Business
Amid homeowner insurance crisis, consumer advocates and industry clash at hearing
The fault lines running through California’s spiraling homeowners insurance crisis were on display Tuesday at a state hearing, where consumer advocates clashed with industry firms over a plan to allow insurers to use complex computer models to set premiums — a move state officials say will attract insurers to the market.
State Insurance Commissioner Ricardo Lara has proposed allowing insurers to employ so-called catastrophe modeling, which uses algorithms that predict the future risk properties face from wildfires, when setting the price of policies. Currently, rates are based on an insurance company’s past losses, which insurers increasingly dismiss as insufficient in light of the widespread acceptance that climate change has thrust California into a more dangerous future by causing more wildfires.
The models, which are in use in other states, are a key element of Lara’s strategy to moderate price increases by allowing more accurate calculation of risks while persuading insurers to do business in neighborhoods prone to wildfires. The move comes amid a recent stream of insurers exiting the California market with announcements they are not renewing policies or have stopped writing new ones.
Consumer groups worried at the hearing that the draft regulations would not allow enough scrutiny of the models, while several consulting firms that have developed them expressed concern about protecting their intellectual property.
“The algorithms and artificial intelligence that private ‘black box’ catastrophe models use will simply be tools for insurance company price gouging unless California mandates real transparency into how they impact prices and imposes real rules of the road regarding their design and use,” said Carmen Balber, executive director of Consumer Watchdog, an L.A. advocacy group that led the campaign for passage of Proposition 103, the 1988 measure that requires homeowners and auto insurers to get state approval for rate hikes.
The group, like other consumer advocates who spoke at the hearing, called on Lara to work with the state’s academic and insurance experts to develop a “public model,” in which all the factors that go into the computer simulations are available for everyone to review. Such a model could be used to set rates or benchmark privately developed models.
The draft regulations require those who want to review the models to sign nondisclosure agreements, which Consumer Watchdog has alleged will prevent its staff members from discussing the models among themselves.
Julia Borman, a director at Verisk, a company that builds computer models used by insurers, expressed concern that the draft proposal put forth by Lara would allow for a review by “countless participants and create the opportunity for an infinite timeline,” while not safeguarding companies from having their models ripped off by others
Michael Soller, the state Department of Insurance’s deputy commissioner for communications, said Lara has publicly stated that the draft rules will allow for the development of public catastrophe models, which the department might then use to evaluate the insurers’ proprietary models.
The proposal to allow catastrophe models is part of Lara’s larger Sustainable Insurance Strategy announced last fall. Other elements include righting the finances of the state’s Fair Access to Insurance Requirements plan, an insurer of last resort that has been deluged with new policyholders since insurers started pulling back from the market. He also wants to allow insurers to include in premiums the cost of reinsurance, which they purchase to protect themselves from disasters.
Catastrophe models are already allowed in California for pricing policies that cover earthquakes and fires caused by quakes. Along with wildfires, under the proposed regulations, the use of the models would also be permitted for insurance covering terrorism, floods and some other types of coverage.
Gerald Zimmerman, senior vice president of government and industry relations at Allstate, which stopped selling new homeowners insurance policies in the state in 2022, said that adopting Lara’s strategy would be a game changer. “Allstate will begin writing new homeowner insurance policies in nearly every corner of California,” he said.
Other speakers at the three-hour hearing included insurance agents and local officials, as well as homeowners groups, which want to ensure that catastrophe models take into account steps taken by homeowners and government agencies to reduce fire risks, such as by making homes more fire-resistant and reducing brush in a community. Although the draft regulations call for doing so, several speakers complained that such mitigation efforts had not been reflected in recent premium increases.
The Insurance Department plans to review Tuesday’s remarks in preparing for the release of a new set of proposed regulations. Lara has the support of Gov. Gavin Newsom, who issued a letter calling for the commissioner to move quickly to resolve the crisis. The regulations do not require legislative approval or the governor’s signature.
“We will review all public comments while staying on track to implement all changes this year, so insurance companies start writing more policies in all areas,” Soller said.
