.
Speaker 10
Madam Chair, members, John Orwood. On behalf of the independent insurance agents and brokers of California, I want to thank the, committee for having this hearing and the commissioner for all the work that they've done and commend them on a really positive report. Our members are just like everybody else in the public. They can't wait for insurers to come back and to reestablish a competitive market. It is very positive to hear that these five companies have been approved and they're aligned of other companies that are, you know, ready to make filings.
We heard several independent agency companies in there. So, you know, we're anxious for, you know, that to take effect. As the commissioner said, it's gonna take some time, and it's doubtful that these approvals are actually in the marketplace yet. We're actually just going out with a survey to all of our broker members to find out if they're starting to see any relief. I can guarantee you when there's insurers out there that want to write, we're going to pull people out of the fair plan as quickly as possible.
There's no positives for our members to have their clients in the fair plan. We just want to again thank you for this and commit that we wanna work with the commissioner and this committee over the next few months on the number of bills that are out there to try to achieve the balance that I think you're all all trying to do. Thanks very much.
Speaker 12
Annie Thomas, on behalf of the California Alliance of Child and Family Services, in addition to the insurance crisis due to wildfires, the liability insurance crisis has already resulted in the closure of more than 25 foster family agency sites since October 2024. These closures reduced placement options for youth, disrupt relationships with trusted caregivers, and place additional strain on remaining providers. Last year's 31,500,000.0 allocation provided temporary relief. However, these funds will run out this year. We're thankful for the support we've received from CDSS and CDI thus far, but we look forward to working much more closely on long term solutions We consent to the legislature to stabilize the insurance market, protect survivors, and ensure providers can keep their doors open.
Thank you.
Speaker 13
Katie Pettybone on behalf of Pettybone Government Strategies and my client, Century Insurance, and other commercial insurers such as Zurich Insurance and AF Group. Although this hearing is focused on homeowners, I will I would like to highlight that the work that the department has been doing on rate filings on the ground up, work with employees and, training of employees, and certainly the budget support for the department to do their job is actually not only helping the personal lines, it's helping the commercial lines, which commercial lines are what ensures all of our companies and makes the economy go. So, we're encouraged and really, wanna make sure that everyone keeps an eye on as we move forward the things that will have trickle down effect for liability insurance, and appreciate the committee's work. Thank you.
Speaker 3
Yes. Good morning, madam chair and members. Sarah and Taylor on behalf of the Personal Insurance Federation of California. We do wanna thank the committee and the many stakeholders who have worked constructively over the past two plus years to implement the commissioner's sustainable insurance strategy. This collaboration is essential to restore a healthy and reliable insurance market for Californians.
With regard to the point that assembly member Wallace and assembly member Krell made, I do wanna say with the recent SIS filings that are just coming into effect, it's important to steer the ship carefully toward our share goal and not do anything to undermine the progress that's being made. So thank you.
Speaker 14
Good morning. Mark Segner with the American Property Casualty Insurance Association. I'd like to thank the committee for their work and the department for all their work. I also wanna commend the department for their work on zone zero. We know that the only way out of this is to bend the risk curve, and zone zero is key.
And I think when you enjoy the frustration that the department has and we have the challenges that the Department of Forestry is having doing zone zero, which is among many of the easiest things we can do for mitigation, we need to continue to work on that. There's been a lot of time about how much this is gonna take. I think it's important to note that the catastrophe models weren't adopted until this summer. Companies are just starting to review them. And as the department said, companies are getting rate filings and are getting approved relatively quickly.
It's gonna take a while to roll these products out in the market, so we just have to take patience for that. I also wanna point out that the need for adequate rate continues, and that we need to make sure that these quick time frames also apply to companies that are not able to use the SIS filing restrictions because not all companies either due to geographic or other issues may be able to participate in the SIS. And we have to remember that when you look at the distressed areas, while it covers a lot of ZIP codes, it only covers about one in every seven policyholders. So we need to remember that there's a lot of other people out there that need to be in insurance. I wanna acknowledge the commissioner when he said the legislature has a chance to make good decisions or bad decisions.
And as some member Wallace has cautioned, as we go forward that and people are looking looking at California to see what the legislature does. We know this is a step forward, but still a lot more work to be done. Thank you.
Speaker 15
Good morning, madam chair and members. Kareem Dreesi on behalf of the California Building Industry Association. Our primary focus and concern continues to be the availability and affordability of insurance in the private insurance market for homebuyers and, in particular, first time homebuyers. We appreciate the chair and the committee's leadership, on these issues, and we look forward to continuing to be a resource to the committee and to the department. Thank you so much.
Speaker 16
Good morning. Chris Rosa here on behalf of NRDC, the Natural Resources Defense Council. We appreciate the focus this committee is having on climate related affordability issues and here to share concerns over California's current approach to wildfire risk, which means that ratepayers' electrical bills are the largest funders of, IOU wildfire prevention in the state, which low income households disproportionately pay for. Progressive sources like the general fund are contributing significantly less to preventing and reducing wildfires in terms of the IOU programs, and California needs holistic intervention on this issue this year to prevent another utility bankruptcy that will increase further cost pressures on Californians with their increases in their electricity bills worsening the affordability problem for both utility and insurance bills, and discouraging the adoption of climate technology. So we thank you for your consideration on that.
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