(Airdate: 2024-05-30) FOX - KTVU - Newsom unveils homeowners insurance plan

Published Date: 05/30/2024

Governor Newsom’s New Home Insurance Plan: Will Speeding Up Rate Approvals Fix California’s Market — or Make It Worse?

California’s long-broken insurance system is finally getting a major overhaul — but not everyone agrees it’s the solution the state needs.

In late May, FOX KTVU reported that Governor Gavin Newsom has unveiled a new plan designed to encourage insurance companies to return to California by cutting regulatory red tape and speeding up the rate-approval process.

For more than a year, insurers have been exiting or scaling back their presence in the state, citing wildfire risk, inflation, and outdated regulations. The governor’s new proposal is meant to help fix that.

But while industry leaders say it could bring long-term stability, consumer advocates warn it may open the door to rapid and repeated rate hikes.

1. The Crisis at a Glance

Thousands of California homeowners have lost their insurance coverage over the last two years as major carriers — including State Farm, Allstate, and Farmers — have paused or limited business in the state.

The reasons are complex but interconnected:

• Rising wildfire risk has made underwriting more expensive and unpredictable.
• Reinsurance costs — the insurance that insurers buy to protect themselves — have tripled.
• Inflation has driven up home rebuilding costs.
• And Proposition 103, the state’s decades-old insurance law, has made it difficult for insurers to adjust rates quickly enough to keep pace.

The result is a market in retreat. Tens of thousands of homeowners have been forced into the California FAIR Plan, the state’s “insurer of last resort,” which provides only limited fire coverage at premium prices.

Governor Newsom says the new plan is designed to reverse that trend.

“We need to stabilize this market,” Newsom said earlier this month. “We need to send the right signals.”

2. The Proposal: A 120-Day Deadline for Rate Decisions

Under current law, if an insurer wants to increase rates or change its coverage offerings, it must file an application with the California Department of Insurance (CDI). That review process can take months — or even years.

Newsom’s plan would impose a 120-day deadline for the CDI to approve or deny rate requests.

“The governor wants lawmakers to approve a proposal that would let insurance companies make changes to their rates more quickly,” reported KTVU’s Ali Rasper.

The goal is to “cut out red tape” and make California’s regulatory system more responsive.

“Right now, if a company wants to increase rates or offer any type of policy change, the insurance commissioner has to approve it,” Rasper explained. “Sometimes that process takes months, even years. Under the governor’s plan, it would have to be approved within 120 days.”

This accelerated timeline, Newsom argues, would give insurers the flexibility they need to stay solvent — and ultimately bring more competition back to California.

3. The Consumer Watchdog Counterpoint

But not everyone is convinced.

The nonprofit advocacy group Consumer Watchdog says the plan could lead to unchecked premium increases, with insurers exploiting the shorter approval window to push through frequent hikes.

“By setting an arbitrary 120-day deadline on which the commissioner has to accept the rate that the insurance company chooses,” said Carmen Balber, executive director of Consumer Watchdog, “the insurance company has no reason to justify what they want to charge.”

Balber warned that insurers could use the rule to repeatedly file small increases — just under the legal threshold — without meaningful review.

“If you can get a rate increase every 120 days with a little regulatory oversight, what are you gonna do?” she asked rhetorically. “You’re gonna ask for a 6.9% rate increase every 120 days.”

That practice, she said, would add up fast — creating “a slow-motion surge” in prices for consumers already struggling to afford coverage.

4. Proposition 103: The Law at the Heart of the Debate

Passed by voters in 1988, Proposition 103 remains the foundation of California’s insurance regulation system.

It requires insurers to get state approval for any rate increase and prevents them from raising premiums by “excessive” amounts — typically more than 7% at a time.

It also gives the public the right to challenge rate filings, adding months or even years to the process.

Supporters say Prop 103 has saved Californians billions of dollars and prevented the kind of runaway rate inflation seen in other states.

But critics argue that it has become outdated, locking insurers into a regulatory framework built for a pre-climate-crisis era.

“California voters passed Prop 103 more than 30 years ago,” Rasper noted. “It says insurance companies can’t increase rates by excessive amounts — more than 7% at a time.”

Newsom’s proposal doesn’t change those fundamental rules.

