Policymakers push for ways to mitigate California’s insurance crisis

May 1, 2024

Proposed updates to outdated regulations aim to curb the worsening crisis

By Zack Cefalu, legislative affairs analyst, Melissa Sparks-Kranz, legislative affairs analyst (environmental quality), and Jolena Voorhis, legislative affairs lobbyist (public safety)

State regulators and lawmakers have unveiled several proposals that could address California’s insurance crisis. Californians statewide are struggling to secure and keep home and property insurance. Many are experiencing insurance price hikes, coverage withdrawals, and refusal by insurers to write new policies.

Cal Cities is engaged on several measures that would streamline wildfire preparedness efforts and proactively reduce harm to fire-prone communities. Cal Cities supports fire prevention activities and stronger considerations of those efforts from insurance companies when writing or renewing coverage policies for cities and homeowners.  

Predictive models for catastrophic loss

On the regulatory front, Insurance Commissioner Ricardo Lara in March proposed regulations that would allow insurance companies to use predictive models to forecast future potential losses in some regions when renewing or writing new policies.

Currently, insurers predict losses and natural disasters by analyzing data from the previous 20 years, during which California has seen increases in both frequency and severity of disasters. California is the only state that requires this antiquated process. As such many, including Lara, have cited this outdated regulation as a contributing factor in the state’s insurance crisis.

Lara’s proposed regulations have received mixed reviews. The Department of Insurance recently held an informal public workshop on the proposed regulations. Insurance industry members support the use of predictive models to plan for potential threats and losses more accurately.

Other groups, including fire chiefs, shared local perspectives on the use of predictive models. Murrieta Fire Chief Bernard Molloy II underscored that when using these models, insurers must also consider the work that communities are already doing to protect residents and their properties through wildfire mitigation efforts.

Cal Cities is currently monitoring the proposed regulations and anticipates the formal rulemaking will be finalized by the end of this year as part of the Commissioner’s broader Sustainable Insurance Strategy. Another draft of the regulations is expected to be released in the coming months.

Pending legislative proposals

Cal Cities is also supporting legislative efforts that would help prevent wildfires and incorporate mitigation efforts into the writing of insurance policies. Cities are encouraged to contact their local legislators and express support for these measures.

SB 1060 (Becker) would require insurers to consider the wildfire risk mitigation of hazardous fuel reduction, home hardening, and defensible space, ensuring cities and homeowners receive credit for the billions of dollars and efforts invested in wildfire resilience and community protection. Cal Cities testified in support of this bill in the Senate Committee on Insurance. The bill is currently pending in the Senate Appropriations Committee.

Cal Cities is sponsoring a related measure, AB 2330 (Holden), which would streamline the permitting process for vegetation management in Fire Hazard Severity Zones (FHSZ) near urban communities. AB 2330 would also require the state to overlay existing critical habitat maps with FHSZ maps to identify lands that could benefit from the streamlined permitting process. 

“While progress has been made, proactive measures prove most effective,” La Verne Fire Chief Chris Nigg told lawmakers when testifying on AB 2330.

The bill would reduce uncertain and often prolonged permitting timelines that end up delaying wildfire preparedness efforts, sometimes across multiple fire seasons. It would also strengthen local agencies’ ability to proactively conduct vegetation management efforts that reduce the threat of wildfire. AB 2330 recently passed out of the Assembly Water, Parks, and Wildlife Committee with bipartisan support and is now in the Assembly Appropriations Committee.