(Airdate: 2024-05-13) ABC - KXTV - Gov Newsom wants to expedite insurance reforms

Published Date: 05/13/2024

Governor Newsom Pushes to Fast-Track California’s Insurance Reforms

California’s insurance crisis has been building for years — and now, the state’s top leaders are finally racing against the clock to fix it.

As ABC 10 News Sacramento reported on May 13, 2024, Governor Gavin Newsom has announced a bold move to accelerate long-awaited insurance reforms — introducing what he calls a “trailer bill” to the state budget that would force faster rate approvals and help stabilize California’s collapsing homeowners insurance market.

“December? I don’t think we have that much time,” Newsom said during a press conference. “We need to move. We need to stabilize this market. We need to send the right signals.”

For millions of homeowners across the state — many of whom have already been dropped by their insurers or seen premiums double — this could mark the first tangible step toward relief.

1. A Market on the Brink

California’s insurance market has been under strain for years, but the last two have pushed it to the edge.

“Over the past two years, the majority of California’s biggest homeowners insurance companies — and many of the smaller ones — have paused or limited business in the state,” reported ABC 10’s Becca Habegger.

The reasons are well-documented:

• Wildfire risk that’s grown more severe and unpredictable.
• Inflation driving up the cost to rebuild homes.
• Reinsurance costs that have tripled for many carriers.
• And decades-old regulations that restrict insurers from using modern risk models.

As a result, tens of thousands of Californians have been forced to turn to the California FAIR Plan, the state’s last-resort fire insurance program. Premiums there can be two or three times higher than traditional coverage — and the plan only covers fire and smoke damage, not theft, liability, or water damage.

“We’ve been canceled by our homeowners insurance at least five times, possibly six,” one retiree told ABC 10. “My payment has doubled, and I’m not making any more money.”

For many, the crisis is more than financial — it’s existential.

“I want to be able to afford to live here for a long time,” said another homeowner.

2. Newsom’s Executive Order — and Why It Wasn’t Enough

Recognizing the growing emergency, Governor Newsom issued an executive order in September 2023, directing Insurance Commissioner Ricardo Lara to issue emergency regulations to stabilize the market.

That directive resulted in the Sustainable Insurance Strategy — a sweeping package of reforms designed to:

• Allow insurers to use forward-looking catastrophe modeling,
• Include reinsurance costs in their rate filings, and
• Expand coverage access for wildfire-prone areas.

But under the current plan, most of those changes wouldn’t take effect until December 2024.

Newsom now says that’s too long to wait.

“We cannot wait another day — let alone through the end of the year,” he said.

3. The “Trailer Bill”: A Fast Lane for Reform

To speed things up, Governor Newsom announced plans to attach a “trailer bill” to the state’s upcoming budget.

A trailer bill is a piece of legislation linked to the budget that allows policymakers to fast-track specific policy changes without waiting for the standard legislative process.

In this case, the bill would require the California Department of Insurance (CDI) to review and rule on insurance rate filings within 60 days.

Currently, the process can take six months to a year — a bottleneck that has driven insurers to pause or withdraw from California altogether.

“We need to get this rate ruling process done,” Newsom said. “That’s why we want to expedite it over a 60-day period.”

By shortening the approval window, Newsom hopes to send a clear signal to insurers that California is serious about reform.

“We need to move. We need to stabilize this market. We need to send the right signals.”

4. Industry Response: “They’re Starving to Write Business”

According to insurance industry expert Karl Susman, the governor’s move could be exactly what the market needs.

“To actually hear on stage from the governor that not only does he understand that there is a problem, but that he even realizes the urgency factor — meaning we cannot wait — was very refreshing to hear,” Susman told ABC 10.

Susman, who works closely with insurers across the state, said companies are eager to return to California’s market once the regulatory environment allows them to operate sustainably.

“I can tell you from my conversations with people in the industry and home offices from several insurance companies — they’re feeling the same way,” Susman said. “If all of these things happen the way they’re supposed to happen, they’re ready to go. They’re starving to write business.”

This is a critical point: the problem isn’t that insurers don’t want to sell policies — it’s that they can’t do so profitably under current regulations.

