(Airdate: 2024-06-03) FOX - KTVU - NEW BILL AIMS TO STABILIZE INSURANCE MARKET

Published Date: 06/03/2024

Governor Newsom’s “Trailer Bill” Explained: A Short-Term Fix for California’s Insurance Crisis

California’s insurance market has been in turmoil for years, with major carriers scaling back, pausing new business, or exiting the state altogether. The result has been a coverage crunch for homeowners and small businesses, especially in wildfire-prone areas.

Now, under growing political pressure to act, Governor Gavin Newsom has introduced a new “trailer bill” designed to stabilize the insurance market — at least temporarily — while longer-term reforms make their way through the system.

The legislation builds on Insurance Commissioner Ricardo Lara’s Sustainable Insurance Strategy, which aims to modernize California’s outdated regulatory framework. But as insurance expert Karl Susman explained in a recent interview with FOX KTVU, Newsom’s proposal seeks to speed things up dramatically.

Here’s what the bill does, why it matters, and what it could mean for insurers, regulators, and California consumers.

The Crisis: Insurers Leaving, Costs Rising

The state’s insurance market is under immense strain.

In the last five years, wildfires, inflation, and rising construction costs have driven insurers’ losses to historic levels. Companies like State Farm, Allstate, and Farmers have either paused writing new homeowners policies or significantly reduced their exposure in California.

Without enough carriers competing for business, prices have surged. Some homeowners have seen premium increases of 200% to 400%, while many small businesses have been forced into the California FAIR Plan — the insurer of last resort — which offers limited coverage at high cost.

“The companies cite wildfire risk as well as soaring construction costs for their withdrawal,” reported FOX’s Alex Savidge.

Against this backdrop, political pressure has mounted for the state to take action — and fast.

The Governor’s Response: Streamlining Rate Reviews

Governor Newsom’s proposal centers on streamlining the approval process for insurance rate changes — a key step in allowing carriers to operate sustainably in the state again.

Under California’s Proposition 103, enacted in 1988, insurers must obtain approval from the Department of Insurance before changing rates or policy terms. While this consumer-protection measure was groundbreaking at the time, it’s now seen by many as a bottleneck.

Susman explained:

“What this trailer bill will do is expedite part of the Insurance Commissioner’s Sustainable Insurance Strategy. It’s about making it faster for insurance carriers to put in changes to policies and start writing again.”

In essence, the new legislation would enforce existing timelines already written into Proposition 103 — something that has rarely happened in practice.

The 60-Day Rule — and Why It Matters

Under the original law, insurers are supposed to receive a response to any rate filing within 60 days. However, in reality, reviews often drag on for months or even years, leaving insurers stuck in regulatory limbo.

“The law already says 60 days,” Susman said. “It just hasn’t been followed.”

The trailer bill reaffirms that 60-day window but adds structure:

• The Department of Insurance can request one 30-day extension, and then one additional 30-day extension — bringing the total possible review period to 120 days maximum.
• After that, the Department must respond — either approving, denying, or suggesting modifications.

“The Department doesn’t have to approve it,” Susman clarified. “They just have to respond. Right now, it can take years. This enforces the law we already have.”

By enforcing deadlines, the state hopes to make the process more predictable and attractive for insurers considering re-entering the California market.

Addressing Consumer Concerns

Critics of the plan, including some consumer advocacy groups, worry that a faster review process could mean less public oversight and fewer opportunities to challenge rate hikes.

But Susman pushed back strongly on that idea:

“Unfortunately, that’s just not true,” he said. “The bill specifically reaffirms Proposition 103 and keeps all existing rules for public intervention.”

Under Prop 103, consumer groups and individuals have the right to intervene in any rate proceeding, submitting evidence or objections if they believe an insurer’s request is unjustified.

Those rights remain intact. The only change, according to Susman, is that the timeline for review must now be followed — forcing both insurers and regulators to act more efficiently.

“Everything is the same as far as how people can intervene,” he said. “It just has to be done faster.”

What Makes This a “Trailer Bill”?

Unlike traditional standalone legislation, the governor’s proposal is being introduced as a trailer bill, meaning it’s attached to the state budget rather than going through the full legislative process.

That gives it a faster track to passage — since the budget must be finalized by June 15 — but also makes it more politically charged.

