The timing wasn’t good.
Just as insurance commissioner Ricardo Lara’s historic and highly controversial overhaul insurance companies had their premiums in effect, a horribly destructive and deadly Los Angeles wildfire exploded in January.
On the one hand, California’s trend towards such catastrophes has driven disasters by the insurance industry’s claim that it will generate significant potential losses that cannot be beneficially insured without a change in the rate-making system.
However, as fire victims flooded the insurance company with claims, Lara faced pressure to crack down on businesses that minimize or delay settlement payments. Meanwhile, his critics have accused him of being comfortable with the industry he regulates, as detailed this week in the Los Angeles Times article.
To put it mildly, it’s a yeasty situation.
Lara, a former state legislator who was elected to the insurance board in 2018, drafted his new regulatory plan in response to a decision by a major insurer to cut down on California’s insurance or leave the state altogether. It’s starting to start. Wildfires.
They argued that California’s long-standing system for calculating premiums, based on past experience, is insufficient. They wanted to include estimates of future exposures and the costs of getting reinsurance to alleviate losses in the process.
Lara incorporated these changes into these plans, but only if the insurer wanted to write policies in areas where fire is prone.
“Giving people more options to protect themselves is a way to resolve the California insurance crisis,” Lara said, publishing details of the plan. “For the first time in history, we are asking insurance companies to expand where people need the most help. Due to our climate change, we can no longer see the past. We are innovative and positive to protect Californians’ access to insurance.”
It attracted insightful criticism from Consumer Watchdog, a Southern California organisation that wrote the 1988 vote measurement, depicting the increasing authority of insurance commissioners to choose their position and regulatory position. The group has been sniping Lala since his election, robbing the insurance company of campaigning money and accusing him of not actively overseeing the operation.
The group benefited brilliantly from the “intervention fees” when creating fees awarded by previous commissioners. Although Lala was not generous, the organization won $643,530 in 2024. This is 100% of the annual awards.
The Los Angeles fire forced Lara to juggle long-term efforts to stabilize the insurance market with immediate response to problems arising from the disaster.
Lara has allowed insurers to impose valuations on policyholders and strengthen the unstable finances of California’s fair plan. This is the last groove system that covers property owners who are unable to get compensation from the regular market where applications have increased significantly.
However, he refused to immediately approve a request for a 22% emergency rate hike from California’s largest insurance company, state farm, and said the company must prove its need.
The Los Angeles fire not only protects the investments Californians have in their homes and businesses, but also highlights the absolute important role of the healthy insurance market as an important factor in buying and selling real estate. The lender will not issue uninsured property mortgages.
Insurance committee members must protect the interests of consumers, of course, but one of those interests is the sound insurance market, and parallel obligations will keep insurers motivated to do business in California. It’s about making enough profits.
It remains uncertain whether Lala’s rate-making overhaul will meet both of these orders. He deserves at least credit for trying to fix a dysfunctional system after Congress and Government Gavin Newsom bowed and gave him a job.