“They make money by selling insurance,” Susman has said in other interviews. “If they’re choosing not to sell it, there’s a reason — they can’t make money doing it.”

5. A Crisis for Retirees and Fixed-Income Homeowners

The homeowners hit hardest by this crisis are often retirees or those on fixed incomes.

Their insurance costs are doubling or tripling, even as their incomes remain flat — forcing some to consider leaving the state entirely.

“What would you say to the average homeowner — folks in the foothills, retirees, who say, ‘I simply can’t live here much longer’?” ABC 10’s Habegger asked the governor.

Newsom’s response was empathetic and urgent:

“I’m with them,” he said. “That’s why we’re doing the trailer bill. That’s why I did the executive order. I can’t impress upon them more the urgency that we share.”

By pushing for faster regulatory turnaround, the administration hopes to reduce premium volatility, attract more carriers back into the state, and ultimately stabilize the market before the next wildfire season peaks.

6. How We Got Here: A Perfect Storm of Policy and Climate

California’s insurance crisis didn’t happen overnight. It’s the product of a regulatory framework designed in the 1980s colliding with a 21st-century climate reality.

Under Proposition 103, passed in 1988, insurers must base their rates on historical losses — not predictive models — and all rate increases must go through a lengthy public approval process.

That system worked for decades — until wildfires began destroying billions of dollars’ worth of homes every year.

At the same time, reinsurance markets (the insurers’ insurers) began charging astronomical prices to cover California wildfire exposure.

The result: carriers can’t adjust fast enough to match their actual risk, leading to massive underwriting losses and widespread market withdrawal.

Now, with more than 300,000 homes insured through the FAIR Plan, the state is reaching a breaking point.

7. The Political and Economic Stakes

Governor Newsom’s fast-tracked proposal isn’t just about insurance — it’s about housing stability and affordability.

If homeowners in fire-prone regions can’t find coverage, they can’t maintain mortgages or sell their properties. Lenders require active homeowners insurance, meaning a collapsed insurance market could quickly spill over into the broader housing economy.

“We need to stabilize this market,” Newsom repeated during his press conference.

The proposal also reflects growing political pressure. In communities from Sonoma to San Diego, constituents have made it clear that insurance availability is now one of the top quality-of-life issues in California.

8. What Comes Next

If approved, the trailer bill would take effect as part of the 2024–2025 state budget, which lawmakers are expected to finalize by summer.

It would mark the first major step toward implementing Commissioner Lara’s Sustainable Insurance Strategy ahead of schedule — with the goal of restoring competition and consumer choice before year’s end.

“If all of these things happen the way they’re supposed to happen,” Susman said, “the carriers will come back.”

Insurers have told state officials they’re ready to re-enter the market — but only if reforms make the system viable again.

“Yes and yes and yes,” Newsom said when asked whether he’s received commitments from insurers to return once reforms take effect. “That’s why I’m moving forward with this trailer bill. Let’s go.”

9. What Homeowners Should Do in the Meantime

For now, homeowners should remain proactive:

✅ 1. Review Your Policy

Check renewal dates and stay in contact with your insurer or agent. Don’t wait for a non-renewal notice to start exploring options.

✅ 2. Contact an Independent Broker

Independent agents can help access smaller or surplus-line carriers not available through major brands.

✅ 3. Consider the FAIR Plan

If you can’t find private coverage, the FAIR Plan remains a fallback option — but pair it with a “Difference in Conditions” (DIC) policy for complete protection.

✅ 4. Stay Informed

Follow updates from the California Department of Insurance and the Governor’s Office. Reforms are evolving rapidly, and timelines may shift.

10. The Bottom Line

Governor Newsom’s trailer bill represents the most aggressive push yet to rescue California’s faltering homeowners insurance market.

By accelerating regulatory approvals and signaling commitment to reform, the administration hopes to restore stability, attract competition, and give Californians back their peace of mind.

“To hear the governor say, ‘We cannot wait,’ was refreshing,” said Susman. “The urgency is real — and it’s shared.”

If this plan succeeds, it could mark a turning point — not just for California homeowners, but for the state’s broader effort to reconcile climate risk and consumer protection in the age of wildfires.

Because for thousands of families across the Golden State, the stakes couldn’t be higher.