Assembly Standing Committee on Insurance

Good morning Members of the Committee. Welcome to the Assembly Committee on Insurance. Today we will consider one Bill, AB 597 by Assemblyman Harabedium. Following the Bill presentation, we will move to our oversight hearing titled Department of Insurance Sustainable Insurance Strategy Post Southern California Wildfires. We are going to get started as a Subcommitee today. Assemblyman Harabedian. Whenever you're ready. Go ahead and present.

Thank you Madam Chair. Good morning and good morning to the Members and thank you all for being here. Thank you for the opportunity to present AB597, a Bill that strengthens consumer protections for Californians in the aftermath of disasters.

When disaster strikes, whether it be a wildfire, flood or earthquake, homeowners turn to their insurance policies to be to begin the process of rebuilding their lives. For too many unfortunately, navigating the claims process is overwhelming and they seek help from public insurance adjusters, licensed professionals who assist policyholders in handling their claims.

Public adjusters can play an essential role in advocating for their policyholders, but gaps in current law have led to certain abuses and complaints to the California Department of Insurance, such as excessive fees where some adjusters charge exorbitant rates, reducing the funds available for families to rebuild their homes.

Misleading contracts with vague contract terms have left policyholders uncertain about what they are actually paying for and unethical solicitation practices where some adjusters have aggressively sought out clients in the middle of disasters, taking advantage of vulnerable homeowners. This is why I'm proud to author AB597, which directly addresses these concerns.

AB597 will cap public adjuster fees at 15% of the insurance payout in cases of declared disasters. Strengthen contract transparency by requiring adjusters to clearly state the claims and coverages they are handling, ensuring policyholders know exactly what they are paying for.

It would also ban predatory solicitation practices preventing adjusters from contacting survivors while emergency conditions are still present, such as when firefighters are actively responding or evacuation orders are in effect. These reforms are straightforward and they are consumer protections. States like Kentucky, Florida and Texas have already implemented stricter limits on adjuster fees to safeguard policyholders.

We are trying to address a situation where there are bad actors. There are plenty of great public adjusters, many of whom are here today, many of whom I know personally, that do a great job for their clients and the consumers.

But we want to protect people in their most vulnerable moments, and that's what this Bill is trying to do. Given the ongoing wildfire responses in my constituency, I do want to note that we are requesting an urgency clause with this Bill and I will accept the Committee amendments. Thank you for those.

And I respectfully ask for your I vote here to testify in support is Josephine Figueroa and Tony Signorale from the California Department of Insurance.

Thank you. Assemblymember just want to clarify there are no Committee amendments. will be taken in appropriation.

Okay.

Appropriations. Thank you. Whenever.

Good morning Madam Chair and Members of the Committee. Josephine Figueroa, Deputy Commissioner and Legislative Director for the Department of Insurance under the leadership of Insurance Commissioner Ricardo Lara.

As a proud sponsor of AB597 insurance Commissioner, I would like to thank Assemblymember Harabedian for his leadership in authoring this important measure that will protect Californians from price gouging and unfair practices by public adjusters. As we all are aware, recent wildfires have brought immense emotional and financial strain to many Californians during these challenging times.

We must work together to prevent the revictimization and targeting of disaster survivors when they are at their most vulnerable. Although responsible, public adjusters provide a great essential service negotiating on behalf of consumers, aiding them in securing additional funds under an insurance policy. Bad actors exist like in many other fields.

Unfortunately, these bad actors in the public adjuster space use wildfires as an opportunity to victimize disaster survivors when they are most vulnerable by charging exorbitant amounts upwards up to 30% which we have heard during our wildfire workshops or more, and soliciting during prohibited periods.

AB 597 provides essential protections from price gouging by narrowing imposing a 15% gap on public adjuster fees for claims related to catastrophic disasters or state emergencies. Additionally, it ensures funds go to where they are most needed to the consumer by prohibiting the consideration of payments received by consumers prior to entering into a contract with a public adjuster.