“In a perfect world, we’d go through a longer process,” Susman acknowledged. “But this is about urgency. The governor is saying, ‘We can’t wait until the end of the year.’”

By bundling the reform into the budget, Newsom ensures it moves forward quickly — but critics argue it limits public debate.

Still, given the scale of the insurance crisis, speed has become a virtue.

Short-Term Relief, Long-Term Reform

Newsom has been careful to frame his proposal as a short-term solution. The real heavy lifting remains with Commissioner Lara’s Sustainable Insurance Strategy, which is already in motion and set to roll out by year’s end.

That broader strategy includes:

• Allowing insurers to use forward-looking wildfire models (instead of relying only on past data).
• Letting companies factor in reinsurance costs when setting rates.
• Encouraging more coverage in high-risk areas in exchange for regulatory flexibility.
• Incentivizing home hardening and mitigation measures to reduce losses.

The trailer bill doesn’t replace those reforms — it accelerates the parts that can be implemented immediately.

“Governor Newsom said at the budget conference that we can’t wait that long,” Susman noted. “He wants to get some of these changes done now.”

Why It Matters for Homeowners and Businesses

If successful, this expedited review process could help break the logjam that’s keeping insurers from writing new policies.

By shortening the time it takes to approve rate adjustments, carriers could regain confidence in their ability to operate profitably — a necessary step for re-entering high-risk markets like rural Northern California, Lake County, and parts of the Sierra foothills.

For homeowners, this could eventually mean:

• More available policies and competition.
• Fewer forced FAIR Plan enrollments.
• Better pricing stability as markets reopen.

For businesses, particularly those in tourism, agriculture, and hospitality — sectors that have been hardest hit — it could restore the ability to insure property and operations at reasonable cost.

The Political Dimension

Of course, as FOX anchor Heather Holmes noted, the move is also highly political.

“This is a political play,” she said. “Doing it as a trailer bill isn’t the same as putting it through the full legislative process.”

Susman agreed — but also pointed out that urgency justifies the approach:

“You’re absolutely right,” he said. “In a perfect world, we’d go through all the debate. But this is about reopening the marketplace. It’s about getting things moving again.”

Indeed, with both homeowners and business owners feeling the pressure — and insurers lobbying for flexibility — the governor’s political calculus is clear: deliver quick relief before the next fire season or election cycle.

The Bigger Picture: Enforcement, Not Deregulation

One of the more interesting takeaways from Susman’s analysis is that this isn’t deregulation — it’s enforcement.

Proposition 103 already contains strict deadlines and consumer protections; they’ve simply been ignored for decades.

The trailer bill doesn’t gut those safeguards — it forces compliance.

“This isn’t about rewriting the law,” Susman emphasized. “It’s about following the law we already have.”

That distinction could make all the difference in how the reform is received by both industry leaders and consumer advocates.

What Happens Next

The trailer bill is expected to move quickly as part of the state budget process. If approved, the Department of Insurance would be required to start enforcing the 60-day rule immediately, while continuing to implement the larger Sustainable Insurance Strategy throughout 2024.

By year’s end, Californians could see a reopened insurance marketplace — with more carriers, more flexibility, and a pathway back to stability.

Of course, whether insurers actually return depends on how well the reforms address their underlying concerns: rising reinsurance costs, mounting wildfire risk, and unpredictable regulatory delays.

Still, for the first time in years, there’s a sense that momentum is shifting — that California might finally be ready to modernize its insurance system without abandoning consumer protection.

Final Thoughts: A Needed Push Toward Balance

The story of California’s insurance crisis has always been one of extremes: too many losses for insurers, too few options for consumers, and too much delay in between.

Governor Newsom’s trailer bill doesn’t solve everything — but it marks an important step toward balance.

By enforcing deadlines, maintaining transparency, and aligning state policy with market realities, the measure could help thaw a frozen marketplace and pave the way for lasting reform.

As Susman summed up, it’s about restoring functionality:

“We’re expediting something that’s meant to expedite the way business is done. It’s about making sure the system actually works the way it was intended.”

If California succeeds in that goal, the rest of the country — facing similar climate and cost pressures — may find a blueprint for stabilizing their own markets in the years ahead.