Newsom’s 120-Day Insurance Reform Plan in California

Published Date: 05/30/2024

California’s long-bysroken 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 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a year, insurers have been exiting or scaling back their presence in the state, citing wildfire risk, inflation, and outdated regulations.

While industry leaders say the proposal could restore stability, consumer advocates warn it may open the door to rapid and repeated rate hikes.

California’s Insurance Crisis at a Glance

Over the past two years, thousands of California homeowners have lost their insurance coverage as major carriers — including State Farm, Allstate, and Farmers — paused or restricted new business in the state.

Several forces are driving the collapse:

• Rising wildfire risk has made underwriting more expensive and unpredictable.
• Reinsurance costs — the insurance insurers buy to protect themselves — have tripled.
• Inflation has sharply increased rebuilding costs.
• Proposition 103, California’s decades-old insurance law, limits how quickly insurers can adjust rates.

The result is a shrinking private market and a surge in enrollment in the California FAIR Plan, the state’s insurer of last resort, which provides limited fire coverage at significantly higher premiums.

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

The 120-Day Deadline for Rate Decisions

Under current law, insurers must file rate increase requests with the California Department of Insurance (CDI). That review process can take many months — and sometimes more than a year.

Newsom’s proposal would impose a strict 120-day deadline for the CDI to approve or deny those 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.

Under the plan, the department would be required to issue a decision within four months instead of allowing lengthy open-ended reviews. Newsom argues this faster timeline would give insurers the flexibility they need to remain financially viable and bring more competition back into the state.

Consumer Watchdog’s Warning on Rapid Rate Increases

The nonprofit group Consumer Watchdog strongly opposes the proposal, arguing it could weaken oversight and lead to back-to-back premium increases.

Carmen Balber, executive director of Consumer Watchdog, warned that placing a firm 120-day decision deadline on the commissioner could allow insurers to push through repetitive increases with limited scrutiny.

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

She warned that while each individual increase might fall below the “excessive” threshold, the cumulative impact would create a steady surge in costs for consumers already under financial strain.

Proposition 103 and the Regulatory Battlefield

Proposition 103, passed by voters in 1988, remains the backbone of California’s insurance regulation system. It requires state approval for all rate increases and limits “excessive” hikes — typically those above 7%. It also gives the public the right to formally challenge rate filings.

Supporters credit Prop 103 with saving consumers billions of dollars over the past three decades. Critics argue it was designed for a pre-climate-crisis era and now traps insurers in a system that cannot keep up with modern catastrophe risk.

Governor Newsom’s office insists the new proposal does not change Prop 103’s core consumer protections.

According to a statement reported by KTVU, the plan “requires the Department of Insurance to modernize and streamline its rate application process” and “makes no changes to the rules in Prop 103 for how much an insurance company can charge.”

Still, opponents fear the shortened review window effectively weakens public oversight.

The Insurance Industry’s View: Speed Is Survival

Insurance broker and market analyst Karl Susman told KTVU that the current system is unsustainable for both insurers and consumers.

“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 would rise under the governor’s proposal, but said the alternative — a frozen market with shrinking competition — is far worse.

“Are there going to be rates that go up? Sure. Are there going to be rates that go down? Sure,” Susman said. “But being able to make changes quickly that benefit the consumer is what will bring carriers back.”

According to Susman, insurers are not seeking unlimited pricing freedom — they want predictability, speed, and a workable approval process.

A Market Frozen in Place

Under the current system, insurers often wait 12 to 18 months for rate approvals. During that time, wildfire seasons can generate billions of dollars in losses, erasing any chance of profitability.

Without the ability to adjust pricing in real time, many companies have chosen to pause new policies or exit California altogether.

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

This gridlock has helped push more than 300,000 homeowners onto the FAIR Plan, where premiums continue to climb and coverage remains limited.

The Balancing Act Between Oversight and Agility

The central challenge of Newsom’s proposal is balancing faster decision-making with meaningful consumer protection.

The governor’s office maintains that the intent is not deregulation, but modernization — speeding up bureaucracy while keeping Prop 103’s safeguards intact.

Still, with Consumer Watchdog and other advocacy groups mobilizing opposition, the political battle is intensifying. The deeper issue is who defines “fair” pricing in an era of accelerating climate risk.

The Economic Stakes for Housing and Lending

Insurance availability is now directly tied to California’s housing market. Without coverage, homes become uninsurable, unmortgageable, and effectively unsellable.

Every major lender requires active homeowners insurance before approving a mortgage. When private insurance disappears, real estate transactions stall and local economies suffer.

This is why Newsom has linked insurance reform to his broader budget strategy, using a “trailer bill” to fast-track solutions within the 2024–2025 state budget.

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

What Homeowners Can Expect if the Plan Passes

If the proposal becomes law, the insurance market could begin shifting by early 2025.

In the short term:

• Some insurers may raise rates to catch up with inflation and wildfire exposure.
• Other carriers may begin cautiously re-entering the California market.

Longer term:

• Faster approvals could prevent future market withdrawals.
• Increased competition could eventually help stabilize pricing.

As Susman summarized, the goal is simple: “Being able to make changes quickly that benefit the consumer — that’s the key.”

The Bottom Line on Newsom’s Insurance Overhaul

Governor Newsom’s 120-day rate-approval proposal represents the boldest attempt yet to modernize California’s stalled insurance system.

Supporters see it as a necessary step to bring insurers back and restore competition. Critics fear it will fast-track premium increases and weaken public oversight.

The reality likely lies somewhere in the middle.

California’s insurance market needs both speed and scrutiny — flexibility to match climate-driven risk, paired with strong consumer protections.

As KTVU’s reporting makes clear, all sides agree on one essential point: 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 Newsom’s 120-day plan can finally deliver what Californians need most — an insurance system that is fast enough for insurers and fair enough for consumers.