California’s long-running insurance crisis took a dramatic turn in Sacramento this summer — and not the one many expected.
After weeks of tense debate, lawmakers failed to pass any major insurance reform bills before the legislative deadline, leaving both consumer advocates and the insurance industry frustrated. The battle centered on a controversial proposal that critics said would have quietly expanded insurers’ power to raise rates and shift costs to consumers — a move watchdog groups labeled a “backroom bailout.”
As ABC 7’s Michael Finney reported in his Seven on Your Side segment, “It was a wild ride. Consumer advocates were saying the insurance industry was working on a secret backroom deal to get a major bailout — and force consumers to pay for it.”
With the legislative window now closed, the status quo remains — and instability continues for California homeowners struggling to find coverage.
The “Backroom Deal” That Sparked the Controversy
For weeks, speculation swirled around the Capitol that the insurance industry was quietly working with lawmakers on emergency legislation to speed up rate approvals and ease financial pressure on insurers.
Consumer groups warned the proposal would have allowed rate hikes without full public financial disclosure, shifted wildfire-related costs from companies to consumers, and permitted insurers to charge customers for expenses currently classified as business costs under state law.
“This is no way to run a country. This is no way for the state of California to conduct its business,” said Robert Herrell of the Consumer Federation of California in remarks to ABC 7.
Jamie Court of Consumer Watchdog accused the industry of attempting to move the plan forward without public hearings or debate. When the final legislative deadline passed, however, no deal materialized.
“Important legislative deadlines have just passed,” Finney reported. “So now we know what’s going on — there will be no legislative deals cut this session.”
What Insurers Were Asking For
Although consumer advocates celebrated the collapse of the proposal, the insurance industry’s demands revealed deep dissatisfaction with California’s regulatory framework.
According to ABC 7’s reporting, insurers were seeking three primary changes: faster rate approvals with reduced disclosure requirements, the ability to share more wildfire-related costs with consumers, and permission to include routine business expenses in rate filings.
Industry leaders argue these changes are necessary to keep companies solvent and prevent additional withdrawals from California’s increasingly risky insurance market. The Personal Insurance Federation of California, representing major carriers, denied that any secret proposal existed but acknowledged the need for reform.
Consumer Advocates Defend Proposition 103
Consumer watchdog groups view the industry’s requests as a direct threat to the protections created by Proposition 103, the voter-approved law passed in 1988.
Proposition 103 requires insurers to obtain state approval for all rate increases, publicly disclose financial data, and justify requested changes through a transparent process that includes public comment.
Former California Insurance Commissioner John Garamendi warned that weakening those safeguards would expose consumers to unchecked pricing power.
“If they succeed,” Garamendi said, “guaranteed, California policyholders are going to once again be screwed by the insurance industry.”
For advocates, the failure of the proposal was a victory for transparency, even if it means continued market disruption in the short term.
The Policy Vacuum After the Collapse
With no reform bill passed, California’s insurance market remains stuck in regulatory gridlock.
Insurers continue to face slow rate approvals and strict limits on using predictive catastrophe modeling. Consumers, meanwhile, are dealing with rising premiums, increased non-renewals, and growing reliance on the California FAIR Plan.
Insurance broker Karl Susman told ABC 7 the failure of reform efforts has already made coverage harder to obtain.
“When the announcement came down that there was not going to be any type of arrangement,” Susman said, “it made getting property insurance more difficult.”
How California’s Insurance Crisis Escalated
The current standoff is the result of years of mounting pressure, which intensified sharply after 2023.
Major carriers including State Farm, Allstate, and Farmers have paused or reduced new business in the state. More than 300,000 homeowners have been pushed onto the FAIR Plan. Premiums in some regions have surged between 30% and 50%.
At the heart of the conflict is Proposition 103’s prohibition on predictive catastrophe modeling and its requirement that rate increases be based primarily on historical losses.
That framework proved effective for decades, but insurers now argue it cannot keep pace with climate-driven wildfire losses, escalating rebuilding costs, and reinsurance inflation.
The Political Stalemate in Sacramento
Governor Gavin Newsom has publicly urged faster action, warning that California cannot afford to wait until the end of 2024 for relief.
“We need to stabilize this market,” Newsom said in May. “We can’t wait.”
His administration supports Insurance Commissioner Ricardo Lara’s Sustainable Insurance Strategy, which would allow limited use of catastrophe models while requiring insurers to write more policies in high-risk areas.
However, with no legislative backing this session, most reforms are proceeding through regulatory channels, a slower process that frustrates insurers and worries homeowners.
What Homeowners Should Expect Going Forward
With reform stalled, experts expect continued tightening of the insurance market through the rest of 2024.
Homeowners are advised to stay informed about new rate filings and regulatory updates from the California Department of Insurance. Working with independent insurance agents can provide access to regional carriers and supplemental “Difference in Conditions” policies to pair with FAIR Plan coverage.
Investing in wildfire mitigation — such as defensible space, Class A roofing, and home hardening — may improve insurability and lead to future discounts under new state rules.
Most of all, consumers should prepare for ongoing volatility until meaningful regulatory or legislative changes take effect.
Transparency Versus Secrecy in Insurance Reform
This episode highlighted a critical tension in California’s insurance debate: transparency versus expediency.
Consumer advocates accused insurers of operating behind closed doors. Insurers accused regulators of ignoring economic realities. Both sides claimed to be acting in the public interest.
As Jamie Court put it, “The sunshine was the best disinfectant. It kept this deal from happening.”
The challenge now is whether policymakers can convert that transparency into constructive reform through open debate rather than emergency shortcuts.
The Bottom Line for California Homeowners
California’s insurance market remains trapped in a difficult paradox. Consumers demand affordability, insurers demand pricing flexibility, and regulators are bound by a law written for a very different risk landscape.
The collapse of the Sacramento reform talks solved none of these problems. It did, however, reinforce the importance of openness in any future attempt to reshape the system.
As Karl Susman summarized, the lack of action only deepens the capacity shortage. Until real movement occurs, California homeowners should expect continued turbulence — and keep a close watch on what happens next in Sacramento.