Business
Read Nick Bilton’s Letter to Scott Pelley
Dear Mr. Pelley:
I meant what I said in my letter last week to the 60 Minutes team: joining 60 Minutes is the honor of my career and I am grateful to be working alongside the people who have contributed to the most important television journalism brand this country has ever produced. While I’m new to 60 Minutes, I’ve devoted my career to investigative journalism and storytelling. I started this job excited to collaborate and to benefit from the wisdom and experience of the 60 Minutes veterans, with you among them. For that reason, one of the first things I did in my new role was call you to talk and invite you to dinner. It is a profound disappointment that you rejected that overture and chose ambush instead. Yesterday, you hijacked my first meeting with staff to disparage me, my qualifications, and my intentions with remarkable incivility and contempt. I welcome a diversity of viewpoints and respectful debate among the team, but this was nothing of the sort. Yesterday’s performative display of hostility enacted in front of the staff instead of in a civil, private conversation-demonstrated that you have no interest in contributing to the future success of the show, or approaching my new tenure with a mind open to collaboration and progress. I am here to deliver first-in-class news programming, not to make headlines about newsroom drama. I am eager to work alongside those who share this goal.
Despite yesterday’s misconduct, I had hoped that in sitting down with you today we could find a path forward together. You made clear that you are not interested in such a path.
Your antipathy to the future of the show has come through loud and clear. And I have heard you. I therefore write on behalf of CBS News, Inc. (“CBS”) to inform you that your employment with CBS is terminated for cause effective immediately. Enclosed is your formal termination letter.
Sincerely,
Nick Bilton
Executive Producer, 60 Minutes
Business
Aspiration co-founder sentenced to 14 years for fraud
The co-founder of Aspiration, Joseph Sanberg, was sentenced to 14 years in prison on Monday after defrauding investors and lenders of over $248 million.
The startup, an eco-friendly digital banking company boasting fossil fuel-free investments, carbon offsets for gas purchases, and a debit card with cash-back benefits for shopping at clean companies, was founded by Sanberg and Andrei Cherny. Cherny left the company in 2022 and has not been charged.
Sanberg, an Orange County native, pleaded guilty to wire fraud in October after being arrested in March last year. Aspiration subsequently filed for bankruptcy and liquidated all of its assets by July.
Sanberg and venture capitalist Ibrahim AlHusseini, who also faces charges, together forged a series of bank statements in order to obtain loans. From 2020 to 2021, the pair forged AlHusseini’s bank statements to show millions of dollars in assets in order to obtain millions of dollars from lenders.
Additionally, they forged a letter from their audit committee stating that $250 million in funds were available, when in reality Aspiration had less than $1 million. The amount of loans defrauded exceeded $248 million.
In 2021, Sanberg artificially inflated Aspiration’s 2021 revenue by $44 million by recruiting 27 fake customers to sign letters of intent pledging tens of thousands of dollars per month for tree planting services. Sanberg himself funded the contracts and used the inflated revenue numbers to obtain more loans.
The charges sparked an NBA investigation into salary cap allegations due to Aspiration’s connections with Clippers owner Steve Ballmer.
Ballmer personally invested $60 million in Aspiration, all of which was lost. He is now the target of a civil lawsuit alleging his participation in the scheme. Ballmer denies the allegations.
The team announced a $300-million sponsorship deal with Aspiration, and Clippers player Kawhi Leonard signed a four-year, $28-million marketing contract with the company, which reportedly performed no duties. The issue has raised concerns about how players are circumventing the NBA’s salary cap.
The team lost the $300-million sponsorship deal and an additional $20 million paid for carbon offset purchases.
Business
Monterey Park takes landmark vote on banning data centers
Residents in the city of Monterey Park will be the first in the nation to vote on a permanent ban on data centers Tuesday.
If approved, Measure NDC would prohibit data centers within the city limits and could only be overturned by another vote.
Yard signs saying “No Data Center” in English and Chinese with images of dragons line sidewalks in the San Gabriel Valley city.
