Reviving California's Insurance Market: A Talk with Assemblyman Tom Lackey

Published Date: 07/24/2024

Reviving California’s Insurance Market: Assemblyman Tom Lackey on the Challenges of Reform and the Road Ahead

California’s homeowners are facing a crisis of confidence — not just in their insurance companies, but in the system itself. Carriers are retreating from the state, rates are skyrocketing, and millions are being pushed into the California FAIR Plan, once considered a last-resort option.

At the same time, policymakers in Sacramento are debating how to modernize a decades-old regulatory structure that hasn’t kept up with today’s economic and environmental realities.

In a recent episode of Insurance Hour, host Karl Susman sat down with Assemblyman Tom Lackey, a former California Highway Patrol officer and a seasoned legislator, for a frank discussion on the state’s Sustainable Insurance Strategy — a long-awaited plan aimed at stabilizing California’s faltering insurance market.

Their conversation reveals the complexities, politics, and high stakes behind the state’s attempt to “jumpstart” private insurance in California.

“We’re in Trouble — and Everyone Knows It.”

Susman opened the discussion with a question that’s on every homeowner’s mind:

“Assemblyman, you’ve heard about the Sustainable Insurance Strategy. What are you hearing from your constituents, and what do people here in Sacramento really think about it?”

Lackey didn’t mince words.

“I think there are more questions than answers,” he said. “It’s a goal — and no one quite knows how to get there. The only thing that’s predictable is that we’re in trouble.”

That sense of urgency echoes what many in the industry have been saying for years. The Sustainable Insurance Strategy, introduced by Insurance Commissioner Ricardo Lara, is designed to bring insurers back to California by modernizing rate-setting rules, introducing catastrophe models, and requiring companies to write policies in high-risk areas.

But as Lackey pointed out, the plan remains more aspiration than roadmap.

“We’ve kind of been procrastinating,” he said. “And the longer we wait, the harder it gets.”

The Legislature’s Role — and Its Limits

Susman pressed further, asking how lawmakers in Sacramento view their role in the process.

“You’ve got the Insurance Commissioner, you’ve got the Governor, and then you’ve got the Legislature. Who should actually be driving this?”

Lackey’s answer was refreshingly pragmatic:

“We have an elected Insurance Commissioner. This is his job. He’s responsible for managing this. The Legislature shouldn’t be the sole driver — maybe a partner, but not the one steering the ship.”

However, Lackey also acknowledged that Lara has been calling for help.

“He’s crying for help,” Lackey said. “And so we should run to offer assistance. But how we arrive at that is not so simple.”

In other words, California’s insurance reform is a shared responsibility — one that requires both political leadership and technical expertise.

The Governor’s “Trailer Bill”: Help or Hindrance?

One of the most debated developments in recent months has been Governor Gavin Newsom’s trailer bill, which aims to fast-track parts of Lara’s strategy by embedding them in state budget legislation.

Susman asked Lackey whether that kind of executive involvement helps or hinders progress.

“It depends,” Lackey said. “I have no problem with anybody trying to help. Partnership should be part of the solution. But the primary responsibility should come from the Commissioner. This is complex — and how we get there matters.”

That complexity is what makes insurance reform so challenging. It’s not just about pricing — it’s about economics, risk modeling, and trust.

“It touches everyone’s life,” Lackey said. “Everyone needs a residence, and if you’re fortunate enough to be a homeowner, you know this is a real problem.”

The 85% Requirement: A Bold but Risky Mandate

Under Lara’s plan, insurers would be required to write at least 85% of policies in designated “distressed areas” — regions where coverage has become scarce due to wildfire exposure or economic challenges.

The goal: to depopulate the FAIR Plan and restore access to private coverage.

But Lackey questioned whether the 85% target is realistic.

“We’re telling insurance companies what they have to do — and they’ll do it,” he said. “But the cost? I don’t know if it’s sustainable. I don’t even know if it’s doable.”

He went on to describe a growing “disconnect between honesty and ability.”

“We have to be honest with people,” he said. “The goal is to increase affordable insurance availability. But there’s a gap between what sounds good and what can actually work.”

The Equity Debate: What’s “Fair” in the FAIR Plan?

