To The Point Aug 12 2025
Published Date: 08/12/2025
California’s Insurance Market at a Crossroads: New Ballot Initiative Seeks to Repeal Proposition 103
California’s insurance crisis has hit a boiling point—and the next big showdown may come not in the legislature, but at the ballot box.
This week, a new initiative called the California Insurance Market Reform Act of 2026 was submitted to the state for review. Its goal: to repeal Proposition 103, the landmark 1988 voter initiative that has governed how insurance companies set rates, seek approvals, and interact with regulators for nearly four decades.
Supporters say the move is essential to save California’s collapsing insurance market and attract carriers back to the state. Opponents call it a dangerous rollback of consumer protections that could lead to unchecked rate increases.
Either way, the proposal marks a turning point in a long-simmering battle over how California regulates one of its most essential industries.
The Origins of Proposition 103: Consumer Protection in the 1980s
To understand why this new ballot measure matters, it’s worth revisiting what Proposition 103 was meant to do—and how it has shaped the state’s insurance landscape.
Passed by voters in 1988, Proposition 103 was authored by consumer advocate Harvey Rosenfield and championed by his group Consumer Watchdog. Its goal was straightforward:
- Lower insurance costs for consumers, and
- Hold insurance companies accountable through transparency and oversight.
The law required all insurers—auto, homeowners, renters, and property—to obtain prior approval from the California Department of Insurance (CDI) before changing rates. It also made the Insurance Commissioner an elected position, empowering voters to choose the state’s top insurance regulator.
At the time, the reform was hailed as a victory for consumers. California became a model for public accountability in rate-setting, and for years, Proposition 103 was credited with keeping premiums among the lowest in the nation.
But four decades later, critics argue that the law’s rigid structure has failed to keep pace with economic reality—and is now one of the main reasons carriers are abandoning California altogether.
A Market in Crisis
Over the past several years, the state’s insurance system has been under severe strain.
Massive wildfire losses, inflation-driven repair costs, and soaring reinsurance prices have pushed many of California’s largest insurers—including State Farm, Allstate, and Farmers—to pause new business or drastically reduce their footprint in the state.
According to insurance expert Karl Susman, California’s system has become unsustainable because companies cannot adjust rates quickly enough to match escalating risk.
“We’re trying to run a 2025 insurance market with 1988 rules,” he explained in a recent interview. “Proposition 103 may have made sense at the time, but it’s now strangling the market. Companies can’t keep up, and that’s why they’re leaving.”
The result has been a domino effect of rising costs and shrinking coverage options. Homeowners who lose their policies are being pushed into the California FAIR Plan, the state’s insurer of last resort, which offers only basic fire coverage at higher prices.
As more Californians turn to the FAIR Plan, even that system is buckling under financial pressure.
The California Insurance Market Reform Act of 2026
Enter the California Insurance Market Reform Act of 2026, a proposed ballot initiative that aims to completely rewrite the rules of the state’s insurance industry.
If approved by voters, the measure would:
- Repeal Proposition 103 in its entirety.
- Make the Insurance Commissioner an appointed, rather than elected, position.
- The Commissioner would be appointed by the governor and confirmed by the state Senate.
- Crucially, the appointee would need at least 10 years of insurance industry experience—a requirement designed to ensure technical expertise.
- Modernize wildfire mapping, requiring it to be updated every three years to reflect current risks.
- Incorporate reinsurance costs and mitigation credits into rate-setting—a key reform long sought by insurers.
- Establish clearer timelines for rate approvals. Proposition 103 currently requires the Department of Insurance to respond to filings within 60 days, but in practice, reviews can drag on for six months to a year, paralyzing insurers and leaving consumers in limbo.
Supporters argue that these changes would restore competition, attract carriers back to the market, and stabilize premiums in the long term.
“This is about making California a place where carriers want to come and compete again,” said one industry expert. “We need a sustainable, fair, and modern process that protects consumers and allows companies to operate.”
The Case Against Repeal: Consumer Advocates Push Back
Not everyone sees Proposition 103 as the problem.
Harvey Rosenfield, the law’s original author and founder of Consumer Watchdog, remains one of its most vocal defenders. In response to the new initiative, Rosenfield dismissed it as a thinly veiled industry power grab.
