Assembly Standing Committee on Insurance

Welcome to the Assembly Insurance Committee's oversight hearing of the California Department of Insurance. This hearing is focused on the sustainable insurance strategy announced by California's Insurance Commissioner, Ricardo Lara, last September. We previously held a hearing on the sustainable insurance strategy in December and today will receive an update from the insurance Commissioner on the progress of his strategy.

So far, this year has been a roller coaster filled with ups and downs as it relates to California's insurance market. The ups recently consisted of hearing from some insurers that they are ready to return to California's insurance market.

After reviewing the recently proposed regulations by the Department of Insurance on catastrophic modeling, the downs consisting of insurers continuing to non renew policies and the fair plan growing. I want to thank the commissioner for diving in headfirst and taking on these historic reforms. It's no easy task.

You've been clear and upfront about your December 31, 2024 deadline to complete your strategy, but I must state, time is running out. It's imperative that the insurance market stabilize now.

Today I want to focus on what elements of the sustainable insurance strategy are close to completion, what is left to do, and how quickly can we anticipate the insurance market recovery. Additionally, the governor recently announced a proposal that will address the rate filing process as part of his May revisions.

I'd like to hear from the commissioner on this recent announcement. Members, we will take questions following the commissioner's testimony without further delay. Commissioner Lara, would you like to begin?

Thank you. Good afternoon and thank you, Chair Calderon, for your continued work with my department. With me here today, I have Lucy Wang, who's part of our special counsel, and Deputy Commissioner Mike Peterson, who's our deputy Commissioner for climate and sustainability.

And thank you again for giving me this opportunity to testify and to provide you a critical and important update on my sustainable insurance strategy. I appreciate the continued involvement from you and the members here today to help solve the insurance crisis we're in. Your partnership really has been invaluable and I want to thank you and your staff.

Since last September, my department has been working diligently on ambitious reforms to designed to stabilize our state's insurance marketplace, and I'm thankful for my staff and their incredible commitment to this bold, comprehensive strategy that will modernize our state's insurance market, especially with the growing threat of climate change.

I want to address the questions that everyone has asked upfront and that you have texted me and called me so many times. Chairwoman, when will our work be complete and when will Californians start to see benefits? My answer is we will finish our regulatory work this year, and Californians are already seeing the benefits.

We need to be thorough, thoughtful and deliberate. I don't want another insurance commissioner to be back in front of you in five or 10 years because these regulations could not be implemented and do not meet the mandate of Proposition 103.

The purpose of Prop 103 is fourfold, to protect consumers from arbitrary insurance rates and practices, to encourage a competitive insurance marketplace, to provide for an accountable insurance commissioner, and to keep fair, available and affordable insurance for all Californians. Under Prop 103, insurance companies are not required to write policies that was upheld in the Garamendi precedent.

Underwriting mandates will not prevent insurance companies from further retreating. It's important to say let me put our work into perspective. We are here creating entirely new laws, new procedures from the ground up, and we need to make sure that we have all that in place.

Our entire team has been continuously engaged and working hard throughout this insurance crisis, and Californians are already seeing results. And here are some of the notable updates since we last met in Pasadena. Just yesterday, Farmers announced that they will reopen several of its commercial coverage lines, including for homeowners associations, apartments and condominiums.

As you know, Farmers is California's largest domiciled insurance company and the second largest homeowners rider. This decision is a direct result of my department's approval of its commercial rate filing. My department has also approved three of Farmers homeowners rate filings in the last year as the company continues to write homeowners policies across the state.

Last year we heard I'm sorry, last week we heard that Mercury Insurance Company is working with Tokyo Marine to pick up the bulk of its personal homeowners insurance business. Mercury is another California based company that has not stopped writing new homeowners policies, and Tokyo Marine continues to write commercial policies.

My staff just approved CSA's insurance and changes homeowners insurance rate filing last Friday. This ensures that CSSA continues to write homeowners policies under the AAA Northern California brand. Earlier this year, the department approved significant homeowners rate filings for AAA south so it can continue to write homeowners policies throughout Southern California.

And during my department's catastrophe modeling workshop last month, an Allstate Executive testified that it will end its pause on new homeowners business in California and begin writing virtually in every corner of the state when our strategy is fully implemented. In fact, this is important to note.

Every top 10 homeowners insurance company in California has had a justified rate increase in the past five months, according to the rules under Prop. 103. This underscores the tremendous urgency that my department is showing during this crisis.

Although these are signs of progress, however, we are not going to declare success prematurely or be reactive to every single insurance announcement or headline.

We are all living under a time of uncertainty, and I know that this is frustrating for everyone who is trying to buy or sell a home or worried about whether they can even afford the insurance coverage they need. As we face another fire season, we are continuing to monitor the current fire in San Bernardino County.

And unfortunately, members, this is the reality of our situation. You've heard this before, but it bears repeating. We are on our way to enacting the state's largest insurance reform in 30 years.

Since the passage of Prop. 103 in 1988, Prop 103 was less than two pages of text, and it took years of regulatory work, dozens of rule-makings, and even scores of litigation to make that landmark initiative a reality today. Now we are facing the accumulated stress of decades of long needed reforms and, quite frankly, neglected decisions.

For years, insurance companies submitted rate requests less than what they need, largely because of the stagnant intervener process that we have. Only in California, we are compressing decades of deferral and delay into a one year timeline of action. Essentially, we have literally been surviving with 20th century regulations for a 21st century problem that cannot continue.

There are others who are still trying to figure out if there's even an insurance crisis or just denying that there's an emergency to begin with. I think it's a news flash to all of us. This is what an insurance crisis looks like.

I stand with our governor's remark on his news conference that the time is of the essence, and I appreciate the chairwoman's continued dialogue and appreciate her sense of urgency as well. I appreciate his strong support of my strategy and his continued commitment to ensuring my department has the support and resources we need to implement strong, lasting reforms.

Everything that we're doing now is with one central fact in mind. We know the clock is ticking and we need our reforms to work on day one. We are going to do this right by engaging with you, as we always have, the governor's administration and constructive stakeholders. We will continue to be innovative and bold.

That's how we solve the insurance crisis and stabilize our insurance marketplace in order to benefit and protect consumers. As I said last September, that I plan to complete all the regulatory elements of my strategy by the end of the year.

And I know some may not appreciate this aggressive timeline, but I have to get this right without undue political or reactive pressure. And I also recognize that this strategy might end up being the most important work that I get done during my entire tenure as commissioner. So I fully take this personally and very seriously.

We have taken significant steps forward and are on our way to meeting our deadline, and I want to give you now a comprehensive update on the various components of my strategy. The first component is incorporating catastrophic modeling into our rate making.

As you know, California is the only state that still requires the use of historical wildfire data in rule-making in rate making. In March, my department introduced proposed regulations to allow insurance companies to utilize forward looking catastrophe modeling.

Insurance companies that commit to increasing their writings in wildfire distressed properties across the state, while removing policies from the fair plan, will be able to use modeling in their rate filings. This will increase insurance availability for those currently unable to get coverage except from the fair plan.

This will also result in policies removed from the fair plan and into the regular market, which is all our goal. There continues to be intense stakeholder interest in our pending catastrophe modeling regulation, and I wanna go into a bit of a detail here on this topic.

Last year, my department hosted two workshops focused on answering two critical questions. First, how can we meet Prop. 103's mandate for public review and transparency while recognizing private modelers proprietary material contained in a model? Second, how can we develop the process for incorporating modeling into California's existing rate making process?

Last month, my department invited the public to comment on draft regulation language that would address these two critical questions. The public input process is important, but we have to get this right. I also want to be very clear about one other matter that keeps coming up at our department's regulatory workshops, which is a question around public models.

There is currently no existing option that we can use today, and I support the creation of a public wildfire model. But developing a public model indeed will make California a national leader, especially if we utilize the power of our state's public higher education system in helping create it, which we intend to do.

But again, this is not a quick and simple solution. For a public model to be useful. It takes time and commitment. And let me just give you a quick example. Florida created a public model for hurricanes, which took five years and millions of dollars of state funding.

We will start laying out the groundwork for a public model, and that's what my regulations will also do. Meanwhile, private models are widely used today in the insurance industry and across the nation in both rulemaking and underwriting.

It is critical for the speed of our reforms that we move forward in utilizing private models, and our regulatory drafts lay out a thorough process for model review currently, California's efforts to mitigate for mitigation are not fully recognized, as you all know, in our overall insurance rates because we require insurance companies to use only past loss experience.

Moving forward, allowing modeling will update the department's rulemaking process to include recognition of mitigation efforts at the parcel level and also, more importantly, at the community wide level. Recognizing mitigation will make people safer and help keep insurance fair and available for all Californians.

My department plans to host a public workshop in June setting out commitments that homeowners and commercial insurance companies must meet in order to use models in their rate applications. As I stated when I announced my strategy, insurance companies must increase and maintain their market share of wildfire distressed properties.

For homeowners insurance coverage, they must meet a threshold of no less than 85% of their statewide numbers. If an insurance company fails to follow through on its commitment, my department will use its enforcement authority to review the rate filing and reassess the rate.

Also, as part of my June workshop, we are, and I'm looking at you as I am we are going to be identifying welfare distressed areas where we expect insurance companies to write more policies. This is going to be part of our modeling regulation. We will release maps that these wildfire distress areas.

We will be releasing the maps of these wildfire distress areas in advance so everyone can see them. And we all know that urban areas and rural areas have different characteristics.

We are looking hard at where the fair plan has grown and become the large percentage of the policies, and here are some things that we're going to see in these maps. In some cases it's going to be an entire county and in other cases it would be individual zip code.

