Newsom Fast-Tracks California Insurance Reform

Published Date: 05/13/2024

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 announced a bold move to accelerate long-awaited insurance reforms by introducing a “trailer bill” tied to the state budget. The measure is intended to force faster rate approvals and 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 who have already been dropped by insurers or seen premiums double, this could represent the first tangible step toward relief.

A Market on the Brink

California’s insurance market has been under strain for years, but the past 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 primary drivers of the crisis are well established:

Wildfire risk has grown more severe and unpredictable.

Inflation has driven up the cost to rebuild homes.

Reinsurance costs have tripled for many carriers.

Decades-old regulations limit the use of modern risk models.

As insurers retreat, tens of thousands of Californians have been forced onto the California FAIR Plan, the state’s last-resort fire insurance program. Premiums on the FAIR Plan are often two to three times higher than traditional coverage and only cover fire and smoke — 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 households, the crisis has become existential.

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

Newsom’s Executive Order and Its Limits

In September 2023, Governor Newsom issued an executive order directing Insurance Commissioner Ricardo Lara to adopt emergency regulations to stabilize the market. That directive led to the Sustainable Insurance Strategy, a sweeping reform package designed to:

Allow forward-looking catastrophe modeling.

Include reinsurance costs in rate filings.

Expand coverage access for wildfire-prone regions.

Under the original plan, most of these reforms were not scheduled to take effect until December 2024. Newsom now says that timeline is unacceptable.

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

The Trailer Bill and the 60-Day Review Mandate

To accelerate reform, Newsom announced plans to attach a “trailer bill” to the upcoming state budget.

A trailer bill is legislation tied to the budget that allows policymakers to fast-track specific policy changes without waiting through the full legislative cycle.

Under this proposal, the California Department of Insurance would be required to review and rule on insurance rate filings within 60 days. Currently, the approval process can take six months to a year — a delay that has pushed many insurers to pause or withdraw from the state 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 compressing the review timeline, the administration hopes to send an unmistakable message that California is serious about restoring a viable insurance market.

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

Industry Response: Insurers Ready to Return

Insurance industry expert Karl Susman said the governor’s remarks struck a fundamentally different tone from past regulatory discussions.

“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.

According to Susman, insurers are eager to return to California once the regulatory environment allows for sustainable operations.

“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,” he 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.”

The issue, he emphasized, is not a lack of interest in selling policies — it is an inability to do so profitably under current regulations.

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

The Human Toll on Retirees and Fixed-Income Homeowners

The homeowners being hit hardest by the crisis are often retirees and those on fixed incomes.

As premiums double or triple while incomes remain flat, some residents are being forced to consider leaving California altogether.

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

“I’m with them,” Newsom replied. “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.”

The administration’s goal is to reduce premium volatility, attract carriers back into the state, and stabilize coverage availability before the next wildfire season reaches full intensity.

How California Reached This Point

California’s insurance crisis is the product of a regulatory framework built for the 1980s colliding with 21st-century climate volatility.

Under Proposition 103, passed in 1988, insurers must base rates on historical loss data and submit all rate increases for prior approval. That system functioned for decades — until wildfires began destroying billions of dollars in property annually.

At the same time, reinsurance markets began charging dramatically higher prices to cover California wildfire exposure.

Insurers now face a dual squeeze: rising catastrophe losses and regulatory delays that prevent pricing adjustments from keeping pace with actual risk. The result has been massive underwriting losses and widespread market withdrawal.

With more than 300,000 homes now insured through the FAIR Plan, the system is approaching a financial and structural breaking point.

The Political and Economic Stakes

Newsom’s fast-tracked reform proposal is not just about insurance — it is about housing stability and economic security.

Without access to homeowners insurance, properties cannot be financed or sold. Mortgage lenders require active insurance coverage, meaning a collapsed insurance market could trigger a broader housing and lending crisis.

“We need to stabilize this market,” Newsom repeated.

The political pressure is also mounting. From Sonoma to San Diego, insurance availability has become one of the most urgent quality-of-life issues for California residents.

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 become the first accelerated implementation of Commissioner Lara’s Sustainable Insurance Strategy, with the objective of restoring competition and consumer choice before the end of the year.

“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 are prepared to re-enter the market if reforms make operations viable again.

“Yes and yes and yes,” Newsom said when asked if insurers have committed to returning once reforms take effect. “That’s why I’m moving forward with this trailer bill. Let’s go.”

What Homeowners Should Do in the Meantime

Until reforms are enacted, homeowners are urged to stay proactive:

Review your policy and renewal dates regularly.

Stay in close contact with your insurer or agent.

Work with an independent broker to access specialty or surplus-line markets.

Use the FAIR Plan as a fallback if private coverage is unavailable, paired with a Difference in Conditions policy for full protection.

Follow updates from the California Department of Insurance and the Governor’s Office as reforms evolve.

The Bottom Line

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

By accelerating regulatory approvals and sending a clear signal of commitment to reform, the administration aims to restore stability, attract competition, and give Californians access to reliable coverage again.

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

If the plan succeeds, it could mark a turning point not only for California homeowners, but also for how the state balances climate risk and consumer protection in an era of increasingly destructive wildfires.

For thousands of families across the Golden State, the stakes could not be higher.