Editorial: Nix last-minute California wildfire insurance bailout scheme

Keeping the public in the dark on negotiations is an outrageous flaunting of the political process

For months, lawmakers, regulators, the insurance commissioner, and the governor stood by as the state’s wildfire insurance market devolved into a full-fledged crisis affecting tens of thousands of Californians.

The governor and the Legislature could have introduced legislation that would have started a transparent process that would have allowed the public to vet legislation through widespread debate.

Now, lawmakers are attempting to ram through a last-minute agreement without public input that could benefit insurers at the expense of Californians. It also threatens to go against the spirit of Proposition 103, the 1988 insurance reform bill that prohibited price gouging, saving policyholders billions of dollars.

It’s a blatant abuse of the political process. Californians are entitled to better.

Proponents are expected to unveil their legislation in the coming days, using the egregious, sleazy “gut and amend” process, in which a dormant bill is pulled to the floor in the final days of a legislative session, gutted entirely, and amended with new language that the authors know will not be thoroughly scrutinized before the bill is voted on by the full Legislature.

As a result, details about the proposed legislation are scarce.

Last week, Politico reported that a late-session push by insurers, home builders, and the state’s insurance commissioner would allow rates to rise in exchange for carriers remaining in California. Farmers and State Farm are not writing new policies in the state, and Allstate is limiting its new policies.

Companies must now prove that the premiums they want to charge are necessary to cover projected claims, reasonable expenses, and a fair profit, as Proposition 103 author Harvey Rosenfield noted in an oped published earlier this week. Instead, the new legislation would allow insurers to set premiums using a “forward-looking” model, potentially causing them to overcharge policyholders.

Rosenfeld points out that the agreement would also relieve insurers of their obligations under the California FAIR Plan, which allows people who are unable to purchase coverage from an individual insurer to purchase a policy — albeit with fewer benefits and higher prices. In that case, California consumers, not insurance companies, would face higher rates to insure insurance companies against wildfire losses.

It is unsurprising that California Insurance Commissioner Ricardo Lara supports the proposed legislation. Lara has a history of cozying up to the industry and prioritizing its needs over Californians’.

During his 2018 campaign for the office, Lara pledged not to accept money from the insurance industry. But he broke that promise and then quickly began raising more money from the industry for his 2022 campaign after his election. According to the San Diego Union Tribune, Lara collected at least $270,000 from 56 people and companies with insurance industry ties.

Make no mistake about it. The shrinking wildfire insurance market necessitates legislative intervention. Allowing the insurance industry a seat at the table while preventing the public from scrutinizing any legislation serves no one’s interests in California.