We believe in the best approach, which is a hybrid approach is best so that if you are stuck on the fair plan because of your unique wildfire risk, whether you're urban or rural, there will be help for you. The second component of my strategy involves incorporating reinsurance into rulemaking.

My department plans to introduce a proposed regulation proposed regulation text in July to allow insurance companies to take on greater risk in California, to incorporate the cost of reinsurance in their rate filings, and to cover those risks.

To make sure that this is being done right, we are hiring an outside expert to provide technical and actuarial feedback on the drafting of this regulation. This is part of the ongoing budget support that the governor talked about last week and was included in the appropriation that the governor and the legislature made last year.

Reinsurance is important for insurance companies to help manage the risk. As you all know it enables them to write policies and cover losses. Despite growing threats from climate change, California is only one of few states that does not allow insurance companies to recover this expense in their rates.

This contributes to the insurance company's decisions to renew policies or to restrict writing just the low risk policies in California, and that's if they're even writing at all. The third component of my strategy involves modernizing the fair plan. I continue to improve the fair plan, which has been neglected for many years under multiple insurance commissioners.

The fair plan needs changes to fulfill its statutory role of providing coverage to all when they cannot find coverage in the regular market. My staff has worked on reports and audits to make the fair plan more responsive to consumers.

And after being subject to the department operational and financial surveillance exams, the fair plan is focused on improvements such as strengthening controls over informational systems, making appropriate changes to its operational processes, improving customer service and response times by hiring more staff, and implementing more reasonable and clear eligibility guidelines for its residential dwelling policies.

I ask any consumer or insurance broker who is having issues with the fair plan to call our consumer services hotline. We will resolve your issue as quickly as possible again by July. I plan to require the fair plan to increase coverage to 20 million per structure for our larger homeowners associations, condo associations, farms and other businesses.

I will also require the fair plan to have sounder financial stability, a sounder financial stability structure, and my staff have had construction meetings with the fair plans governing board, executive management and the admitted insurance companies in order to ensure a smooth process as possible and that they have the work plan that helps meet the needs of consumers during this crisis.

The fourth component of my strategy is improving rate filing efficiency. In February, my department published a complete rate application regulation that creates clarity in the rate review process for all participants. This is a critical part of reducing unnecessary delays that can cause rate filings to take more than a year.

A more complete rate application upfront ensures my rate application experts have the necessary comprehensive information that they need to make quicker decisions pending the rate filings. Last Friday, as you mentioned, Madam Chair, the governor announced a new legislative proposal that would help expedite my department's insurance rate filing process.

This proposal could be done more quickly via statute than regulation. This is why we are going this route with the governor. I look forward to partnering with you all and thank the administration for working with me on this important accountability element of my strategy.

This proposal is similar to a concept discussed last summer between my department, the state assembly leadership and the governor's office. Under this proposal, my department will have the resources to thoroughly review a rate within the current 60 day. That's the 60 day timeline prescribed under Prop . 103. The proposal allows for a 30 day extension when needed.

My department will provide information to the insurance companies and the public on resolved and unresolved issues that will help get filings reviewed more quickly. This proposal holds insurance companies accountable for providing the complete information my department needs to make informed and timely decisions on these filings.

I was in support of this proposal last year and I'm remaining committed to it today. Consumers benefit when more insurance products and greater availability of coverage are available. Insurance companies should have more certainty on their pending filings so that we have a competitive insurance marketplace once again.

Above all my department rates review, my department's rate review is always the public's check on rates. We will continue to thoroughly review each and every application filed to make sure they're compliant with our laws and justified under Prop. 103 and that consumers are protected.

Now, the fifth and last component of our strategy is transparency and accountability for intervenors. Last September, I initiated an administrative reforms to increase transparency, ensure accountability, and to increase public participation in California's Prop. 103 Intervener process. Under Prop.

103, California is the only state that requires all homeowners, commercial and auto insurance rate filings to be open for intervenors. Ultimately, this is another cost that is passed on to consumers in their rates. My department launched a new website to increase public transparency regarding this intervener process.

This webpage explains how the process works and has links which allow the public to access the petitions filed by intervenors to participate and to recover the compensation. We are being transparent with the public about who is intervening and how much they are being paid. You can also access the department's response to intervener petitions.

You can review the department's new orders and see that we now only allow intervenors to raise concerns that are relevant to the pending rate filing application. This is a new accountability action that my department has implemented since last September.

In closing, we have been meeting across the state with fire chief realtors, insurance industry, consumer groups, agricultural groups, HOAs community associations, local elected leaders, among others. We are moving at the speed of transparency and good decisions. California's history is littered with two fast remedies that have not stood the test of time.

Proposition 103 requires all information provided to the department be subject to public inspection. We cannot sidestep this requirement because we don't want much needed reform to be tied up in avoidable litigation. That is true even under the governor's executive order. From last September.

If we lose in court over process and not substance, that would be the ultimate failure. Insurance companies and insurance consumers have had strong feedback to everything that we are publicly releasing to date. We recognize that there are continuous concerns and that we're not going to satisfy absolutely everyone.

The governor's executive order supports my authority to move forward quickly. And let me be very clear. Even if the legislature were to introduce and pass legislation with an urgency clause this year, it would still have to go through the regulatory public process at my department.

My regulatory actions will be in place by the end of this year much faster than implementing any new legislation. Doing something for the sake of expediency will not help get filings approved any faster or just further complicates the work we are doing at this moment.

My department, especially my rate regulation branch, needs to be supported, staffed and equipped to fully and successfully implement this groundbreaking strategy.

Major reforms require an entirely new implementation process, and these include hiring the right people with the right competencies, supplementing our workforce with consulting services, restructuring our rate regulation branch so that staff can review evolving insurance products made available to consumers in the 21st century, hiring staff who have previously worked at the department and have specific rate filing expertise as retired annuitants, as well as paying staff to work overtime.

We also are continuing to support our existing staff with real time training and investing in their development and their developing our workforce and ensuring that we're using all the resources, including the NAIC Center for Excellence in Modeling.

In addition, with entirely new procedures being developed from the ground up, insurance companies also need to know what to file, how to file it and when the time is right to file. I want to thank the legislature and the governor for their continued budget authority to hire consulting services.

I cannot emphasize how important it is that we as a very large regulatory department, think about effective implementation so that we all succeed. We have to also remain flexible. We have to be responsive. The lesson of the past is that we cannot be locked into another 30 years of stagnant regulations.

This must be a living document, living reforms that can adjust to California's changing risk profile. My department is working under ambitious timeline which allows the necessary public input and transparency required by existing law and provides little room for error.

I respect, I respectfully ask that you continue to give me and my department the support and the space to do our jobs and get this all done right by the end of this year. Thank you.

Thank you Commissioner Lara and we appreciate you being here. I know you're a little under the weather, so thank you for coming. Despite not feeling well. So in the interest of time, I'm actually going to open it up to my colleagues who might have questions. Assemblymember Connolly.

Thank you. Chair good afternoon, everyone. First, thank you for allowing me to participate. Although not a member of this committee, I'm chair of the Select Committee on wildfire prevention and Assembly, lead on the Joint Committee on Climate Change. Commissioner Lara, I wanted to thank you for appearing, for continuing to engage.

Needless to say, the perspective I think I have and colleagues are we're looking forward to the ongoing, robust discussion and really assurances that everything that can possibly be done to help the millions of Californians currently struggling to get affordable insurance is being done. And I know you take that very seriously.

If I might offer just a couple of quick opening thoughts and then a series of questions. I come from this as my district specifically is in a region which has experienced some of the worst wildfires in recent history.

And I'm constantly talking to folks who are doing everything they can with their own money to protect their homes and communities from the next disaster. Yet too often, their rates on homeowners insurance are rising dramatically, or they are actually losing coverage altogether or unable to access adequate coverage.

And potentially the fair plan, which, as you've noted, creates its own set of issues, the sustainable insurance strategy and the safer from wildfires program must be tooled to ensure that consumers are receiving direct benefits for doing the right thing and that we are reducing the risk of more disasters for vulnerable communities.

Final point I'll make is I've authored AB 20416 this year to improve the safer from wildfires program. I look forward to working with the department, the Commissioner, to make these programs as helpful as possible to as many people as possible.

So some questions, and I'll primarily focus on some safer from wildfires, but just a couple preliminary ones, are we still on track to meet the deadline for SIS outlined on the Department of Insurance's website of December of this year for implementation? Great. You mentioned your April 23 workshop. Thank you for doing that.

Could you provide a little more detail on what the public input your department received from the workshop on the new catastrophe modeling proposal?

Sure. I'll have my special counsel, Lucy Wang, a follow up on that.

Hi. Good afternoon. So the April workshop was very informative in the sense that it was the first opportunity for stakeholders and the public to take a look at our draft regulatory text.

And we were answering two important questions, which was one, how can we come up with a process that protects modelers proprietary information while also meeting Prop 100 and three's public review process. And so we got to hear concerns from the public, from consumer organizations about whether or not they will have a right to review, which they will.

And then we also heard from modeling companies. Surprisingly, everyone was very receptive. This is really, it was very creative and very difficult to try to thread the needle on that because it's very important that we do meet the mandate of Prop 1003's public transparency.

So as a result of the workshop comments, we are going to go and take a look at the.

And so as a result, we receive very technical comments about the placement of those regulations, where they were located in the insurance code. I would say that there is work to be done in areas to be tightened, but by and large the reception was positive.

No, great to hear that. And I think we're all looking forward to the deeper dive and understanding more about this. I know several of us had occasion to meet with Lloyds of London and heard more about kind of best practices around this. So appreciate as work continues on that.

So turning to safer from wildfires, perhaps starting with just a sense of is there a current backlog for approving safer from wildfires discounts.