Lastly, it provides individuals the rights to rescind or void a contract that was solicited during a prohibited period which does not currently exist in law. Today we have engaged with representatives from public adjusters and have heard their concerns.

We are committed to continuing these discussions to ensure consumers are able to benefit from public adjuster services without compromising victims ability to rebuild their lives literally. On behalf of Insurance Commissioner Ricardo Lara, I ask for your I vote.

With me today is Tony Cignarale, Deputy Commissioner for Consumer Services and Market Conduct from the, for the Department here to answer any technical questions you may have today. Thank you very much.

Are there any additional witnesses in support.

The American Property Casualty Insurance Association support of the Bill. We look forward to continuing to work with the author. We've shared some comments in our letter. We look forward to working with the author and sponsor. Thank you.

Good morning, Madam Chair, Members, Seren Taylor with the Personal Insurance Federation in support. Thank you.

Good morning. Stacey Jackson, Executive Director of Pacific Association Of Domestic Insurance Companies. We also lend our support.

Thank you. Do we have any lead witnesses in opposition?

Ron Reitz with the Pacific Coast Association of Public Insurance Adjusters. We oppose it as written, but we. Are willing to work with the Assembly Member and the Committee on Revisions.

Matthew Blumkin, the President of the National Association of Public Adjusters, representing 17,000 public adjusters in 46 states. The CEO of the Greenspan Company, the oldest public adjusting company in the west coast of 80 years coming next year.

And a 30 year California lawyer representing insurance companies and brokers and agents, and for the last 17 as a public adjuster in opposition. But we are more than willing to work with Assemblymen, the Department of Insurance, Insurance Commissioner Lara and this Committee on reasonable language.

Thank you. Okay, we're gonna. Any other lead. Any other witnesses in opposition? Seeing none. We're gonna take a minute to establish a quorum. Secretary, please call the roll. .

[Roll Call]

Thank you. Okay, we're going to bring it back to the Committee. Do we have any questions or comments from the Committee? Thank you. Would you like to close?

Respectfully ask for an aye vote. Thank you, Madam Chair.

Thank you. Secretary. Please call the roll.

[Roll Call]

Okay, thank you. Assemblyman. We're going to leave the roll. Well, the Bill is out. We're going to leave the roll open for Members. The vote is.

We're going to now recess our hearing and we're going to convene our oversight hearing at 10am we will now reconvene the Bill hearing for additional Members to add on. Secretary, please call the roll.

[Roll Call]

The votes 13-0. We'll now recess our regular Bill hearing and we'll convene our informational hearing at 10am we will now reconvene the Bill hearing for additional Members to add on. Please call the roll.

[Roll Call]

Okay, 16 to 0. We'll now recess our regular Bill hearing in order to convene our oversight hearing at 10:00am.

Welcome to the Assembly Insurance Committee's oversight hearing of the California Department of Insurance. This hearing is the Fourth Assembly Insurance Committee oversight hearing focused on the Insurance Commissioner's sustainable insurance strategy. This Committee continues to monitor the SIS closely and will continue for as long as it takes to ensure the availability of insurance resumes in California.

Today, once again, we'll receive an update from Insurance Commissioner Lada on the sis. Since the last oversight hearing, the Insurance Commissioner finalized a number of reforms intended to stabilize the insurance market and incentivize insurers to right and write policies in California.

I'd like to hear more detail today about whether the devastating Southern California wildfires will delay progress of the cysts. I think it's safe to say that without the sis, our insurance market following the Southern California wildfires would be in a far worse state. Progress, albeit slow, still provides hope.

Hope that California will return to a competitive and healthy insurance market and hope that our constituents aren't faced with non renewal notices and hope that investments in mitigation will translate to insurance availability and affordability. Considering the Insurance Commissioner started tackling this in 20231 thing that we have learned is that change will not be instantaneous.

