There’s no law requiring California property owners to carry insurance, but the vast majority buy it to protect themselves from fire and other perils, or are required to do so by their mortgage lenders.

There’s also no law requiring insurance companies to offer coverage in California, but most would prefer to do so in the nation’s most immense concentration of property needing protection.

For decades, insuring California’s homes, farms and commercial properties was a hum-drum business of willing sellers and willing buyers. However, the former have become less willing as the state experiences an ever-increasing number of wildfires — even during winter months — that devastate homes and businesses in fire-prone areas.

Last Friday, as the latest of those fires was driving people from their homes in the quaint seaside village of Malibu, Ricardo Lara, the state’s elected insurance commissioner, formally unveiled a large chunk of his plan to stem the exodus of insurers from California.

It would allow insurers to use computer modeling of future exposure to set premiums, while requiring them to offer coverage in risky communities roughly in line with their shares of the market. Until now, insurers set rates based on past losses.

“Giving people more choices to protect themselves is how we will solve California’s insurance crisis,” Lara said in a statement as he released details of the modeling plan. “For the first time in history we are requiring insurance companies to expand where people need help the most. With our changing climate we can no longer look to the past. We are being innovative and forward-looking to protect Californians’ access to insurance.”

He also noted that in setting rates, insurers will be required to consider hardening efforts by threatened communities and property owners to reduce potential losses.

Lara claims support from environmental groups, farmers and other stakeholders, in addition to insurers. But he’s drawing sharp criticism from Consumer Watchdog, an organization that has sponsored landmark changes in insurance regulation. The group has also received millions of dollars in fees from intervening in insurance rates cases, and has been a harsh critic of Lara throughout his time in office.

“Full transparency is what keeps insurance rates honest but Commissioner Lara’s rule does away with that protection,” Consumer Watchdog executive director Carmen Balber said in a statement. “The rule will let insurance companies raise rates based on secret algorithms but not expand coverage as promised.”

The new rules take effect in January. Farmers Insurance, California’s second-largest property insurer, has already pledged to expand its coverage in response to Lara’s actions. The American Property Casualty Association, a trade group, also reacted positively.

“California will continue to have a robust regulatory and rate approval process that guarantees that rates reflect the actual cost of covering claims,” the association said.

While the rules unveiled last week are central to Lara’s plans, there are other elements that remain: shoring up the FAIR Plan, California’s last ditch insurer for property owners who cannot obtain coverage elsewhere, speeding up insurance rate case approvals, and allowing insurers to include costs of reinsurance — coverage of their potential losses — in setting rates.

Adoption of Lara’s plans may result in premium increases, but maintaining a viable insurance market is a vital factor in the state’s economy. The inability to buy insurance would devastate the residential and commercial real estate market and require property owners to pay for fire losses out of their own pockets.

Lara’s plans may not be perfect, but nobody — including Consumer Watchdog — has offered a better alternative. He should be credited with at least attempting to deal with one of California’s existential crises.

Here are the morning’s top stories on Monday, December 16, 2024…

• The first time Donald Trump was elected president, blue state Democrats — particularly those from California — asserted themselves as the frontline of the resistance. Eight years later, they say they’re making an intentional decision to stay calm, at least for now.
• It’s official. California regulators are enforcing an agreement with the state’s largest insurance companies that they hope will stem the insurance crisis.
• Crews have been working around the clock in the community of Scotts Valley in the Santa Cruz Mountains after a rare tornado touched down in the city on Saturday. At least five people were injured.

The first time Donald Trump was elected president, blue state Democrats — particularly those from California — asserted themselves as the frontline of the resistance. Eight years later, they say their best strategy for confronting a second Trump presidency is to stay calm.

Take California’s newly sworn-in U.S. Sen. Adam Schiff: The former House member garnered national attention during Trump’s first term. Schiff led the first impeachment of the president-elect, served on the House committee investigating the Jan. 6 assault on the Capitol, and regularly appeared on TV news as a spokesperson for a defiant Democratic party. However, as he begins his first term as senator, Schiff said his primary focus is on what he can get done for his home state. “We have a lot of serious challenges that people talk to me up and down the state as I traveled to California during the campaign,” he said, going on to cite the state’s high cost of living, water and air quality, and wildfires. “My first priority is solving those problems, meeting the needs of Californians.”

Schiff isn’t alone. As blue state Democrats brace for the president-elect to be sworn in again, even those he’s named as political enemies, like Schiff and others on the Jan. 6 committee, say they won’t be the ones picking a fight.

California Issues New Rules For Home Insurers

The state’s insurance department is requiring companies to write more policies in risky wildfire areas. In exchange it will let them use forward-looking risk models to set rates.