Thank you Mister Assemblymember. I'll give you a status of where we're at. Our rate regulation branch has received around 395 filings incorporating safer from wildfires. I believe 150 of those have been approved. But several of those filings unfortunately have been intervened.

And that's part of our process that we cannot change even to give our consumers discounts seems to be complicated under this intervener process. And so we're going through the process as required by Prop 103. But we're roughly almost half of those approved.

Okay, we're seeing some reporting of late about those who seek to participate. They're doing home hardening, etcetera. Yet there's questions about what is the actual discount they receive or kind of the cost benefit, if you will, of doing it.

So one issue, Farmers Insurance, for example, estimated that the average policyholder in an area with high fire risk would only save $42 to $75 a year for taking mitigation steps. There's another example. Multi pane windows and no flammable structures within 30ft of a home results in a 0.1% discount for each.

Meaning if my policy costs $5,000 annually, my work will save a grand total of $10 annually. I guess the question is, where's the incentive? Maybe if you can shed some light on that narrative that's kind of taking hold.

Yeah, I apologize. Yeah, let me look into that further. Obviously these policies differ from homeowner to homeowner. Cause all the residencies are, the residences are different. I can tell you that from what we've approved, and I can only give you the macro numbers. We've actually seen a 20% to 30% discount.

But let me do a deeper dive and see on those specific policies, because the last thing we want is it not to be significant enough so that we don't encourage folks to actually, one, take the discount and two, do the home hardening that we need. So let me follow up with you on that.

Yeah, would be happy to follow up with you on that. I have communities and folks spending thousands of thousands of dollars to make their properties less risky for insurers, and yet there's still no one in many cases that will write insurance coverage for them. Could you elaborate on your proposal around the 85% minimum?

Where are we vis a vis the insurance industry with that commitment implementation? That seems to be kind of a cornerstone of what you're proposing.

Yeah, absolutely. So we are on, like I said, we are on schedule to wrap these proposals done by the end of the year. We're already starting to see the insurance companies and the market kind of respond to the regulations and proposed regulations.

I don't know if you were here earlier, but I can just give you a quick synopsis.

Please. Yeah, I'm sorry.

No, it's okay. So just yesterday, Farmers announced that they're going to reopen several of its commercial coverage lines, including homeowners association apartments and condominiums. As you know, they're the largest domiciled insurance company and the second largest homeowners writer.

Last week we heard Mercury Insurance, who's also domiciled, is taking Tokyo Marine to pick up the bulk of its personal homeowners business. Mercury is another home based. Our staff just approved CSSA's insurance exchange homeowners insurance rate last filing last Friday.

This ensures that CSSA can continue to write in Northern California. Earlier this year, we've approved a significant homeowner's rate filing in AAA South so it can continue writing home policies in Southern California. And then just a quick fact.

Every top 10 homeowners insurance company in California has had a justified rate increase in the past five months according, and this is under the rules under Prop 103. So demonstrating that we're trying to move as quickly as possible as well.

Great. Do we have any data or a data collection process on how many households have benefited from the Safer from Wildfires program in terms of money and discounts etcetera?

Yeah, let me again do a deeper dive and try to get that data for you. But I have Mike Peterson, who's our Deputy Commissioner for Climate and Sustainability. Maybe you have an idea.

Yeah, thanks for the question. No, I can just follow up on what Commissioner Lara said and that is that this is a book that's still being written. As these discounts are being implemented, we are collecting data, but at this point, we can't. It's a single point in time. We can't capture the whole comprehensive benefit, that process.

It is a challenge in that, you know, this regulation just got implemented or just got finalized in October 2022. As Commissioner Lara mentioned, we are still approving rate filings, but the ones that are out there are having an impact and will calculate and monitor the progress moving forward.

Maybe we can work on maybe creating some sort of reporting mechanism so we can track. I'm also curious to see if we can track the amount of take up and if there's some sort of macro numbers we can achieve here. Am I working this out real time?

And then you did ask about the commitment from insurance industry on the threshold of no less than 85% of their statewide numbers.

That continues to be their commitment in our ongoing conversations, which really makes this agreement really historic, in which we're actively working with the industry to meet their needs and to make sure that we're following the process and the public transparency mandated by law.

I would also say that I think this, I know that this, the sustainable insurance strategy is actually maybe the first time that we're all trying to work together to solve the backlog, get some commitments and get some real funding around mitigation.

And so your piece in terms of the budget becomes very critical when it comes to risk mitigation.

Couple more questions. So I was surprised to hear in this Committee room when I was presenting my Bill, there was a representative of the insurance industry that said that single family homes, if you will, doing hardening isn't helpful.

We have, I personally can attest to, at least visually touring devastated fire areas where it's very noteworthy in a given neighborhood that you might have one home that was completely burnt down, another standing, two more burnt, so on and so forth. The common denominator seemed to be that the one standing did in fact, take burnt precautions.

So do you agree with the insurance representative's assessment? Shouldn't insurers want homes to be harder to, even if they're single family neighborhoods?

Absolutely. It's critical. And this is why the Safer from Wildfires regulation is critical because for the first time ever, we drafted community wide mitigation standards. And of course, as you know, the individual dwelling and the surrounding of that dwelling are critical.

But after hundreds of town halls in every part of California, one of the issue that came, that kept coming up was, well, I've done everything to protect my home, but my neighbor hasn't done anything, or I'm abutting a national forest, or this is state property or city property.

And so this was our way of trying to capture everyone. But we also know that the topography is very different and the landscapes are very different. So the needs for single family home communities are going to be very different than, let's say, you know, Mariposa County, for example.

So this is why also the catastrophic modeling becomes important because now for the first time, we're going to be able to go in to see the community at a zip code level, county level, to see if they're doing the mitigation.

This is also going to prove important after the next wildfire so that we can see how the fire acted. How were these homes mitigated? Did they implement community wide mitigation standards, which by the way, this has never been done before for the creation.

So one, I would answer your question by saying, absolutely, we need to give all the different characteristics of our unique and diverse communities every tool and give them clear actions that they can do to be able to bring down the risk and keep insurers writing and keeping themselves safe.

Yeah, and then I appreciate that. And then finally, and I always end on this, what about actually preventing insurers from dropping people who are actually doing the mitigation work on their homes?

In other words, how can we incentivize people to protect their homes if there's no guarantee they are even going to have insurance once the work is done?

So this is where, this is where in my talking points, I said we cannot restrict ourselves to another 30 years of really strict regulations that do not allow us to adjust and, and be able to reveal once these regulations are in place, because we want to know how the market is reacting to our sustainable insurance strategy so that we're able to assess and verify and not have to wait through an entire process to be able to act quickly so that we're meeting the challenges of our ongoing risk profile and risk changes.

This is why the commitment of having insurers going back into these communities if they want to use these two tools becomes important because we are giving them what they've been asking for and we are asked and we are committed, they're committing to going back into those communities.

So again, putting my former Senate appropriations hat on is what do you want, what do we want for the consumers? And let's figure this out together.

No, really appreciate that. And just final comment, put me in the column that if you are doing the necessary mitigation work. You should not be losing your insurance.

Absolutely.

Thank you. We have several more questions from colleagues, but I wanted to ask you a question real quick. I greatly appreciate your transparency and your partnership. I know how hard you and your team have been working.

As you work through the sustainable insurance strategy and the regs and implementation, do you anticipate any more of the admitted insurers non renewing or withdrawing from the market?

Chairwoman, this is a very important question and one that keeps me up at night every day. As you know, I can't predict the future, but this is why time is of the essence and we're already seeing the market react to our changes. Right.

I think at first they were very skeptical about are we really going to get this done? Are we really going to actually modernize Prop 103? And once they saw that we were doing it, you're starting to see insurance companies really respond to that. However, I don't know when the next big fire is going to happen.

I don't know when the big one is actually going to hit or the next big flood. And so trying to forecast where the market's going to be is really, it's almost impossible. But I can tell you that the conversations I've had with reinsurers around the world is that they're leaning into California with these changes.

Some of them have said, please push on the reinsurance. That's critical. Others say, you need to work on your rate filing time. We can't spend a year or two on a rate filing that once it's approved, no longer meets the, the risk profile of what we're trying to solve for.

So this is why the trailer bill language we're supporting and the governor's may revise is critical because it holds all of us accountable. It says, insurance companies, you need to provide a complete ray file. Department, you need to get this done within 60 days.

Unless you have some concerns, you're going to get another 30 days, which is the spirit of Prop 103. We lost that during, you know, during the process.

And so, you know, this is why it's important, at least we felt, to get that TBL in, that could take into effect quicker than us running another regulation that would have to go through the entire regulatory process.

And that's why we felt it was a better way for us to do that legislatively so it can have an impact quicker and keep us from hopefully another catastrophe.

Thank you. Assemblymember Wood.

Thank you. Thank you, Madam Chair. I kind of want to go back to that. I have a series of questions which probably wouldn't surprise you, Commissioner. We'll go back to that. First of all, we haven't seen trailer bill Language. All I know is there was a slide last week that said expedite rate file.

I can't remember exactly what it says, but anyway, there's a slide in the Governor's presentation last week, but we don't know what we're talking, what we're talking about here. So you said it will be faster in statute.

We could have done that had you come to us and told us, the Legislature, we happy to work with you to come on something there. Why do you feel that that's, and I heard you say something else, that it might not be faster. So I'm confused. I have heard it two different ways.

Am I the only one who heard it two different ways? We heard it two different ways. So what is the right way?

We were prepared to do it through the regulatory process, but just given our workload and trying to get all these regulations done by the end of the year, this was the one component that we could have done that we felt our legal team said, you know, we could do this in the Legislature.

What component?

