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As Californians head to the polls Tuesday, the governor’s and Los Angeles mayoral races aren’t the only contests drawing attention. Voters are also choosing the state’s next insurance commissioner as the industry grapples with mounting wildfire losses and soaring costs.
The California Department of Insurance regulates how insurers and licensees conduct business in the state, including approving rates on homeowner, auto and business coverage.
Democrat Ricardo Lara, the current insurance commissioner, is termed out — opening the door for new blood at a time when Californians are still grappling with the aftermath of the Palisades Fire and an industry that is facing extensive scrutiny.
Following the devastating wildfires, major insurance companies in the state have dropped coverage and forced residents to turn to the California Fair Plan with much less protective coverage and higher out-of-pocket costs to rebuild their homes.
Last month, state regulators conducted a probe into State Farm, California’s largest insurance provider, and found a staggering 398 violations of state law in 114 of the 220 sample claims that were looked into.
Regulators are pushing a multimillion-dollar fine and possible license suspension for the insurance company after the California Department of Insurance investigation last month found it delayed claims, lowballed payouts, and shuffled adjusters, sowing confusion for policyholders.
State Farm called the probe a “politically motivated attack that could ultimately cripple California’s homeowners insurance market.”
But the increased threat of wildfires is not going away, and the next insurance commissioner will have to grapple with residents seeking more coverage options, at a time when companies might seek to opt out of a market that poses to much risk.
“It’s not that people will face higher rates, it’s that they will need to go get insurance from another insurance company, and those companies are not required to write insurance,” Dave Jones, the former California Insurance Commissioner, told The California Post last month, underscoring that other carriers might not want the additional exposure in a state where wildfire risks have increased.
The leading Democratic candidates are a mix of former statewide officials, including state Senator Ben Allen, former San Francisco Board of Supervisor Jane Kim, former state senator and assembly member Steven Bradford, as well as Patrick Wolff, a financial analyst who has never held public office.
None of the candidates on the Republican side have held public office, and include longtime insurance agent Stacy Korsgaden, and attorney Merritt Farren, a former Disney executive and attorney who lost his home in the fires.
Solutions facing California’s insurance crisis vary by candidate — with Kim proposing a state authority for wildfires and floods that are funded partly by policyholder premiums, while Farren’s plan consists of establishing a state reinsurance authority that’s funded by the fee insurers charge their policyholders, according to CalMatters who conducted interviews with several of the candidates.
Bradford told the outlet he would like to see a public-private partnership with insurance companies.
Gubernatorial candidates Xavier Becerra and Steve Hilton have both suggested their own ideas to address the state’s insurance crisis.
Becerra proposed a temporary freeze on home insurance premiums until state officials can come up with a longterm solution, while Hilton wants to get people of the FAIR plan and back into the standard marketplace, and create a stable and predictable environment that brings back insurers.
Under California’s jungle primary system, the top two candidates regardless of party will advance to the November general election.
But whoever comes out on top will face a daunting task.
Democratic Congressman John Garamendi, who also served as the state’s first insurance commissioner, described the job to CalMatters as “complex, hard, detailed work.”
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