Opinion: California lawmakers should reject last-minute insurance scheme

Harvey Rosenfield, author of Proposition 103, says end-of-session industry ploy undermines landmark initiative

Insurance lobbyists are working with Sacramento officials to undermine Proposition 103’s consumer protections as part of a last-minute industry bailout that could cost California homeowners, renters, and condo owners thousands of dollars each year.

Insurance price gouging is prohibited under Proposition 103, which was approved by California voters in 1988 after a David vs. Goliath battle at the ballot box. Companies must demonstrate that the premiums they intend to charge are required to cover projected claims, reasonable expenses, and a reasonable profit. The initiative, which is unique in the country, has saved Californians hundreds of dollars per year on their auto and property insurance — which is why the insurance industry is attempting to derail it.

The Sacramento agreement would also relieve insurers of their obligations under the California FAIR Plan. This is a state-created, but industry-controlled, operation through which people who are unable to obtain coverage from an individual insurer can still obtain coverage — albeit at a lower cost and with fewer benefits. FAIR Plan profits are shared by insurers, but they are liable if claims exceed premiums.

The companies’ escalating refusals to sell or renew coverage, ostensibly due to wildfire risk, have driven many Californians to the FAIR Plan. The proposal would levy a surcharge on all homeowners in the state to cover any unexpected FAIR Plan losses. In other words, Californians would end up paying insurance companies to cover wildfire losses.

Regardless of what insurers say, this agreement will not appease the industry. Insurance companies in Florida are already allowed to do everything that the bailout would allow them to do here. Homeowner insurance premiums are two to three times higher than in California, and insurance companies are already fleeing the state.

Nothing in the industry bailout requires an insurance company to resume selling policies to anyone who wishes to purchase one.

Our representatives should not make Californians pay the ransom demanded by the insurance industry. A legislative coup at the end of the session that denies the public the opportunity to carefully vet a self-serving proposal of this magnitude profoundly disrespects the voters, especially because our Constitution gives voters the final say in determining insurance policy.

This will have the same disastrous consequences as the Legislature’s deregulation of electricity rates in 1996, which resulted in phony power shortages and $70 billion in additional charges on our electricity bills.

Instead, state legislators should focus on the real threat — climate change — and seek solutions that benefit everyone, not just the industry.

Priority one: Accelerate funding for proven programs that will enable all California homeowners, businesses, and communities to prevent or limit wildfire damage. Last year’s Hurricane Ian had little effect on a Florida community built from the ground up using the most advanced loss-prevention techniques.

Insurance companies or the building industry should not set land use policy; future construction in high-risk areas should be based on objective, real-time assessments of their vulnerability. Furthermore, the Insurance Commissioner should establish a deadline by which insurance companies must cease investing in and insuring the fossil fuel industry.

Finally, the insurance industry’s harassment must end. Attorney General Rob Bonta should immediately investigate insurance companies’ collusion to create market shortages, which is a violation of antitrust laws.

Over the last 25 years, homeowner insurance companies in California have made four times the national average in profits. As a condition of doing business in the nation’s largest and most profitable insurance market, the companies should be required to sell insurance to anyone who has taken reasonable precautions to protect their home and property from wildfire — and at the fair rates set by Proposition 103.

Proposition 103, the insurance reform measure approved by voters in 1988, was written by Harvey Rosenfield.