Napa, CA – California lawmakers are taking urgent action to address the growing insurance crisis that has been exacerbated by recent wildfires. As flames ravaged neighborhoods in Altadena, Pacific Palisades, and other parts of Los Angeles, the state’s already struggling insurance market has come under increased scrutiny. In response, a series of bills have been introduced to help stabilize the system, improve customer service, and provide financial relief for homeowners.
One of the most significant proposals is Assembly Bill 234, introduced by Assemblymember Lisa Calderon. The bill aims to place the Speaker of the Assembly and the Chairperson of the Senate Committee on Rules on the governing committee of the FAIR Plan, California’s fire insurance provider of last resort. The FAIR Plan, which is managed by an association of insurers, has recently faced financial difficulties due to the volume of claims resulting from the recent fires. In February, the organization requested a $1 billion lifeline from its member insurance companies.
The bill seeks to enhance transparency and accountability within the FAIR Plan, ensuring its ability to cover the growing number of Californians who are finding it difficult to obtain insurance through traditional means. If passed, California would become the first state to place lawmakers on the board of its FAIR Plan, though other states have similar arrangements with insurance department representatives.
Beyond financial concerns, the FAIR Plan has also been plagued by customer service issues. Many policyholders have reported problems with billing, renewals, and claims processing. Betty Ryder, a Los Angeles-area resident, recently discovered that she had been without fire insurance for an entire year due to a payment error by the FAIR Plan. After months of frustrating attempts to resolve the issue, Ryder was left in limbo with her policy reinstated, but without a refund for the $5,300 her mortgage company had already paid.
Insurance agents have echoed similar complaints, citing frequent billing errors and slow response times. Lili Thompson, an account manager in Chico, noted that customers are often left dealing with incorrect billing or minor balances that lead to canceled policies. “The issues with the FAIR Plan are widespread, and it’s difficult to get them resolved quickly,” Thompson said.
Despite these ongoing challenges, the FAIR Plan has assured that it works to correct errors in favor of its customers, though it has struggled to keep up with demand. The organization cited its rapid growth and a transition to a new software system as reasons for the ongoing delays and problems.
Another bill, Assembly Bill 226, seeks to help address the financial instability of the FAIR Plan by allowing it to spread out claims payments over time. The bill, co-authored by Calderon and Assemblymember David Alvarez, would enable the FAIR Plan to secure bond financing from the California Infrastructure and Economic Development Bank. This legislation aims to ensure that the FAIR Plan can continue to provide coverage without overwhelming its financial capacity.
“Insurance companies are not going to cover California if they are forced to pay out catastrophic claims without any flexibility,” Alvarez explained. The bill has already gained support from the FAIR Plan, which sees it as a vital tool for managing large-scale claims.
Senate Bill 495, introduced by Senator Ben Allen, addresses another significant pain point for policyholders—claims processing. The bill proposes eliminating the requirement for policyholders to submit itemized inventories of lost property when filing claims after a state of emergency. This would significantly simplify the claims process for victims of disasters like wildfires, where individuals often lose everything.
Allen emphasized that many insurance companies are already moving in this direction voluntarily. “It’s a hassle for insurers and policyholders alike to go through detailed inventory lists, especially when people have just lost their homes,” he said.
While the insurance industry has historically opposed similar legislation, Allen’s bill has garnered backing from Insurance Commissioner Ricardo Lara, who believes the measure will help streamline the claims process for California residents.
In addition to the regulatory changes, lawmakers are considering financial relief for homeowners struggling with rising insurance premiums. Assembly Bill 1354, introduced by Republican Assemblymembers Heath Flora and Greg Wallis, would allow taxpayers to write off the rising costs of their fire insurance premiums for the next five years. The tax credits would apply to individuals with incomes under $150,000 or $300,000 for joint filers and would be based on the difference between current premiums and those paid in 2023.
While some view this as a much-needed relief for homeowners facing increasing costs, others, like consumer advocacy groups, argue that state funds should be directed toward more preventive measures. Amy Bach, executive director of United Policyholders, suggested that the state should require insurance companies to provide more policies in exchange for taxpayer relief.
Another bold proposal, Senate Bill 222, would allow individuals, insurers, and the FAIR Plan to sue fossil-fuel companies for damages related to climate change and wildfires. This bill, sponsored by Senator Scott Wiener, is part of a broader effort to hold the fossil-fuel industry accountable for its role in climate change. “The scale and frequency of disasters today are no coincidence,” Wiener said. “They are driven by climate change, and it’s time for the companies responsible to pay.”
Although the insurance industry has voiced concerns that the legislation could increase costs for consumers, supporters argue that it could help offset some of the rising costs of insurance and mitigate the financial impact of future disasters.
As California continues to grapple with the fallout from increasingly destructive wildfires and an unstable insurance market, lawmakers are working to enact measures that could provide both short-term relief and long-term stability. From enhancing oversight of the FAIR Plan to providing tax credits for insurance premiums and holding the fossil-fuel industry accountable, the state is considering a wide range of solutions aimed at addressing the crisis. However, with opposition from the insurance industry and concerns about the financial impact of these proposals, it remains to be seen how successful these efforts will be in bringing lasting change to California’s insurance market.