“In a statement,” Rasper reported, “a spokesperson for Governor Newsom said the proposal requires the Department of Insurance to modernize and streamline its rate application process. It makes no changes to the rules in Prop 103 for how much an insurance company can charge.”

Still, critics worry the practical effect will be higher costs — and less public oversight.

5. The Industry Perspective: “It’s Not Good for Anyone Right Now”

While consumer advocates see danger, industry analysts see necessity.

Insurance broker and market analyst Karl Susman, who’s been closely tracking California’s insurance turmoil, told KTVU that the current system simply isn’t sustainable.

“The current state of the insurance market isn’t good for anyone,” Susman said. “Being able to make more changes quickly that benefit the consumer — that’s what’s needed.”

He acknowledged that some rates may rise under the governor’s plan, but said the alternative — a frozen market with no competition — is far worse.

“Are there going to be rates that go up? Sure,” Susman said. “Are there going to be rates that go down? Sure.”

The real benefit, he argued, would be stability and access.

“Being able to make more changes quickly that benefit the consumer — that’s what’s going to bring carriers back.”

Susman added that insurers aren’t looking for a blank check — they simply need predictability and speed in the regulatory process to justify writing new business.

6. A Market Frozen in Place

Currently, California’s rate-approval process can take 12 to 18 months — a delay that leaves insurers vulnerable to sudden cost swings.

During that waiting period, wildfire seasons can destroy billions of dollars’ worth of property, wiping out any hope of profitability.

Without the ability to adjust rates promptly, many companies have chosen to stop writing new policies altogether.

“The current system is broken,” Susman has said in other interviews. “You can lose money faster by being successful here.”

That gridlock has pushed more than 300,000 homeowners onto the FAIR Plan, where premiums are climbing even higher.

Insurers and regulators alike agree that unless the system becomes more flexible, California’s insurance market could collapse entirely.

7. The Balancing Act: Oversight vs. Agility

The governor’s challenge is to strike a balance between protecting consumers and restoring solvency to the market.

His office insists that the new plan does not weaken consumer safeguards, but rather streamlines bureaucracy.

“The proposal requires the Department of Insurance to modernize and streamline its rate application process,” the governor’s spokesperson said. “It makes no changes to Proposition 103.”

Still, with consumer groups mobilizing against the plan, the political debate is intensifying.

The question isn’t just how quickly rates should change — but who should decide what’s fair in an era of mounting climate risk.

8. The Economic Stakes

California’s housing market depends on functioning insurance. Without it, homes become uninsurable, unmortgageable, and unsellable.

Every major lender requires proof of homeowners insurance before approving a mortgage. When coverage evaporates, so do sales — threatening both the housing economy and state tax revenue.

That’s why Governor Newsom has made insurance reform a budget priority, linking the proposal to his broader “trailer bill” strategy designed to fast-track solutions within the 2024–2025 budget cycle.

“We cannot wait another day,” Newsom said earlier this spring. “We need to move.”

9. What Homeowners Can Expect

If the plan passes, homeowners could see a more stable — but more expensive — market by early 2025.

Short-term:

• Some carriers may raise rates to catch up with inflation and risk exposure.
• Others may begin re-entering the market, creating new competition.

Long-term:

• Faster regulatory approvals could prevent insurer flight.
• More availability could ultimately ease pricing pressure.

As Susman summed up, “Being able to make changes quickly that benefit the consumer — that’s the key.”

10. The Bottom Line

Governor Newsom’s new insurance plan represents a bold attempt to modernize a system that’s been paralyzed by outdated laws and mounting risk.

Supporters see it as a necessary modernization that will help bring insurers back to California and restore balance to a market on the brink.

Critics see it as a giveaway to insurance companies that will accelerate premium hikes and weaken oversight.

The truth likely lies somewhere in between.

California’s insurance market needs both speed and scrutiny — the ability to adapt to climate realities while preserving fairness and transparency.

As KTVU’s report makes clear, one thing everyone agrees on is that the current system isn’t working.

“The state of the insurance market isn’t good for anyone,” Susman said.

The coming months will determine whether Governor Newsom’s 120-day plan can deliver what Californians need most: an insurance system that’s fast enough for insurers and fair enough for consumers.