The Sustainable Insurance Strategy doesn’t just focus on high-risk wildfire zones. It also includes economically distressed communities, where the premium-to-income ratio is disproportionately high.

Susman asked if it’s fair to tie affordability to economic geography.

“That’s the great debate,” Lackey replied. “What’s fair to one person isn’t fair to another. What we need is something manageable — realistic — that provides necessary protection at a reasonable cost.”

The challenge, he explained, is that the people most exposed to risk often have the least ability to pay.

“That’s the dilemma,” he said. “And it’s very real. People are worried — and they should be.”

Availability Before Affordability

At one recent industry forum, Commissioner Lara made a striking statement: “Our goal right now is availability before affordability.”

Susman unpacked what that means.

“He’s basically saying: Let’s get companies writing again first, then let competition bring rates down later. But right now, we don’t even have a market. If you call 100 carriers today, maybe two can actually help you — and one will probably point you to the FAIR Plan.”

Lackey agreed.

“It’s at a crisis level,” he said. “We don’t really have a functioning marketplace for property insurance in California.”

That’s why the first step, according to both men, has to be getting private carriers back into the game — even if it means higher short-term premiums.

Competition as the Catalyst

When asked whether competition could ultimately solve the crisis, Lackey was unequivocal.

“It’s clearly got to be the goal,” he said. “Because that’s just a pragmatic set of rules. Supply and demand is real — it’s not political.”

That statement highlights an often-overlooked truth: Insurance markets are economic ecosystems, not political constructs. When too many constraints are placed on pricing or underwriting, the system eventually breaks down.

“Some people try to make it political,” Lackey added. “But it’s like gravity — you can’t argue with it. It’s a natural law.”

More competition means more choices, which means better pricing. But to get there, regulators have to give insurers the confidence and flexibility to operate profitably.

The Cost of Delay

Both Susman and Lackey agreed that time is not on California’s side.

“The longer we wait to arrive at a solution,” Lackey said, “the more difficult it becomes.”

With another wildfire season already underway, the stakes couldn’t be higher. Every uninsured or underinsured property increases the state’s financial vulnerability.

“Without insurance, we’ve got real catastrophes,” Lackey warned. “This isn’t something the state should be picking up the dime for. The goal should be to promote private industry — not replace it.”

The Role of Consumer Advocacy

In the final portion of the conversation, Susman brought up one of the thorniest issues in California’s insurance debate: the role of consumer advocacy groups.

“A lot of the information out there comes from consumer groups,” Susman said. “But sometimes that information conflicts with what we hear from the industry. How do we reconcile that?”

Lackey responded carefully but candidly:

“Consumer groups want to protect the public — and that’s a good thing. But sometimes that keeps policymakers from doing what needs to be done.”

It’s a political balancing act that has stalled reform for years. When consumer advocates oppose rate increases, insurers freeze new business. When insurers threaten to leave, regulators scramble for compromise.

The result: gridlock.

“It’s not rooted in fairness,” Lackey said. “It’s rooted in something much deeper. And that’s what makes it so hard to swallow.”

Honesty, Realism, and Partnership

If there was one theme that emerged from the conversation, it was honesty — about the scale of the problem, the limits of government control, and the need for genuine collaboration between public and private sectors.

“Partnership is what we should be,” Lackey said. “This can’t be government versus industry. It has to be both working toward the same goal.”

And that goal, Susman emphasized, is simple in theory but daunting in execution:
Restoring a functional, fair, and competitive insurance market for all Californians.

Final Thoughts: A Call for Action and Accountability

California’s insurance crisis didn’t happen overnight — and it won’t be solved overnight. But as Assemblyman Lackey and Karl Susman made clear, the first step is acknowledging the scope of the problem and committing to action.

“We need to stop procrastinating,” Lackey said. “We’re at a point where waiting is no longer an option.”

The Sustainable Insurance Strategy may not have all the answers, but it represents a necessary shift in thinking — one that prioritizes availability, competition, and transparency.

In the end, the state’s insurance future depends on more than new laws or mandates. It depends on restoring trust — between insurers, regulators, and the people they serve.

“We’ve got to figure this out,” Lackey said. “Because everyone’s depending on it.”