CalMatters
By Levi Sumagaysay, Calmatters
State Insurance Commissioner Ricardo Lara — who is in the midst of issuing new regulations to address California’s insurance crisis — told CalMatters this week that he feels like he is “in a forced marriage” with the insurance industry, and that “we’re staying together for the kids.”
But Lara found common ground with a major U.S. insurer’s CEO at a first-of-its-kind summit in Los Angeles on Wednesday.
Other insurance commissioners, government officials, insurance industry representatives, nonprofits and academics from around the nation and world gathered for the Global Sustainable Insurance Summit this week — in a state where residents are dealing with higher premiums for homeowners and auto insurance, with some of them finding it tough to get insured at all.
When Lara asked Farmers Insurance CEO Raul Vargas what it would take to get insurers to start writing policies in California again after they stopped or delayed new business, Vargas pointed to one of the regulations Lara unveiled recently: allowing insurers to use catastrophe modeling when setting their rates. Catastrophe modeling would let insurers use future risk assessments combined with historical data to help price their premiums.
“Insurers need the confidence to price correctly for the risk,” Vargas said, adding that Farmers has had “constructive conversations” with California’s Insurance Department that has allowed the company to remain in the state. It is notable that the CEO of a major U.S. insurance company publicly expressed support for Lara’s plan. Insurance trade groups have mostly been speaking on behalf of insurers so far about the insurance situation in the state — which has forced many homeowners to turn to the last-resort FAIR Plan.
Some Farmers affiliates stopped writing insurance in California late last year, but Farmers spokesperson Luis Sahagun told CalMatters at the time that other Farmers entities, which provide insurance to nearly all of the companies’ customers in the state, were staying put.
Lara and Vargas also agreed on a few other things that both regulators and the insurance industry need to do: share data, work together, communicate with consumers about the importance of mitigation and learn from others.
Vargas, who became CEO in 2023, said he is stressing the importance of curiosity at Farmers. “Don’t think you have all the answers,” he said. “Look outside. Even to your competitors.”
Lara expressed a similar sentiment about looking outside in an interview with CalMatters on Tuesday. He said his department needs to soak up others’ expertise as it deals with what he calls a pivotal moment. He also said this week’s gathering was “critical” and that he hopes the U.S. insurance industry comes away from the summit with new ideas.
“This is about bringing the global perspective to insurers,” Lara said. “We need to have conversations beyond ‘we need more rate’,” the commissioner said, referring to insurers asking the state to approve increasing their premiums.
Present at the two-day summit were representatives from insurance companies that have paused writing or pulled back on new and certain types of insurance policies in the state. Those companies include CSAA, Mercury Insurance, American Family Insurance, Nationwide and Chubb, according to the Insurance Department.
State Farm, which frustrated the Insurance Department last month when it said it would not be renewing tens of thousands of homeowner policies around the same time Lara introduced his draft regulation on catastrophe modeling, did not appear to have sent a company representative.
Ceres, a nonprofit organization that works with investors, companies and other nonprofits to advocate for sustainability, funded the event and worked with California’s Insurance Department to organize it.
“The climate crisis is a financial risk for all entities and has impacts across industries,” said Steven Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets, in an interview with CalMatters. ”It’s important to bring people together to help Californians and others across the globe.”
This article was originally published by CalMatters.
It’s good to know the state is making progress with some of these companies, anyway. But I’d say the Cal Matters journalists should chase down State Farm, since they’re one of the biggest home insurers and they’ve already declined to renew some 30K homeowner’s policies. Why only some kinds? They need to participate in events like this, too.
CA is in such a state of disarray and mismanagement under Newsom and all the Democratic representatives, they don’t even know WHAT HAPPENED to $24 BILLION DOLLARS of taxpayer funds… TWENTY-FOUR BILLION….!!!! Maybe Edhat should run THAT story from the CalMatters site… That is an insane amount of money…
COAST – are you saying $24 billion is missing? That’s pretty significant, if true. Do you have any links or anything to confirm that?
https://calmatters.org/housing/homelessness/2024/04/california-homelessness-spending/
The article you’ve linked isn’t about the insurance crisis at all, just so people know. It has at best an indirect connection in that’s it’s a state-run program (or 5 of them actually) and it’s about housing the state’s homeless population. So the $24B isn’t related to the insurance crisis and I’m not sure why you’re bringing it up.
Indirect connection Kirk? Its another example that CA is in a state of disarray and mismanagement. The #1 reason that insurance company’s are leaving Ca. is state imposed restrictions. I suppose we could take a look at the railroad to nowhere as a well run cost effective project to spend Billions of taxpayer dollars.
Yes, exactly, an indirect connection at best, as you define it. The insurance industry problem is not directly connected to the states efforts to reduce homelessness. The only connection is that they are both efforts by the state to deal with housing issues.
The Cal Matters article actually reflects that CA is making some progress improving relations with insurers, or at least trying to, and that according to some of them the reason they are no longer writing policy here is that that they are financially unprepared to deal with natural catastrophes like wildfires and floods. It’s not unnecessary regulation alone, though no doubt they don’t like being regulated.
I think the insurance industry as a whole needs a lot of regulation, considering how deeply embedded they are with financial institutions and the grip they have over everyday life. Look how insane our health care system is, with all the “medical bankruptcies”. The health insurance industry has a huge role in those costs. Same with auto insurance. Why does it cost $2500 to fix a dent in your bumper? Because of the auto insurance industry giving the deep-pocket justification for body shops jacking up the price. Giving carte blanche freedom to the insurance industry would be the absolute worst thing for Californians.
@ Kirk- Not sure if medical and the homeowners insurance are directly related here in CA, but the companies are in the same business… Had a friend who HAS medical insurance I was visiting @ Goleta Valley CH who had been in a car accident. While I was there, the Rep from Cottage Accounting came in and was asking questions about his insurance, workplace and who he banks with… After asking him questions, she went to the next bed over (shared room, both patients arrived the same day) and she asked him the same questions- NO insurance, NO job, NO bank account info… Ask yourself WHO IS PAYING…..
COAST – obviously, us taxpayers are paying for emergency care for uninsured people. Guess what though? If we funded a better universal health care system, we’d be paying a lot LESS than we are now for others’ care.
People are so scared of anything that sounds “socialist,” they’d rather pay more out of their taxes for situations like that.
COAST – so, like the others who read your linked article, I still don’t see any evidence of $24 billion missing. You got anything else to back that up or is this another untrue statement?
CoastWatch, did you READ the article you linked to? I just did.
You make it sound like the money nefariously disappeared.
The article is about data and its management.
I’m not defending the economics of CA’s homeless programs, but you’re not quite on the mark.
….and Newsom and Big Tech pushed Measure 1 to distribute ANOTHER $6.4 BILLION to this issue… They (Sacramento) knows how to manage taxpayer funds with accountability.
If you haven’t already done it, just post your link on whatever social media you use. I’m sure you’ll get lots of likes and “re-truths” or whatever. It has no relevance here.