Newsom Fast-Tracks California Home Insurance Reform

Published Date: 05/11/2024

California’s insurance market has been under strain for years, but in early 2024, a surprising development signaled potential change: Governor Gavin Newsom announced he is fast-tracking reform.



During a budget press conference largely focused on fiscal policy, Newsom made unexpected and unusually direct remarks about California’s homeowners insurance crisis. Insurance expert Karl Susman later analyzed the comments on The Insurance Hour, calling them the clearest sign yet that executive leadership is stepping in.

For millions of homeowners facing canceled policies, soaring premiums, and growing reliance on the FAIR Plan, this could mark the most important turning point in decades.

The Crisis That Finally Reached a Breaking Point

California’s home insurance market has been deteriorating since the mid-2010s, when repeated wildfire seasons produced historic losses. By 2023, major carriers including State Farm, Allstate, and Farmers had paused new business or withdrawn from high-risk regions altogether.

This forced thousands of homeowners into the California FAIR Plan, the state’s insurer of last resort. But as Karl Susman emphasized, the FAIR Plan was never designed to function as a permanent replacement for the private market.

“It’s a safety net,” he said. “And when a safety net becomes the whole system, you have a crisis.”

While Insurance Commissioner Ricardo Lara and the Department of Insurance have been working since 2023 on the Sustainable Insurance Strategy to stabilize the market, progress has been slow. Newsom’s announcement effectively places that effort on a rapid timeline.

“We Need to Move”: The Governor’s Direct Message

Governor Newsom’s comments were unusually candid for an issue that is often buried in regulatory process.

“We did an executive order about a year ago, and we’re trying to reconcile 30 years where there hasn’t been much reform in this space,” he said. “We’re mindful of voter-approved constraints. We’re mindful of the burdens placed on our FAIR Plan. But we need to stabilize this market. We need to send the right signals. We need to move.”

His reference to voter-approved constraints points directly to Proposition 103, the 1988 law that requires prior approval of insurance rate increases and restricts the use of forward-looking catastrophe modeling.

Under current rules, insurers must base rates largely on historical losses rather than predictive risk—an approach that no longer aligns with California’s climate-driven loss patterns. As reinsurance costs and wildfire severity rise, many carriers argue the math no longer works.

Newsom’s remarks indicated agreement with that assessment—and a willingness to act.

The 60-Day Review and the Trailer Bill Strategy

The most significant policy shift came when Newsom committed to accelerating the regulatory process.

“We’ve got to move this process along,” he said. “We can’t wait until December. We’re promoting a 60-day process of review. It should not take this long for emergency regulations.”

The proposed 60-day review would dramatically compress approval timelines for key portions of the Sustainable Insurance Strategy. Newsom also proposed using a trailer bill—legislation attached to the state budget—to move reforms through the legislature more quickly.

“I’m almost tempted to do another executive order,” he added, “but under the circumstances, I think working with the legislature on a trailer bill is more appropriate.”

For an industry accustomed to years-long regulatory delays, the shift in pace is substantial.

Coordination with the Department of Insurance and Lawmakers

Newsom emphasized that the effort is collaborative, not a bypass of existing authority.

“I know our insurance commissioner; we’re in constant contact,” he said. “His team is working their tails off. I know how concerned the legislature is on this… but we’ve just got to do more.”

His comments positioned Commissioner Lara’s Sustainable Insurance Strategy as the framework for reform, with the governor providing urgency and political backing for faster implementation.

Key elements of the Department’s plan include:

• Allowing catastrophe modeling to project future wildfire risk
• Enabling insurers to include reinsurance costs in rate filings
• Modernizing the FAIR Plan with expanded coverage and online platforms
• Requiring insurers to write in high-risk areas in proportion to their statewide market share

These reforms are designed to restore private market participation while maintaining consumer safeguards.

Why the Budget Speech Mattered More Than It Seemed

As Susman observed, the announcement was “buried in a budget speech, but not buried in importance.”

While most media coverage focused on fiscal policy, the insurance remarks sent a clear signal: the governor now views the insurance crisis as a top-tier policy failure requiring immediate executive attention.

“For the first time in a long time,” Susman said, “we’re seeing top-level acknowledgement that this is not a regulatory quirk—it’s a systemic problem.”

That acknowledgment matters in a climate where insurers warn of collapse while consumer advocates fear unchecked rate increases. Newsom’s framing recast the situation as a shared emergency rather than an industry-versus-consumer battle.

Balancing Speed with Consumer Protection

The challenge now is how to move quickly without weakening oversight.

Newsom stressed that the fast-track process would remain grounded in voter protections and consumer interests.

“We’ve been meeting with everybody on this,” he said. “Strong opinions about time to decision-making on resolving open-ended questions around reinsurance, guaranteeing insurance within the WUI, guaranteeing that people come back into the market… all of the above.”

He emphasized that reform does not mean deregulation—it means restoring functionality within the framework of Proposition 103. His comments appeared aimed at preempting criticism from consumer advocacy groups that have opposed modernization in the past.

The administration’s message is that accountability and market stability are not mutually exclusive.

What Fast-Tracked Reform Could Mean for Homeowners

For homeowners, especially those in wildfire-prone areas, the reforms could translate into tangible relief.

If the 60-day process accelerates regulatory approval as intended, insurers would be able to use catastrophe modeling to price policies based on real-world risk mitigation, such as:

• Fire-resistant roofing
• Defensible space and vegetation management
• Community-level fire prevention investments

Potential outcomes include:

• Greater availability as private carriers re-enter high-risk markets
• More fairness for homeowners who invest in mitigation
• Improved stability with fewer sudden non-renewals
• Reduced reliance on the FAIR Plan

As Susman explained, the reforms are ultimately about restoring predictability and access for policyholders.

“Homeowners don’t need politics,” he said. “They need stability.”

A Statewide Call to Act with Urgency

Newsom’s tone reflected impatience with incremental change.

“We share the same goal,” he said. “But we need to do more. And we need to do it faster.”

For the first time in years, the governor’s office, the legislature, and the Department of Insurance appear aligned around a single objective:

preventing further collapse of the residential insurance market.

If successful, the trailer bill and fast-track process could become a national model for how states balance consumer protection with actuarial reality in an era of climate volatility.

Final Thoughts

For years, California’s insurance market has been trapped in regulatory gridlock—between carriers and regulators, risk and rate control, politics and practicality.

Governor Newsom’s announcement signals a potential end to that stalemate.

By pairing urgency with oversight and reform with accountability, the state is acknowledging what homeowners and insurers have long understood: modernization is no longer optional.

As Karl Susman concluded in his analysis, “This isn’t about politics. It’s about math. And if the math finally starts to work again, homeowners across California will breathe a little easier.”