The mid max, in terms of the rate filing, the complete rate filing, where it says moving forward, the rate filing process is we're gonna do a complete rate filing for insurance companies. They have to submit a complete rate filing, and then the Insurance Department has to get this done within 60 days, which is the Prop.

103 requirement with some exemptions for the 30 day.

60 days from what?

From the rate filing.

From the complete rate filing?

Submitting a complete file. A complete file to approval, which gives certainty to the industry that it's no longer going to languish in like a year or two. So once we got back and we were reviewing, we're putting a timeline together, working backwards from December, our legal team decided, you know, we can get this done.

This is one component that we can just, we can get that done legislatively. So it's the exact same language that was in the negotiations from last summer. And we can get that. We can get that for you.

And so we just felt, why have this component added to the long regulatory process when we could get that done this year? That's the one piece that we feel that we could defend legally through the legislative process.

And I've heard from industry that one of the challenges with a complete rate filing is that there's a tool that they're not able to use that you have, which prevents them from being able to give you a complete rate filing at the time. So what are we doing to resolve that issue?

Well, it's very vague because we wouldn't even know what tool they're talking about.

I'm sure they'd be happy to tell you. I'm sure they have, actually.

Yeah, because all the brief findings are very different. But we know that one, under this agreement, we're all holding both of us accountable. Like I said, you know, they're going to.

Because I could tell you in my past experience, insurance company submits a rate filing, we get approved and it takes a year or so, and the minute it gets approved, they submit another one just to have it as a placeholder.

Without the data that we need to be able to look at, is it justifiable and go through the process. And I don't blame them because if it's going to take another year, you know, we're going to just put something in to put it in. Now, which creates a problem for our actuaries. Right.

Because then you become, it becomes a back and forth. Well, it's incomplete. Well, we need to know what you're looking for. And then a meeting happens, and then if it gets intervened, that's a whole other process. So now the TBL, hopefully from last summer, is we're going to be very clear that one.

You need to submit a complete file. So we hold the insurance companies accountable and we're holding ourselves to account that we're going to get this done within 60 days. So that's what we're, that's what we're trying to all do because, look, everybody knows how to play the game. And some companies will tell you we submitted a complete.

But then when I, when I engage and figure out, well, what are we missing? All of a sudden the data appears and then it gets, you know, it gets approved. So we're trying to stop that game and just create clear deadlines for everyone moving forward.

Okay, well, thank you. And I want to say upfront, so I hear the urgency in your voice, and I appreciate that. And I don't want to underscore the urgency of the constituents that I represent who are really, really, really frustrated. So September 21 of last year was this expanded authority from the Governor. We are now May 15.

That's eight months. I know you're working on the cap modeling. There's cap modeling in 49 other states. Correct. So are we reinventing the wheel here? Why are we not adopting one? I understand we want to get to a public model. That's fine.

We can do that in the out years, but for the time being, why are we not looking at a model that's working and adopting that, at least on a pilot basis, to see if it works or not? Or are we trying to create the perfect cap model here? Because we don't have time for that.

We don't have time. I'm going to give you a simple answer, and then I'm going to go into some detail. Prop 103, well, no other state has.

We're gonna get sued, no matter what we do here. This is California, man.

Right. But I want to get sued and not lose in process. The process that's clearly dictated within Prop 103. I'm just telling you the rules I have to play with. Right? No other state has Prop 103 that demands certain transparency and processes that need to be in place.

I could have approved this if I wanted, quickly, but I don't want to go through this entire process to just lose in court over process. I'll take it over substance and then there's clear direction. But that's the short of it. That's the short answer that I have. And California's market, Assemblymember Wood, is very different than other states.

And I know that's not an answer you want to hear, but we're way more complicated. And we have this proposition that dictates how we need to go through this process and creating an entire new catastrophic model, something that we've never done from the ground up, in my opinion.

And I know I said this earlier, I know some people still don't agree with our timeline, but trying to get this done in a year is still revolutionary for us. And I know time is of the essence. And so the short of it is Prop 103. We have to adhere to it. It's the law of the land.

If you want to have conversations around that, we can, but no other state has Prop 103.

So you couldn't pilot one of these others while you're creating the big, the one that we're actually to see if it works or not. I mean.

We would still have to go through this regulatory process. And by the way, I know there was questions around the Governor's Executive order. Even with the Governor's Executive order, it does not cite step Prop 103 that we have to go through.

So what we have done, I'm not going to, I don't want to lay out our entire legal strategy, but we're working on is the emergency regs to submit to OAL in conjunction with the normal reg so that the emergency reg can get implemented, because we're still going to have to go back and do the normal, for lack of a better word, or traditional reg.

We're getting those done simultaneously. So we submit them both. So then we're not having to go back and redo the reg that we already submitted under emergency guidelines. I don't know if that makes sense.

I guess so. But I've always interpreted emergency regulations as being much faster. And so that's why I'm confused about the timelines here, because emergency means emergency, not 810121415 months. That's not an emergency. By then, the patients died. We don't have time for that.

I mean, I don't mean to laugh, but you're absolutely right. Why don't we have Lucy further explain?

Why don't I further explain? I mean, the Commissioner hit it on the head right there, which is Proposition 103.

Even if we passed a regulation within 55 days under emergency rulemaking that says you're allowed to incorporate catastrophe model into rate making, that means insurance companies who come in with a model have to submit that model and in all its transparency to the Department, which they're not willing to do.

Modeling companies do not want to submit their models under Prop . 103 because it is subject to complete public transparency plus with the intervention process.

So that process alone can take, that will, could take the Department one to two years to review, whereas now we are implementing regulations that take into account the modeler's desire to maintain that information proprietary while also meeting Prop . 1003's mandate of public transparency.

That's why the second reason why it is not similar to other states is because other states are filing use. They go ahead and they file their rate with cat modeling. And you as the state have to accept that even if it means increased rate premiums for your consumers.

In California, where, you know, we are very strong on our consumer protections and we are the only state mandating where if they use this risk mitigation tool, cap modeling, they also have to make that measuring commitment to right policies in our wildfire distressed areas.

And that's under Prop . 103.

So I'm going to guess that the issue around reinsurance is going to have a similar answer because now, you said reinsurance is. We're not going to see your proposed reg until July. July. So that's a full 10 months since. And reinsurance has been used worldwide. So are we reinventing that wheel, too?

No, we actually, I would have thought that that one might have been done sooner. What am I missing here?

I'm just. Okay. I mean, you're not. No, no, you're absolutely. These are important questions that we want to. It's important that we clarify?

Yeah, I mean, we face this question every single day. And if it was that simple, we would have passed a regulation already. It's not a simple thing of just incorporating reinsurance is something that, first of all, unlike other states, that they just incorporate reinsurance.

We have stated very clearly, we are only going to incorporate the net cost of California insurance. We are not going to carry the cost of other states. Number one.

Number two, this requires actuarial formulas that we currently don't have anyone in the Department that can draft, which is why we are hiring an actuarial expert to draft the formulas. It's not as simple as just passing a regulation that says insurers. You can now incorporate the net cost of reinsurance into rate making.

That actually requires much more complications that we are making sure that we abide by so that when it happens, it will be done appropriately and under the law.

The second component to reinsurance is it's not just an automatic, hey, everyone, we're gonna give you reinsurance and you incorporate it, because right away consumers will say, well, that's just a direct connection to passing on an increase.

Once again, this is why it was so landmark that the Commissioner negotiated this agreement with insurance companies where that provision of being able to incorporate the cost of reassurance is directly tied to the commitment to right in wildfire areas.

You are seeing now a real time conversation that I have in my Department with our legal team.

No, and I appreciate that. And I think one of the concerns that I have is that the urgency of our constituents is significant. So while I understand, look, I don't want to pay more for insurance either.

I don't want to pay higher rates, but I sure as hell don't want to be stuck on the fair plan and pay twice as much for less coverage. And that's what we're facing right now. State Farm has decided not to reinsure a bunch of people in our districts in areas that were already burned out from fire.

72,000 policies. Right. You didn't talk about state Farm in your comments, but 72,000 policies not going to be renewed. And these already burned. So a lot of that fuel is gone and the rebuilds are brand new homes that are supposedly fire safe and they're not going to be covered.

And so my point, I guess what I'm is like, we also have, I've got so many thoughts here. I was hard to keep it straight, but in December when we met in Pasadena and we talked about, I think you said at that point there were like 95 or something rate filings that were in process. Right.

Where are we now? How many of those have been approved? I'm going back to my original line of questioning.

Yeah, no, that's great. Do we have that number?

I don't have that number. I have something similar that I can. Okay, go ahead. So thanks for the question. I don't have the number on the 95 that you were asking about, but I do know that in five of the last six months, the Department has closed more filings than we've received.

We tend to receive hundreds per month, so we're closing hundreds as well. And so we are closing more per month, including in March, we closed 13 more than we received. So we are making substantial progress on the number of rate filings we can get.

You. Let me work on getting you a deeper number.

I don't know. I get the impression that filings are still lagging. That's why I'm asking. Do you have adequate staff to keep up with the filings?

No. And we're in the.

Why are you not contracting out or something to get adequate staff? I know that's a, a problem word sometimes, but this is a crisis. Why are we not doing that?

Yeah, we are going through the process of one hiring folks, putting them through the civil service process, making sure they pass the exams and take the exams that they need to go into public service. And we're also contracting out some of the specialty work that we don't have specialty for. So we're doing both.

So as we move forward to the, you know, fast forward, we get to the point where cat modeling is in place and reinsurance is in place, and we've got a handle on how we're going to deal with our intervenors and a variety of things. I got to think that a lot of insurance companies are going to be.

Wait. They're going to want to see all the pieces. They might be indicating they're willing to file more, but I kind of want to package that, you know, in the single rate filing or series of rate filings.

