Gov. Gavin Newsom and California’s Insurance Commissioner said they are overhauling the regulation of the state’s home insurance market that’s changed drastically because of disasters caused by climate change, which will likely make the insurance more available but also more expensive.
“The changes I’m announcing today are aimed at modernizing the insurance market and protecting consumers,” Insurance Commissioner Ricard Lara said at a Thursday news conference.
He described the changes, over the next year, as the state’s biggest insurance regulation reform since voters in 1988 toughened rate regulation.
Lara’s announcement came after Newsom issued an executive order telling the insurance commissioner take “swift regulatory action” to speed approval of rate increases and for the first time let insurers factor into homeowners’ rates the increasing risks of extreme weather and wildfires fueled by climate change.
“It is critical that California’s insurance market works to protect homes and businesses in every corner of our state,” Newsom said in a statement announcing the order. “A balanced approach that will help maintain fair prices and protections for Californians is essential.”
The order takes into account climate change, and how wildfires, floods and droughts have changed the landscape – and what should be covered under insurance.
Some companies, including State Farm and Allstate, have already announced they will stop issuing policies in California, and others are limiting policy renewals.
Newsom’s order will increase the insurance commissioner’s ability to stabilize the market by increasing the coverage options for renters and homeowners especially for those who live in wildfire prone areas. Insurance companies will be able to consider climate risks when setting insurance rates. It will also speed up the approval process for certain plans.
Newsom hopes this new plan will also incentivize smaller insurance companies, which are still issuing new policies, from leaving the state.