California’s Sustainable Insurance Strategy Explained

Published Date: 07/24/2024

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 of residents are being pushed into the California FAIR Plan, once considered a true last-resort option.



At the same time, policymakers in Sacramento are debating how to modernize a decades-old regulatory structure that has failed to keep pace 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 seasoned legislator, for a frank discussion about the state’s Sustainable Insurance Strategy — a long-awaited effort to stabilize California’s fragile insurance market.

Their conversation revealed the complexity, 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 the question 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’s response was blunt.

“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 mirrors what industry leaders have been warning for years. The Sustainable Insurance Strategy, introduced by Insurance Commissioner Ricardo Lara, is intended to bring insurers back to California by modernizing rate-setting rules, introducing catastrophe modeling, and requiring companies to write policies in high-risk and underserved areas.

But as Lackey noted, the strategy still resembles an aspiration more than a detailed 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 on the question of leadership.

“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 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.”

At the same time, Lackey acknowledged that Commissioner Lara has been openly seeking 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.”

Insurance reform, he emphasized, must be a shared responsibility that blends political leadership with technical expertise.

The Governor’s Trailer Bill: Help or Hindrance?

One of the most debated moves in recent months has been Governor Gavin Newsom’s trailer bill, which would fast-track parts of the Commissioner’s strategy through the state budget process.

Susman asked whether that kind of executive intervention accelerates reform or complicates it.

“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.”

For Lackey, the issue goes beyond policy mechanics. Insurance reform affects nearly every resident in California.

“It touches everyone’s life,” he 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

A central element of Lara’s strategy is a requirement that insurers write at least 85% of their statewide market share in designated “distressed areas” — regions where coverage is scarce due to wildfire exposure or economic hardship. The objective is to depopulate the FAIR Plan and restore private-market access.

Lackey questioned whether that 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 described what he sees as a growing gap between policy goals and practical outcomes.

“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 and the FAIR Plan

The Sustainable Insurance Strategy doesn’t focus solely on wildfire-prone areas. It also includes economically distressed communities where premiums consume a disproportionate share of household income.

Susman raised the question of fairness tied to geographic affordability.

“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 dilemma, he explained, is that those most exposed to risk are often the least able to absorb rising insurance costs.

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

Availability Before Affordability

At a recent industry forum, Commissioner Lara made a striking declaration: the state’s immediate priority is “availability before affordability.”

Susman broke down what that means in practice.

“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 with the assessment.

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

Both men acknowledged that while premiums may rise in the short term, restoring availability is a necessary first step toward long-term stability.

Competition as the Catalyst for Recovery

When asked whether competition could ultimately fix the market, 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.”

Insurance markets, he emphasized, operate under economic laws, not political ideology.

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

More competition, in theory, leads to more choices and fairer pricing. But to achieve that, insurers must be given the confidence and flexibility to operate profitably in California.

The Cost of Continued Delay

Both Susman and Lackey agreed that time is working against the state.

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

With wildfire seasons growing longer and more destructive, the financial risks tied to uninsured and underinsured properties are expanding.

“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

Susman raised one of the most polarizing issues in the reform debate: the influence of consumer advocacy groups.

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

Lackey responded with careful candor.

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

That political tension — between controlling rates and keeping insurers in the market — has fueled years of 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 one theme dominated the conversation, it was honesty — about the size of the problem, the limits of regulation, and the necessity of collaboration between government and industry.

“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.”

That shared goal, Susman emphasized, is straightforward in concept but complex in execution: restoring a functional, fair, and competitive insurance market for Californians.

Final Thoughts: A Call for Action and Accountability

California’s insurance crisis did not emerge overnight, and it will not be solved quickly. But as both Lackey and Susman stressed, delay is no longer an option.

“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 provide every answer, but it represents a critical shift toward prioritizing availability, competition, and transparency.

Ultimately, the future of California’s insurance market will depend not only on laws and mandates, but on rebuilding trust between insurers, regulators, and consumers.

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