I guess what I'm getting at here is we're going to get to the end of 24 and the regulations are going to be done. Okay. But it doesn't sound like, it doesn't sound like it would have happened if we didn't, if we were not getting this one through the trailer Bill. So that you were. No, we could.

We would have. We would have. We would have still done it through, regulate the regulatory process. It would just put it extra burden on the one component that we think we can defend in court that could be done through the legislative process.

Okay. All right. So we're still going to get through this process. You're probably going to have a lot of pent up demand for rate filings here. How are you going to be positioned to do those rate, you know, to adjudicate through those rate filings in an efficient way?

Because the relief for consumers is, still feels like it's years out. And that's the point and that's the urgency. And I hear it from you. But are the folks in your unit all as energized here? Because. I hope so.

Cause I can tell you 100%, given the reality of the nature, I know you're getting calls. Everybody's getting calls. I get your calls.

We all understand the urgency and we're trying to thread this very carefully, given the roadblocks that we have that are unique to the state that are in place now and again with the goal of implement being, being able to have these implementable day one and still be defendable in court and not lose this over process.

And so we're being very careful. I do hear you, and I understand, and I'll tell you that my staff, my leadership team also understand because we are at the town halls, we are at the community meetings, and we hear it.

I just, I have to put my hat on as, you know, somebody that, and I understand this could be the most important thing that I get done as Commissioner.

And so I understand the urgency and I want to make sure that we get it right and that's going to be defendable because as you understand, this is California and we want to make sure we're put in the best position.

The last thing I want is for this to be implementable, and then consumers lose out over a court case, and then we're back to square one. So I hear you. I understand your urgency. I really want to get this right. And so, yeah, we're working very hard to get that done and we understand.

Yeah, I know. And you're very careful. You said your leadership team. Do you have the full support of your rank and file? Are we, you comfortable that you do you need more, I mean, from us to expedite this process? Because.

Yeah, no, we have the resource. We are very grateful for the resources that we have.

We've been in communications with our Chairwoman on both the Senate and Assembly, with the governor's office, on the timelines that we've set up to hire folks to fully get staffed and to contract a lot of this workout that is you know, that we don't have the expertise for. So we're in constant communication with our teams.

What the 1400 employees at the Department of Insurance understand, because we communicate with them internally too, is the essence of this crisis. And so everybody understands what we're working on. And so we're all on board.

And I've just a couple more questions. Madam Chair, if you're okay, you said you're looking at contracting for expertise you don't have. Are you considering contracting for just manpower because of the workload? You said you're having a hard time hire.

It takes a while to hire people, and that implies that things are going a little slowly at the rank and file level.

I can tell you. Let me see. I have some numbers here. From June to June 2022 to May 2024, we've had a total of 45 hires. From June 2023 to May 2024, we've had a total of 24 hires and separations, meaning folks left are 13 and eight. We've had several job fairs that we've never had before.

And we're trying to get people, you have to pass exams, you have to do all these things and preparing them through the process. But the unique specialty around catastrophic models, for example, and bringing those actuaries that know that we're really close to closing that out so we can finalize that regulation as well.

I'm not a big fan of outsourcing. It ends up costing more money. But I'm more interested in speed at this point. If there's something that can speed the process along, that's important. What's your honest assessment of the current condition of the fair plan?

Well, like I said, the fair plan needs a lot of work, and we detailed some of the work that needs to be happening, and I'll just go over it really quickly.

After several of our financial surveillance exams of the fair plan, we are focusing them to improve, strengthening their control over their informational systems, making appropriate changes to their operational systems.

We've heard nightmares of people waiting 6 hours to get a live person on the phone, improving customer service response times and asking them to hire more staff, implementing a more reasonable and clear eligibility guideline so people understand, you know, what they're going to be covered for, especially for residential dwelling practices and policies.

And I said in July we're going to again, directly impacting your constituents. In July, we're going to require them to increase their coverage limit to 20 million per structure for our larger homeowners associations, for our condo associations, and for our ag industry that are currently going through this problem.

And so we're going to require the fair plan to actually also have a sounder financial stability structure so that we're very clear to see where are they financially and what they need.

This is important because if there's an ongoing threat of a looming demise of the fair plan, then insurance companies are not going to want to grow in California because they're on the hook for the fair plan.

So this is why it's important that we stabilize, modernize this fair plan so the insurance companies know, okay, they're ready to meet this demand so that we're not going to be on the hook here for this and that we can actually continue to invest in California. This is why the fair plan becomes so critical in this discussion.

And we're going to be asking for very clear and direct. We're more than happy to give you updates as we move on these different aspects of what we're asking them to do through my existing authority to update their operational plan.

And just a final point.

People that are losing insurance, people who can't make real estate transactions because of this, having to go to the FAIR Plan, paying a lot for a minimal amount of coverage, and then having to get additional coverage to cover that. I know in our family situation, I would gladly pay 20, 30% more of an insurance premium to have insurance that is real insurance.

I mean, I'll call it real insurance because it's in a single place, but to have the adequate insurance that I need to protect my assets, then be in this other entity that doesn't. And so the very fear of losing insurance, you know, as a consumer is a big deal.

And like I said, I don't want to pay more, but I'm willing to do it. And I hope that consumer advocates recognize that the risk. If you're a consumer advocate, you should be concerned that people are forced into paying a whole lot more money for something that's not giving them adequate coverage. That should be something consumers should be looking at. The consumer advocates should be looking at and let me have my 20 or 30% increase for the certainty of being able to cover my home and my assets.

Assemblymember Wood, you know, you hit the nail on the head. I'll tell you two things. Immediate thoughts. You know, I was in Placer County and I had a grown man cry in front of me and said that he does not want to be in the FAIR Plan. And what he wants is enough notification to figure out how much he's going to pay.

He understands where he lives, but wants two things, wants to really understand the cost of his policy and his fire risk score, and also have some certainty so that he can budget with his family for the future, this constant year, annual year, to figure out if I'm going to lose my insurance for the only asset that I own.

Had given him so much anxiety that he didn't know what to do. And so he asked me do everything we can to fix the FAIR Plan to make it a little actually fair for consumers. This is why we came up. It was that story that we pushed to have the FAIR Plan offer a comprehensive policy coverage. So we're going to send folks to the FAIR Plan, give them the opportunity to get a comprehensive coverage while they're there, and let's do everything possibly to get them out.

This is why part of the plan is when we married it to, you want these two things you're going to write in these communities and you're going to simultaneously depopulate the FAIR Plan and the first policies that go out, we have a clearing house of those properties already that are fully mitigated, are going to be the first to go.

And what our insurance company is going to want to do, because that's their nature, is I'm going to try to take as many properties that are in the FAIR Plan immediately that are fully mitigated, because nobody's going to want to take the ones that are straggling.

And maybe some of those are never going to be able to get out of the FAIR Plan, but at least we've managed to one, get them a comprehensive policy and taken the bloat out of the insurance, out of the FAIR Plan, so that we can properly assess the folks that still remain, whether that's giving them a subsidy to harden their home.

Many of these people are disabled and can't do the work themselves, can't afford it. And so it allows us to delve in, to really look at who are these homeowners that are still left in the FAIR Plan and do that work. That's where I wanna get to in the next two years after we finish the strategy this year.

And maybe a bunch of your staff can go through an exercise of applying for the FAIR Plan themselves and seeing what it would cost them on the FAIR Plan, so they can understand the anxiety and frustration that some of our constituents go through.

We did the exercise of actually calling the FAIR Plan to see how long it actually waited, and we did that all simultaneously. And I could tell you it was ours.

Assemblywoman Pellerin.

Thank you. Thank you, Commissioner, for being here today, and really appreciate the comments from my colleagues. I represent the area that was damaged by the CZU fires and a zip code where people are getting non-renewals daily, and we're getting calls constantly on this issue. One question that was brought to us by a constituent was that they got a cancellation determination based on drone flyovers. How accurate is that footage?

This is unique, because usually what we hear is what they do currently is use satellite imagery to even filter you through that first before to see if they're even gonna offer you a policy. And we know that information isn't granular to the ground to see what's happening.

This is why my regulation around fire risk scores and making sure now law that people can actually understand what the fire risk score, understand what went into that fire risk score, and being able to appeal it and give you time to lower that score.

That never happened before, because the insurance companies were just making decisions through this kind of satellite imagery. Again, why we also want those catastrophic models because we're not going to be able to go in to see this constituent of yours has done the hard work.

Why are they not getting a policy, right? Especially in your area, as you said, which is one of our target areas, to make sure that we get insurers writing again. So if you don't mind giving us the information of that constituent, because we would love to check in with them. And again, as I said, members, go ahead and ask your questions and we'll wrap up.

I guess the other thing that we're hearing about is that somebody had their home insurance bundled with their car insurance. Then they get the non-renewal, and then their car insurance goes up because it's no longer bundled. And this frustrates me because these insurance companies are here in California making money off of the easy stuff.

Maybe it's easy, but then canceling on the hard stuff. As far as the home insurance. And that conversation you had with your gentleman, we're hearing that, too, where people are just at their wit's end. This is their one asset, and they just cannot continue to survive like this.

Assemblywoman, I'll tell you that one of the biggest requests that we've gotten through our community meetings, which we've met with 150,000 people, was like, why, if a company is no longer writing in a community, why are we letting them write auto insurance? Right? Obviously, those are two different lines of business.

But I also don't want to create unintended consequences where now we create now a crisis on the auto part. Right? And this is, and I asked those same questions. You know, I was the newest family member, the new insurance commissioner in 2019, going to these communities, and they're like, we don't want to create unintended consequences. Right?

