Putting insureds over the tort lobby

California is in the throes of an insurance crisis after the state’s largest insurer, State Farm, and then some other companies announced they no longer are writing new policies here. This comes after years of growing wildfire-related losses. State officials blame climate change, but it’s a problem mainly caused by government regulation.

Simply put, 1988’s Proposition 103, which gave the insurance commissioner power to approve and even roll back rates, has made it impossible for insurers to price their policies to reflect evolving market conditions.

The best evidence: The state-created, industry funded insurer of last resort, the FAIR Plan, grew by 10 times over three years, as more Californians faced non-renewals.

Commissioner Ricardo Lara and Gov. Gavin Newsom have been slow on the uptake, but they did recently come up with a plan to stabilize the market. The governor issued an eight-point executive order that promises to speed up the excruciatingly slow rate-review process.[…]

It’s not enough, but it points in the right direction.

Enter Consumer Watchdog, the trial-attorney-backed organization whose founder authored Prop. 103. Instead of acting like a constructive partner, it accused Lara of committing “an outrageous fraud” for working on a legislative solution with the insurance industry. That bill didn’t pass, but created the blueprint for the executive action.

Absurdly, the group is peeved state leaders shared draft language with insurers. State officials cannot secure a deal with any industry if they don’t work with the affected industry. Lara’s deputy issued a snarky rebuttal: “Watchdog is turning a blind eye to consumers’ needs while defending its own insurance piggy bank.” He’s on point as he refers to massive legal fees the group collects while serving as “intervenors” who challenge rate filings.

A healthy insurance market is vital to California’s economy. Changes to Proposition 103 would require a voter initiative, but state officials can streamline the current process so homeowners in wildfire-prone counties can get affordable insurance they need.

The good news is the department understands what it’s up against with this “consumer” group and is pushing back against its resistance.

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