“The last thing we need is freeing insurance companies to get unlimited rate increases,” he said. “Proposition 103 works. It requires insurers to open their books, justify their rates, and prove that what they’re charging is fair.”
From his perspective, the law doesn’t prevent insurers from raising rates—it simply requires them to demonstrate financial necessity first.
“They’re entitled to any rate they can prove they need,” Rosenfield explained. “They just have to show the math.”
Consumer advocates fear that repealing Proposition 103 would remove one of the nation’s strongest consumer protection frameworks and allow insurers to increase rates unchecked—particularly in the wake of climate-driven disasters.
Commissioner Ricardo Lara: Between Two Worlds
Current Insurance Commissioner Ricardo Lara has been walking a political tightrope throughout California’s insurance crisis.
Lara has attempted to modernize the system through administrative reforms, launching what he calls the Sustainable Insurance Strategy, which includes:
- Allowing insurers to use forward-looking catastrophe models (under certain conditions).
- Offering mitigation credits to homeowners who fire-harden their properties.
- Accelerating rate review timelines.
A spokesperson for Lara told ABC 10 that the commissioner remains focused on “getting Californians coverage” and believes Proposition 103 continues to guarantee consumers’ rights to accountability in the rate-making process.
However, critics argue that administrative tweaks can only go so far—and that structural reform is necessary if California wants to avoid a full-blown insurance collapse.
Why This Ballot Initiative Is Different
Ballot measures to reform or revise Proposition 103 have surfaced before—but most have failed before reaching voters.
This time, however, the momentum feels different.
The scale of California’s insurance crisis has made reform not just a policy debate but a kitchen-table issue. Homeowners, brokers, and local governments are all feeling the effects. Builders can’t get coverage for new developments. Lenders are tightening standards. Fire-prone communities are being hollowed out as insurance costs soar.
As one Sacramento lobbyist noted, “This isn’t theoretical anymore. It’s about whether people can live, build, or rebuild in California.”
If the measure makes it onto the 2026 ballot, it could become one of the most consequential insurance debates in state history—pitting consumer advocates against industry leaders in a fight over the future of California’s risk economy.
What’s at Stake for Homeowners
For homeowners, the stakes couldn’t be higher.
If Proposition 103 is repealed and replaced, insurers would gain more flexibility to adjust rates based on current wildfire risk, reinsurance costs, and mitigation data. In theory, that could make the market more attractive and bring new carriers into the state.
But it could also lead to sharp premium increases in high-risk areas—particularly rural and mountain regions—where wildfire exposure is greatest.
Proponents counter that Californians are already paying higher costs indirectly, as reduced competition drives more policyholders into the expensive FAIR Plan.
Ultimately, the question may come down to which model voters trust more:
- A government-controlled system that prioritizes oversight but struggles with bureaucracy and delays, or
- A market-driven system that prioritizes speed and competition but risks volatility.
A Battle of Narratives: Accountability vs. Adaptability
The upcoming campaign will likely center on competing narratives.
- Supporters of reform will argue that Proposition 103, though well-intentioned, has become outdated and economically destructive—stifling innovation, discouraging investment, and forcing carriers out.
- Opponents will warn that repeal could unleash runaway rate hikes and strip consumers of critical protections that have safeguarded them for decades.
Both sides claim to speak for California’s homeowners. And both agree on one thing: the system, as it stands today, is broken.
Looking Ahead: Can California Balance Fairness and Flexibility?
Whether the California Insurance Market Reform Act of 2026 succeeds or fails, it has already reignited a long-overdue conversation about what kind of insurance market California needs in an era of climate-driven risk.
The challenge will be finding a balance between consumer fairness and market flexibility—ensuring that companies can remain solvent and competitive without abandoning the people they’re meant to protect.
As Susman and other experts have warned, time is running out:
“If we don’t fix this system soon,” Susman says, “we won’t just lose carriers—we’ll lose the ability to insure California itself.”
The coming months will reveal whether lawmakers, regulators, and voters are ready to face that reality—or whether the state’s insurance crisis will continue to smolder, waiting for the next fire to spark change.
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