California’s insurance crisis has reached a boiling point, and the next major showdown may not take place in the Legislature—but at the ballot box. A newly submitted initiative, the California Insurance Market Reform Act of 2026, seeks to repeal Proposition 103, the voter-approved law that has governed insurance rate regulation in the state since 1988.
Supporters say repealing Prop 103 is necessary to save a collapsing insurance market and bring carriers back to California. Opponents warn that it would dismantle one of the nation’s strongest consumer protection frameworks and expose homeowners to unchecked rate increases. Either way, the proposal marks a decisive moment in California’s long-running struggle to balance affordability, accountability, and coverage availability.
The Origins and Purpose of Proposition 103
Passed by voters in 1988, Proposition 103 was authored by consumer advocate Harvey Rosenfield and championed by Consumer Watchdog. Its main purpose was to rein in soaring insurance premiums and force greater transparency on insurance companies operating in California.
The law requires insurers to obtain prior approval from the California Department of Insurance before changing rates for auto, homeowners, renters, and property insurance. It also made the Insurance Commissioner an elected position, giving voters direct control over insurance regulation.
For many years, Proposition 103 was credited with keeping California’s insurance rates among the lowest in the country. But nearly four decades later, critics now argue that the same law has become a barrier to adapting to climate change, construction inflation, and volatile reinsurance markets.
A Market Under Extreme Strain
California’s insurance system is now under unprecedented pressure. Massive wildfire losses, rising rebuilding costs, and skyrocketing reinsurance expenses have forced major carriers such as State Farm, Allstate, and Farmers to pause new policies or sharply reduce their presence in the state.
Insurance expert Karl Susman says the regulatory framework no longer matches today’s risk environment.
“We’re trying to run a 2025 insurance market with 1988 rules,” he explained. “Companies can’t keep up, and that’s why they’re leaving.”
As private insurers retreat, more homeowners are being pushed into the California FAIR Plan, the state’s insurer of last resort. Originally designed as a temporary safety net, the FAIR Plan now insures hundreds of thousands of homes and is itself under growing financial strain.
What the California Insurance Market Reform Act of 2026 Proposes
The California Insurance Market Reform Act of 2026 would fundamentally restructure how insurance is regulated in the state. If approved by voters, it would repeal Proposition 103 in its entirety and replace it with a new regulatory framework.
The proposal would make the Insurance Commissioner an appointed position rather than an elected one. The Governor would appoint the Commissioner, subject to Senate confirmation, and the appointee would be required to have at least ten years of insurance industry experience.
The initiative would also modernize wildfire risk mapping, requiring updates every three years. It would allow insurers to incorporate reinsurance costs and mitigation credits directly into rate-setting and establish clearer timelines for rate approvals to reduce long regulatory delays.
Supporters argue these changes would restore competition, stabilize premiums over time, and attract insurers back into California.
The Case Against Repeal from Consumer Advocates
Consumer groups strongly oppose repealing Proposition 103. Harvey Rosenfield, the law’s original author, has been one of the most vocal critics of the new initiative.
“The last thing we need is freeing insurance companies to get unlimited rate increases,” Rosenfield said. He argues that Proposition 103 does not prevent insurers from raising rates—it simply requires them to justify the increases.
Consumer advocates fear that repeal would weaken transparency and allow excessive rate hikes, particularly after climate-driven disasters when homeowners are most vulnerable.
The Role of Insurance Commissioner Ricardo Lara
Insurance Commissioner Ricardo Lara has attempted to modernize California’s insurance system through regulatory reforms rather than full repeal. His Sustainable Insurance Strategy allows limited use of forward-looking catastrophe models, offers mitigation credits for homeowners who harden their homes, and seeks to accelerate rate review timelines.
The Department of Insurance maintains that Proposition 103 still guarantees accountability in the rate-making process. Critics counter that administrative reforms alone cannot fix what they see as a structurally outdated system.
Why This Ballot Initiative Is Gaining Momentum
Previous attempts to reform Proposition 103 have failed to reach voters. This time, the political and economic climate is different. The insurance crisis is now affecting real estate sales, mortgage approvals, construction, and wildfire recovery across California.
Builders struggle to insure new projects. Homeowners face policy non-renewals and extreme premium increases. Local governments worry about declining property values in wildfire-prone areas.
What was once a regulatory debate has become a statewide economic issue. If enough signatures are gathered, the 2026 ballot could host one of the most consequential insurance votes in California history.
What’s at Stake for Homeowners
For homeowners, the consequences of repeal could be significant. A new system may allow insurers to price risk more accurately using wildfire exposure, reinsurance costs, and mitigation data. That could increase competition and improve availability.
However, it could also drive premiums higher for people living in high-risk areas such as foothill, mountain, and rural communities. Supporters argue that homeowners are already paying more indirectly through the expensive FAIR Plan and shrinking market options.
Voters may ultimately have to choose between a tightly regulated system that prioritizes oversight but struggles with responsiveness, or a market-driven system that prioritizes speed and competition but carries greater volatility.
Accountability Versus Adaptability
The upcoming campaign will likely revolve around two competing ideas. Reform advocates say Proposition 103 has become economically destructive, driving insurers away and reducing consumer choice. Defenders argue that it remains one of the strongest insurance consumer protection laws in the nation.
Both sides agree on one thing: California’s current insurance system is not working as intended.
The Road Ahead for California’s Insurance Market
Whether or not the California Insurance Market Reform Act of 2026 reaches the ballot, it has already reignited a critical conversation about the future of insurance in a climate-driven economy.
California must find a way to protect consumers while also ensuring insurers can remain solvent and willing to write policies in a high-risk environment. Without meaningful reform, experts warn that the state could face deeper market withdrawals and growing dependence on last-resort insurance.
As Karl Susman cautions, if the system is not fixed soon, California risks losing not just insurers—but the ability to insure itself at all.