As a wave of data center opposition sweeps the country, numerous towns and counties across the U.S. have instituted temporary moratoria and other restrictions on the facilities. But only a handful have instituted indefinite bans, and just four other towns have sent related matters to the ballot.
Supporters are hoping the vote will set a precedent for the rest of the region, where residents are fighting proposals in Vernon and City of Industry.
“This is about as permanent a ban as we can get,” said Steven Kung, co-founder of the group No Data Center Monterey Park. “Winning Measure NDC would send a huge message to the rest of the San Gabriel Valley about how residents don’t want data centers.”
The ballot measure emerged from the fight against a 247,000-square-foot center proposed in 2024 by the Australian-owned investment firm HMC StratCap for a residential area in Monterey Park.
The facility would have sat less than 500 feet away from the nearest home and used three times the electricity of the 60,000-person, predominantly Asian American city.
While the developer touted the potential for jobs and tax revenue, residents expressed concerns about noise and air pollution, rising electricity rates and a potential to lower property values.
The company pulled its plans in late March following public outcry and a March 4 city council vote to extend a temporary data center moratorium and place a ban on Tuesday’s ballot.
In a letter to the city council, HMC StratCap said it would pursue a different use for the land and would not engage in a ballot measure fight.
The city council later banned data centers indefinitely, the first in California to do so, said Mayor Elizabeth Yang. But she’s still been out campaigning for the measure with all four other council members.
“If a council puts in an ordinance, a future council can reverse it too,” said Yang. “With the ballot measure, unbanning it is a lot harder because you need the entire city to vote on it.”
The measure proposes the ban “to protect air quality, drinking water resources, and public health” and “prevent impacts to electricity and water rates.”
While California places third in the country for existing data centers with about 300 facilities, it hasn’t been a hot spot in the recent AI-driven data center boom. High electricity rates, expensive land and regulatory hurdles mean that fewer, and smaller, facilities are currently planned than in Virginia, Texas, Georgia, Illinois or Arizona.
“Most of California’s data centers are small by today’s standards,” said Shaolei Ren, an engineering professor at UC Riverside who studies how to reduce the environmental impacts of data centers. “Ten years ago, they would be medium-sized, but the power demand for new AI data centers has increased a lot.”
The average operating data center demands 45 megawatts, according to the Washington Post, while the average planned one would draw 430 MW. The one proposed for Monterey Park would have required about 50 MW at peak demand.
As proposals crop up in SoCal, they’re met with fierce opposition. Montebello, El Monte and Baldwin Park have all enacted temporary moratoria, and Alhambra recently banned data centers as part of a zoning code update. City of Industry, Vernon, City of Commerce and Santa Fe Springs are moving in the other direction, trying to court developers and streamline data center approvals. Community groups are fighting that.
Outside the San Gabriel Valley, residents of Coachella and Imperial County are showing up in droves to protest local proposals.
Matthew Shaw, a volunteer with the Coalition for Responsible Data Center Development, who recently published a report on opposition to AI data centers, said a vote to ban them in Monterey Park “would lead to copycats, partially because so many groups are just opposed to any data center development at all.”
While there is no formal opposition to Measure NDC, some building trades like Ironworker Local 433 supported the Monterey Park data center when it was still live before city council. Those in the data center industry are lamenting the state of public opinion.
“These are multi-billion-dollar assets that are built by multi-trillion-dollar companies. These things will get done,” said Mehdi Paryavi, chairman of the International Data Center Authority. “My biggest problem is that our industry does not invest enough in community engagement.”
Paryavi said towns that seek to limit data centers are missing out on thousands of jobs generated by data center construction, operations and customers, as well as faster artificial intelligence speeds and better performance.
Kung said local community organizers are “looking at the empirical evidence” and seeing a ban as a win.
“We’ve never seen a city that embraces a data center and is like, ‘Look how our quality of life has increased, look how all the revenue has gone into citywide improvements,’” he said. “That just doesn’t exist.”
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