But this is why this agreement is historic, because they're agreeing to come in now for the first time once we make these changes. And Assemblymember Wood just reminded me that we're in constant communication with the industry and with consumers and with insurance consumers like never before.

I mean, if you look at the list of organizations that are supporting us, that's unprecedented. And so we understand. The other thing that I used to do is get the local realtors and the local insurance agents together in a room and be like, talk. One of the realtors wanted less fees so they can sell the home. The insurance agents were like, no, we need to price it appropriately. I realized that we're never going to get, we would never get to an agreement.

But I was able to understand the nuances between the real estate industry and the local insurance agent who, by the way, also has to get the real-time information of what we're discussing because we want them to be able to talk to the homeowner so that they understand that there is a process, there is a strategy, it's coming, and that insurance companies are already reacting to that. And so it gets a little complicated, but we're all working together like we've never had before.

Well, on the real estate side, we're hearing from agents that deals fall through because they cannot get the insurance. And even trying to get it through the FAIR Plan sometimes takes six weeks. So that loan's not going to be retained and they lose out on it. Our office gets those calls, and we're trying to call the FAIR Plan and expedite the processing of those. But it's been frustrating for sure.

Yeah, I agree. Before we leave, I'll give you the contact of our team that's assigned to your district.

I think that we have that in the district.

So just call us and we can try to interrupt and get into the FAIR Plan. It's unfortunate that we have to do this during the crisis. Everybody should be able to get the FAIR Plan, get them to answer, but they're understaffed. This is why we need to get them to be fully staffed under the new plan.

And I hear you on the real estate, I forget what county I was, maybe Tuolumne, where a teacher lost her home because she could no longer afford that, the debt ratio flipped, so she was paying more for insurance than for her single-family home, lost that home. Right? And this is why we've been working directly with the California realtors who support our. Support the strategy, and we're in constant updates with them as well.

So we're not only updating you all, we're updating our partners so that they understand when the regs are moving why we're doing what we're doing in a way that's going to stand the test of time and more importantly, our legal system.

Yeah, and when you raise the FAIR Plan, I mean, that's definitely something that we're concerned with. We need to depopulate that as quickly as possible. I'm concerned that we're just one disaster away from that employee floating, and it's going to be a dire situation if that occurs.

I just feel like there's just too much liability that they have. And all these people that are paying these astronomical rates now for this FAIR Plan that doesn't even provide comprehensive coverage could be really at a loss.

You're absolutely right. And we hear you.

Yeah. Thank you.

Assemblymember Alvarez.

Thank you. Thank you, Commissioner, for being here. Appreciate you. And I want to say thank you to Miss Pellerin, Mr. Connolly, Mr. Wood for sharing very, very deep concerns, certainly from their parts of California. But as you know now, it's reaching everywhere in California and even very urban areas are getting, there are individuals who are being impacted by policy cancellations and all that. So it's clearly an issue for all the state. I also want to thank the chair for hosting this conversation.

I think it's important as someone a little bit newer to the conversation, and I know you had a hearing last December where the strategy was shared and you're providing us an update today. There are some, I'm going to be asking some questions that are, I think, more about trying to understand the, the changes, the tweaks, whatever needs to happen to make sure that the strategy is successful. And quite honestly, to Mr. Wood's point, successful more quickly than what is anticipated.

I also just want to say this is a very complex issue, which clearly you and your staff have a very good handle on, which gives me some comfort. But again, I think our role here is to ensure that we reach a resolution as quickly as possible. So my questions are around that. The first is a couple questions that are quite basic. As I was looking through your website on what's available in terms of information, I see all the different filings, but I wasn't able to, on this device anyway filter. How many rate filings are currently in process?

So we try to answer that earlier. You want to.

I heard that there's 100 that were resolved in March and 50 were submitted. So that like.

I can tell you on just, and again, I can get you these, I'm going to work on getting you these real numbers because I'm actually curious to see these as well. I've been so caught up in the macro policy part, but I can tell you that we've shortened it from a year and a half to like six months. But again, that depends if they're intervened, right? Because this is why the intervener reforms becomes critical.

If they're intervened previous to me coming in, then they could load it with a bunch of questions and even cut and paste our objections to the rate file and then hold the rate filing hostage until they were ready to negotiate.

Which, by the way, doesn't say that in Prop 103 it says an intervener, when they announce they're going to intervene, they're ready to intervene day one. That wasn't the common practice. During our, what we've done with our reforms are an intervener can no longer cut and paste what the department's objections are and use them as their own.

And the, the objections have to be related to the actual rate filing, not policy issues around, you know, what is that?

So they have to take specific numbers and data from the filing itself and challenge that, or what does that mean?

They have to come up? Yes. Whatever is associated with the file. I'll have Lucy further delve into that. Cause this is an important note.

Yeah. So in the past, what happens is, in a petition to intervene, the goal of an intervener is to come in and substantially contribute to the process. But what has happened in the past is it's usually a means to come in and then have it be free discourse on questions in general, directed and targeted at a particular insurer. So that, of course, creates delays in the process.

Having examined how the process works and being focused on streamlining it now, the department will only grant or allow petitions to intervene if the intervener specifically identifies the issues that are identified in the rate filing. So they can't come in and use it as an option.

So give examples, and then, as you give me those examples, this reform is already implemented. Yes. Okay.

Yes. Those things didn't require regulatory change. Those were things that, within the administration. So when Commissioner Lara announced his strategy in September, one of the first steps was just to allow you as part of the public to go in and access all that information on the websites, because a lot of it was, there was no lack of transparency about the petitions that were being filed, the amounts that were, you know, being requested in compensation.

And now you can see all of that information on our website. What you can also see is you can see the department's orders themselves, which, when we grant these petitions, we are very careful to make sure that the issues that are open for intervention are focused on the matter in the rate application. So it's not open season on asking general questions you have about an insurance company. It's focused on their rate applications.

Are you doing that only on new applications or are you going to the backlog and clearing those out as well with the same approach, with the same authority that you are utilizing for new applications?

Well, yeah. Those are applicable to all the rate filings that we currently have and moving forward since September.

Correct. I don't think there's any backlog. I mean, most rate filings do get closed out, so I don't think there's any pending that are stuck in a State of intervention.

You're telling me that there is no file that is more than six months old pending approval?

I am not aware of any current filings that have been intervened and that are being delayed as a result of issues, outstanding issues that were not raised.

Let me make sure I understand. Current filing is filings that have come since you made the change, or filings that have been waiting for approval, that haven't been approved, that are prior to October of last year.

We do have rate filings pending. We're not, you know, and those, again, fall under the current category of we're waiting for data. We're reconciling some of the different points that's been going on. We've been able to cut that timeline like I said, which was a big gargantuan undertaking for our department for what was common practice.

Now there's some ray files that are intervened, including some of our new files that are coming in around those safer from wildfires, which we, by law, by Prop 103, have to adhere to. What we've done is what our special counsel was saying. We've really cut down on what they can use as an excuse to intervene.

And we also have been very proactive of saying, you can no longer just give us a date. Whenever you're ready to have a conversation, a three party conversation with the department, the insurance company, and the intervener. Now we give you dates. These are the dates that we're going to move. And if you speak to the industry, that's never happened before. And we put those interventions in public so that you can see how we're also holding the intervener to account.

Okay. You do have, what is the date of your, how would you say this, the oldest or the most longest waiting pending filing at the moment?

I can look, I'll look, I can get that back.

Okay. And some of those also have. There would be an intervener potentially in some of those.

Most likely those are ones that have been intervened.

Okay. I also heard you say a couple of times something that appears very promising, which is in the last five to six months, the top 10 providers have received some sort of adjustment in the last five to six months.

Correct/ And that's utilizing our existing Prop 103 process. So we've closed those out.

But those were filed potentially prior to your initiation, the strategy.

Oh, yeah, no, yeah, those are filed. We're in constant communication now with the industry. One thing that I've done that has been actually frowned upon by certain consumer groups is that I'm actually meeting with the industry directly to understand what the rate filing blockages. Why are we? Why is this taking so long?

And when you get principals in the room, you know, we. They're like, well, we're still waiting on this data, or we're not incongruent in some of these things. And so then we step out and have the analyst and the individual get the data so that we can square this out, because, again, time is of the essence. The last thing I want is another headline that's only gonna create more chaos in the market or uncertainty for consumers that are already scared of losing their product, their policy. And so that's what we're trying to avoid.

And we've been clearly been able to demonstrate, one, that we can get these done quickly through the current process if they don't get intervened. So we're trying to figure out what was the holdup before I got here. Right? And this is why the mid Max time is critical, because now I'm not gonna have to, you know, when another insurance commissioner comes in, now we're gonna have in statute what the specific timelines and what the triggers would be so that we're no longer having to wait a year, two years.

Let's talk about the min-max time. Because I think that's an important component of your strategy going forward and being successful. So you're sharing with us, and I haven't seen the governor's proposal either to the questions that were raised earlier by my colleagues, but essentially, this proposal is this min-max approach of, there will be 60 days from complete filing, complete application filing for the department to give a response and finalize, with the exception, I heard you say, of 30 additional 30 days in the case of you needed more information or whatever is, you know, typical in this process. So we're talking about 90 days. Where does the intervener process fit into all of that?

So the goal of the maximum minimum is twofold. First is when a complete rate application is submitted. That starts the clock. So that presumes that at the time that the application is submitted, all the information that the department needs in order to evaluate the rate application has been submitted.

Can you pause real quick? Please hold because this is important. In the past, insurance companies would just submit an incomplete. And then they were waiting and expecting that somehow there was a process that, where am I in line? Like, it doesn't work that way.

The trigger happens when it's complete, meaning when the auditor, the actuary, and the analyst have all the data they need to start making their analysis. That's where this becomes important because now we're holding both of ourselves to account. One, you have to submit all the data we need. This is the data we need. So we're clarifying what we need and then puts us an account to say that trigger starts the 60 days.

