Newsom Executive Order To Fix State’s Insurance Crisis Released
Sacramento, CA – Praise from California Governor Gavin Newsom for recent changes to the state’s Fair Access for Insurance Requirements (FAIR) insurance plan, stating that they will help stabilize the insurance market.
“California’s all-of-the-above strategy is addressing this decades-old crisis to get people the reliable and affordable insurance they need. Strengthening the state’s FAIR Plan has been a key priority, and these upgrades will help stabilize the entire market while providing more stability for those who already depend on it,” stated Newsom.
However, a consumer group called the changes in an agreement between the FAIR plan and insurance commissioner a bailout that will lead homeowners to pay for losses under the new agreement. State Insurance Commissioner Ricardo Lara counters that the changes to the FAIR plan are part of his sustainable insurance strategy and calls it the biggest reform to the insurance market since a 1988 voter-approved proposition.
“Modernizing the FAIR plan is a crucial step in our strategy to stabilize California’s insurance market,” Lara said in a statement. “It’s critical for Californians to understand that a growing FAIR plan contributes to our insurance crisis.
The changes increase the current limit of $20 million in commercial property insurance per location to $20 million per structure, with a cap of $100 million for a location. This is beneficial for homeowners, condo associations, farms, builders, and other businesses with multiple buildings in the same spot. The second big change could lead to higher bills for ratepayers.
Currently, if the FAIR plan’s funds are depleted due to a massive event like a wildfire, the plan can place an assessment on insurance companies, who would then have to pay the FAIR plan. Under the agreement revealed Friday, insurance companies could recoup those fees if specific criteria are met. If the FAIR plan levies up to $1 billion in assessments on insurers in a calendar year, they can ask the insurance commissioner for approval to place temporary fees on their policyholders and recoup up to 50% of their assessment. If the assessment levied by the FAIR plan is over $1 billion, insurance companies can recoup 100%.
Newsom has long been pushing for insurance reform, with Lara’s sustainable insurance strategy including requiring insurance companies to submit all their materials when making a rate-making application.