So I think it's important to understand what happens in that process because if you never trigger the 60 days, this could also just create delay. So when you receive an application that you deem is incomplete, what is going to is there is this proposal that we're going to see or that you believe would be the right approach? Again, as we're trying to tweak to make this actual workable, is there going to be a requirement that you respond to the petitioner or to the applicant on what data is actually needed?

Yeah, that's already in the current process, but let's explain that.

Yes. So in February, we hosted our workshop on the complete rate application, where we are for the first time in 20 years, updating what it means to have a complete rate application. So there is clear direction. And that was done as a result of communications with insurance companies and our department as to what are the components needed.

Let's have greater clarification. We have, currently, we have rules and forms within our insurance codes that no one follows anymore. And we've tried to fix it through various bulletins over the last 20 years. So part of that is, the first part of rate review is that we've defined what a complete rate application is.

Another component that Mr. Wood touched upon is the rate reconciliation tool. That is something that the department is developing as a result of listening to what insurance companies need. And that tool is something that we have hired an outside contracting firm to come in and help us do because there's a lot of proprietary information that gets input into that system, and we don't have the IT in place to be able to do that.

So where we've needed the resources, we've gone out and gotten them so that we can do it. So the goal is to create the reconciliation tool so that insurance companies can get the information they need to have a complete rate so that when all these pieces are in place when they submit that application on day one, we are in the right place to then try to meet Proposition 103's 60-day deadline.

When will you have the complete rate tool finalized?

The rate reconciliation tool is in two parts. The first part is going to be completed by the end of this year. It is very complicated. I will be the first to tell you, I can't speak because to the intricacies of that process because it requires literally us contracting an it firm to figure that out. But it's going to be done in two parts. The first part will be done by the end of this year.

So we will not really trigger this minimum maximum 60 day, 30 day before the end of this year because we will not have this tool.

The component that we will have done by this year will allow us to implement the min-max rule.

What is the component that's going to be missing that we will not have?

Why don't we get that? Because we're not the ones working on that. We can get you that information and.

We, unfortunately, not just you, but the state does not have a very good track record on IT and software and systems. So good luck, I guess I should say, on that. So that all, let's say, gets figured out and people submit what they think is the most complete application, but you still find maybe that there's some data missing, that you request them to submit additional data to you in order to have a complete application.

Are you going to have one dedicated personnel? And I don't know if it's a specific classification of employee or what, but like the dedicated personnel to get that done so that you can begin the 60 days. Because the last thing I want to see next year is we, you know, support that legislation and all the other things, and then we're here next year saying, well, we're not getting the applications, you know, to be complete, which means we can't start that 60-day clock. Right?

I can tell you that this is the first time that I can recall that we've worked with the industry to figure out a definition of what a complete rate filing looks like.

Okay.

There was, before there was, nobody was talking to each other, which was a big component to the lag of time.

So we should not be concerned about that component. You feel very confident that.

I feel very confident that now we clearly understand, and that's the thing, there's never been clear rules of what a complete rate filing looks like. And so when the company would submit something thinking it was complete, and then the department were like, no, it's not incomplete, it's incomplete.

I had to pull that out and kind of tease out myself. And so this is why for the first time, we're creating clear guidelines of what is defined as a complete rate and what are the components of that. Because also, Assemblymember, what I don't want is burnout for my actuaries that are constantly having to do back and forth. And so I've always, I'm a believer of, like, clear rules, guidelines of what we all agree on constitutes a complete file. So then I could go back and say, why is this still taking so long?

So then what happens during the six, I mean, you gotta verify data and all that, I assume, after it gets submitted. But what, the 60 days and the 30 days, what do you anticipate happening? And then you were going to talk to me about or share with us about how the intervener process fits into this 60, 30 days?

Well, the intervener process, I mean, can.

We go back to, like, what takes. Place in those 60 days?

What takes place in those 60 days? So upon submission of a complete rate application, then within that 60 days, if our actuary has all of the information they need, then they have the ability to give a preliminary estimate of what that approval will look at and what percentage. Like a ballpark.

Insurance companies want some certainty that when their application goes in, are they close to something that the Insurance Department is willing to approve or are they not? And so we are trying to provide greater clarity and signal to companies upfront what that rate may look like sooner before, you know, a complete review.

And you need the extra 30 days for the purpose of what do you think?

Well, things come up. I mean, we have to have some flexibility. I mean, you know, in everything. These filings are very complex, and we're adding additional components such as cap modeling and reinsurance. This is going to be new for the department as well. So we have to build in some flexibility because what we don't want to do is be log jammed into a 60-day period and we're not doing a thorough review, and then the rate goes through. So we're trying to cover all of our bases and making sure that the process abides by.

Do you have a performance metric then identified for success of this? 95% of the applications done in the 60 days to 30 with a 30 additional? 80%, 50%?

That's something internally that we're going to be preparing, because again, we don't, we don't have that in place now and the mechanisms and the IT technology to be able to do the reconciliation. So we definitely want to have that in place, and we're working on that so that we're self-assessing ourselves.

That's also important for us to know, to see in terms of the workforce, are we appropriately staffed, have the rates filings come down. Because now, guess what? Now insurance companies are actually going to maybe actually submit what they actually do need as opposed to underpricing, which only exacerbates the protection gap. Right?

Because now there's some confidence that one, there's going to be some guidelines on what that constitutes, a complete rate file, a specific specified time. And now with the new requirements for the intervener and having the department come in and say, you can't just bring everything up, that gives some sort of certainty.

Which, by the way, before us was chaos. Right? We would, we didn't. And this is why you would see insurance companies come in and under some they would submit for like a 6.9% when in some cases we sell like, they need 30%, given their risk profile. And so we're trying to cut all that down and keep.

And understanding, look, I was in your shoes. I want to keep ourselves accountable, have the metrics in place to be able to measure so that we're able to adjust as we move forward, because we don't know how markets are going to react, but also make sure that the industry knows what the clear guidelines are, so they're checking themselves as well.

I would say we're not discussing the bill here, but I hope we will once it actually gets put out. A performance metric would be important to be included in any legislation. So we understand exactly what we should expect in terms of accountability for all of us.

But in order for you to be successful with that, you need human resources. And I want to ask you about the cuts in the governor's budget to departments and agencies and how I haven't read your budget, but how does it impact you and the need for those resources?

Well, you know, never let a crisis go to waste. We are, we're really grateful to what the Legislature and the governor has given us in the last year's budget to fully address our needs. And we feel very confident that with that allocation, we are able to hire the workforce that we need to get this to.

So even with the elimination vacancies.

Yes.

Do you know how many vacancies are being eliminated from your department?

I do not know that, but I can get you that information.

Okay. I think I'll leave it at that. Certainly we'll have more conversations about this when the process comes over. Again, thank you for your work. It is, you know, not easy and, but clearly, I think somebody else said earlier today, I've sensed the urgency from you in trying to ensure that we do the right thing and that we ensure that this is fair for everybody, to consumers, for sure. First and foremost. But it really starts with all of these reforms.

And I would like to further at some point talk about how when we make these commitments that we don't just assume that folks will be returning to the market, but that coverage will continue to exist for individuals today. And so that's maybe for another time. You've been very kind with my time, so unless you want to say something, I'll stop there.

Well, you know, I can talk insurance all day, but remember, this is why I think it's critical. And hopefully, you'll hear from the industry that we've engaged with them like no other commissioner has because we understand that we can't just be in our silos. I kind of, I mentioned this at another place, that I'm in a forced marriage with the insurance industry right now, and we're staying together for the kids because we can't be in our silos.

And even no matter what certain consumer groups say or the press say, I have to be able, as the regulator of the industry, to talk to the individuals that I'm regulating. That cannot be seen as a negative thing because we are in a crisis now. And so that is something that we've done like no other commissioner has. Say that fully. And also why you'll hear hopefully from industry that we've been very open about the changes we're making.

Because the last thing I want, as now a former Legislator, is to introduce something that's not going to be, that's not going to work, that's not going to stand in court, and that's not going to be able to be used by the folks that we're regulating. And so this is why we're engaging with them early as we're working on these changes so that we're on the same page and talking to our supporters, all the different insurance consumers and organizations that we work with, and why these hearings are critical so that we're keeping you updated on the work and our progress that we're doing.

Okay. Before I let you close, I have one more question. You talked about the need for intervener reform and the cost, the cost being passed on to the consumer. How much, do you know how much of that cost is passed on to the consumer? And does the consumer know that?

Well, you know, this is really interesting because, you know, the intervener and the one intervener that has successfully written themselves in this proposition are the ones that are still doing the intervening. I think we have a general price, a general amount of money. We can maybe drill some, drill down, and see what percentage of that gets passed on to the consumer. But you know, it's safe to say that that money has to come out of somewhere. And that's also another added cost to the consumer to do the work that we are doing at the department.

The department are the ones that are responsible for doing the public review of these rate files. And this is why we cannot let interveners come in and just take our work, cut and paste it, and say that these are their objections as well. And we can also not let them politicize the rate filing process so that they bring up other grievances that are not related to the filing. There's a place and time for those grievances and that's the Legislature, that's a separate regulatory process that we now have controlled and that have been running rampant for years.

And so these are hard conversations that we're having, but needed changes that have to be made because the millions of money, the millions of dollars that they're making, that they're making off this process have to come out of somewhere and they're coming out of the consumers as well. I don't know if you have an overall random number.

I don't. I don't. I think the commissioner covered it very thoroughly.

Sorry, it's my soapbox.

It's okay. Thank you. I appreciate that. And again, I. Oh, Dr. Wood.

Just a couple really, really quick. First of all, thank you to Mr. Alvarez, who teased out the question I was trying to ask before. What I have kept hearing from industry is that they try to submit a complete rate application, but because of the lack of the ability to reconcile the data with your data, it's not complete. So there's no way that anybody could submit a complete application ever at this point. And so it just, that feels like that's been going on for a long time. Right? And so I'm glad this way.

That's why this tool is critical for us.

Yeah, absolutely. So, and so I'm glad that is happening. I think that will make a big difference. And also just, you know, maybe as a, just to explain my passion around this issue. We first started seeing cancellations and non-renewals in 2017. We lost over 5000 homes in one of the communities I represent.

And recognizing that comes later, it started coming in the rural communities. And it's taken a long time, seven plus years to get where we are, where it feels like other people are beginning to pay attention to what. And so I'm not going to apologize for my passion for representing my constituents, but we've been living this for a long, long time. And we're continuing to live it because we're having more and more cancellations and we don't, you know, some people just don't see the light at the end of the tunnel yet.

I agree with you. Just a point of note, I got here in 2019. But you're absolutely right. We started seeing these signs and what we weren't expecting was the pandemic and the inflation that came with it. All that coupled with more fires that we've ever experienced really got us to this crisis. So you're absolutely right.

We started seeing the signs around 2017, but nowhere near that. We think we were going to go through this thing that we just hopefully survived through. But your point is really well taken. And you know, I would never apologizing for advocating for my constituents as well.

Insurance Commissioner, again, I want to thank you for being so gracious with your time, for flying up when you're not feeling well, and for your frankness and honesty. I know how committed you are to increasing availability for all Californians to insurance. And we appreciate the partnership. Would you like to close?

Thank you again. And we'll gladly return as we continue to, hopefully after the summer, you'll see again more headway as we prepare to really finish this work at the end of the year.

I just again want to stress that it's important for the department to move quickly, but that we're transparent and that we allow for these reforms not only stand the test of time but also stand in court. I don't want to lose these reforms over the process. I'm more than willing to debate this to Kingdom Come over subject matter. And this is why we've been very careful at threading the needle with the current Proposition that we have to work with. I mean, that's just the reality, and we will continue to come before you.

And just as I close, just I want to compare because I know this wasn't asked, but a lot of the members asked. This question is compared to other large states and large markets, California's rates are considerably lower. We are less than the national average and less than Colorado. Florida, Georgia, New York, and Texas are all higher. I know that doesn't bring any relief or reprieve to the folks that still can't barely afford their homes, but know that the process is going to be modernized and we're going to meet these times. And so we appreciate your willingness to work with us and to really get to us to a point where we can solve this crisis and move forward. Thank you.

Thank you so much. Now we're going to go to public comment. Please state your name, affiliation, and you have two minutes.

Good afternoon, Chairman, Members, Commissioner Kim Stone of Stone Advocacy on behalf of Consumer Watchdog and Intervener.

And just for the record, in the last 20 years, Consumer Watchdogs interventions have saved consumers $6 billion in challenging excessive rates and in so doing has taken $11 million in fees, which is 25 cents of compensation for every $100 cost, which is a pretty good return.

Consumer Watchdog and others have urged the creation of a transparent catastrophe model to make sure that climate risk is incorporated into insurance rates in a way that is publicly accountable and doesn't further disadvantage hard kit communities.

We're very glad to hear support from the Commissioner for that idea and urge the building of a public model as soon as possible.

Consumer watchdog also notes that the Commissioner noted there have been consumer challenges to insurance company mitigation filings and want to make clear that Consumer Watchdog has challenged mitigation discounts that were too small or didn't explain to consumers how they were being priced.

One mitigation would have resulted in a $42 discount, which Consumer Watchdog felt was insufficient really to be worth it. To make our homes and communities safer, we have to increase wildfire mitigation and to do that at the home level, homeowners need to know that that mitigation will be rewarded.

Consumer watchdog suggests a kind of guaranteed issue where you would get insurance if you hardened your home. Precedent for that in the auto insurance market having to be covered if you're a good driver and in health insurance market for guaranteed coverage.

That's the best way to depopulate the fare plan to reduce the risk to insurers there and encourage homeowners to do the right thing. Thank you so much.

Thank you. Thank you. Good afternoon, Madam Chair and members Seren Taylor from the Personal Insurance Federation of California. Just to say that we greatly appreciate the work the Committee is doing to ensure transparency and accountability for the implementation of the Commissioner's sustainable insurance strategy.

We do also want to thank the Commissioner and the CDI staff for their hard work and diligence and the good communication the Commissioner talked about. As the Commissioner noted, this is complex and important work. PIF is committed to working collaboratively with all of you to achieve our shared goals of restoring a healthy and reliable insurance market.

And we are confident that once the reforms are implemented and insurers can use the new tools to achieve appropriate rates in a timely manner, consumers who do the mitigation work will benefit from greater availability and better prices than those who do not mitigate. So thank you all very much.

Madam Chair and members Denny Ritter with the American Property Casualty Insurance Association. As you know, California's outdated insurance regulatory framework is failing families and consumers in California. And I want to be clear, Insurers are committed to the State of California. We want to continue protecting Californians and their most valuable assets, like homes, cars, businesses, as we always have.

And we want to be part of the solution to turn things around. We're serious about that. As you all have heard, this problem has been a long time coming and there are no quick or easy fixes. We are working with Commissioner Lara and his team, team on the proposed reforms through the sustainable insurance strategy.

And we need urgent action to streamline the rate review process, better account for climate driven wildfires and disasters, and to eliminate the many obstacles that have led us to where we are now.

I do want to take the time to sincerely thank the Chair, the Committee, the speaker, for holding these oversight hearings and continuing to shed light on these vital reforms and ensuring that we're on track to meet them.

And we do remain committed to working with Commissioner Lara, the Governor and legislative leaders to promote comprehensive reforms to ensure that all Californians have access to the coverage they need. Thank you.

Madam Chair of Members Dan Dunmoyer with the California Building Industry Association. Let me first start by thanking you, Madam Chair, for holding these oversight hearings. We very much at the California Building Industry Association would like to see these continue. And just to keep this discussion going between all stakeholders, just a couple factoids in regards to home building.

We continue still to struggle in finding adequate insurance for condominium, multifamily and affordable housing. And we're seeing an affordable housing space, the cost of insurance in the non admittance of surplus lines market going up to such a degree that some of our affordable housing projects are in jeopardy of going bankrupt.

On for sale market rate condos in almost every district in this state, members are seeing condo projects put on hold until this is resolved. I was heartened by the Commissioner's comments that farmers is back in the market, but the details are important. They will not insure anything over $25 million in value.

Everything we build is over 25 million in value. So we still have a market that's not functioning on the fair plan. Commissioner also touched on, and we commend him for this, his support of the $20 million per structure which was discussed in his Committee on March of last year, that still has not occurred.

Commissioner touched on this in September of 23. He touched on this in March of this year, touched on it today. That process of adding $20 million per structure has still not been concluded and until it is, we can't build condos. It is our most affordable price point for Californians for buying and owning a home.

It's the highest propensity of Latino owners in the State of California. So this is a crisis for us that we're confronting every day, and we would just urge continual accountability on this process. Last two quick things. Commercial insurance is different than residential insurance. We believe that, and we think this should be discussed.

And you can amend Prop 13 and you can take it to the voters to fix it if it doesn't work. And we're spending $1 million for insurance, we don't need Harvey Rosenfield. We don't need Jamie Court. We have actuaries, we have underwriters, we have lawyers. Please make it easier to do commercial insurance.

We're not the little old lady from Pasadena that might be ripped off by an insurance company. We're a commercial risk. So we think there should be a difference in that. And the last thing is you can, as a Legislature, pass laws to amend Prop 13, take them to the voters to reduce rates more quickly.

Maybe they're not as good as they should be, but you can take the voters saying it should be automatically reduced without Prop 103 intervening. You can change that if you want to. So there are things you can do. There are limitations within the law, but you can change the law and you can take it to the voters.

It doesn't have to be in furtherance of 103, you can just change 103. So we urge you to explore these other options. These are things that will help consumers, that will help us build more attainable housing, and that will start to solve this crisis. Thank you, Madam Chair.

Madam Chair, Members, John Norwood, on behalf of the Independent Insurance Agents and Brokers of California, again, thank you for having this Committee hearing, and we thank the Department and everybody in this industry is working on this problem. Couple comments.

As we look at the wildfire problem, I don't think we can suppress or insure our way out of this issue. Just came from an insurance conference where reinsurers are concerned that California's still not spending enough money on fire resiliency. This is something that's going to have to be done. It's not one and done.

It's day in, day out every year. That money is going to have to be put up. There are some communities that have spent thousands, and that's very positive, but it's going to have to be an oncoin commitment. With regard to the fair plan issue. You heard the Commissioner indicate where California's rates are currently voluntary homeowners rates.

We're kind of in the middle of the pack. We all know rates are going to go up. A key element of this whole plan is for insurers to be able to take people out of the fair plan. It's a very price sensitive product.

The fair plan testified here not too long ago that they, their actuaries felt they needed a 70% increase. They got 15.

Unless those rates of the fare plan go up, the industry is going to be hard pressed to get anybody to leave the fair plan, even though the coverage is not as good, because you're going to need the individual's consent to move them out of the fair plan.

And if they're faced with a jump when they're going to be, it's going to be a difficult proposition.

And that kind of, you know, is going to cause some issues with the whole idea that the ability to use cat modeling and reinsurance is dependent upon being able to write in distressed areas and move people out of the fair plan. So just a caution there. Thanks very much.

Okay. The informational hearing on insurance is adjourned.