We commit to continuing our partnership with Commissioner Lada to restore our insurance market. Members, we'll take questions following the Commissioner's testimony without further delay. Commissioner Lotto, would you like to begin?

Thank you. Thank you, Madam Chair. It's good to see so many new and friendly faces. Thank you again for inviting me back to provide an overview of the significant actions I have taken to assist consumers impacted by the devastating fires in Southern California, as well as an important update on my sustainable insurance strategy.

This is my fourth time testifying before this Committee since I introduced the strategy nearly a year ago. I appreciate the continued involvement of the Members of the Committee, many of whom are new to the Committee, and I welcome them to the exciting world of insurance. As we address our state's homeowners and commercial insurance crisis.

It's important that we remain in partnership and that partnership has really been invaluable. Madam Chair and I want to thank you again. So, as you know, our communities across California are facing one of the most urgent crisis of of our time. Climate driven disasters that threaten lives, homes and our economies.

As state leaders, we are at the front lines when disaster strikes. Californians turn to us for solutions and want to assure you that I remain committed to working with you to create these effective and important responses.

Our mission at the Department for our new Members is to protect consumers, hold insurance companies accountable and ensure that our market is stable, sustainable and responsive to the needs of our residents. As a home of the world's fourth largest insurance market, California consumers deserve the most choices in their consumer options.

I'm dedicated to advocating for California and I will be very clear. I will go anywhere and engage with anyone necessary to make the case for our state. To perform this job effectively, we must extend our engagement beyond Sacramento.

That is why I meet directly with consumers, insurance companies and now reinsurers who play an important part of our market. Remaining in our silos is unhelpful, particularly in a crisis. We need to think creatively and directly engage key decision makers by dispelling myths, misinformation and making a compelling case.

I'm working to retain insurance companies in the market and attract those that have exited. I want to state from the onset I want to state from my onset of the testimony, as you said in your comments, Madam Chair, that the implementation of my strategy is not compromised by the recent fires in Southern California.

In fact, these fires underscore the urgency for implementing the strategy as a competitive and fair insurance market provides people with real choices, not just insurance of last resort.

So I've taken a series of actions to enforce a robust consumer protection laws, including longstanding regulations as well as new laws that I collaborated with many of you to pass in recent years.

We are proactively addressing the evolving threats such as climate change, rising global insurance reinsurance, cost inflation, cost, a tightening national property insurance market and now tariff wars among all other increasing cost factors in our market. So the work is vital to our strategy as we move forward.

Since 2019, we have faced over 100 disasters, many of them catastrophic, and my dedicated staff have been on the ground after each and every event in many of your own districts to respond quickly and empathetically to help our consumers during these challenging times.

In fact, since 2019, since I was elected, my staff have participated in 135 local assistance centers and disaster recovery centers following major disasters recovering over 150 million for wildfire policyholders public by addressing their complaints and conducting market conduct examinations. Immediately following the Southern California wildfires, our primary focus was on consumer protections and safety while stabilizing our market.

Key actions I took to safeguard consumers during the fires included advance payments on claims. I ordered insurance companies, including the Fair Plan, to provide advance payments on claims, ensuring that that at least four months of additional living expenses.

As many of you know, this measure aimed to prevent families from struggling to cover short term housing, short term food and other essential needs. We exceeded legal obligations by encouraging insurers to go beyond the existing laws which require at least 30% of personal property losses to be paid up front without an itemized list.

On March 6, my Department reported that similar to our efforts in 2018 as assemblage Gallagher can remember, in 2019 most homeowner insurance companies responded positively to my call, providing at least 75% of contents coverage without requiring a detailed inventory, with some insurers even agreeing to provide 100%. I'm sponsoring SP495, the eliminate the List Act.

Authored by Senator Allen. This Bill would require insurance insurers to pay 100% of contents coverage without needing a detailed inventory list. I also issued a one year moratorium on residential property insurance, preventing companies from canceling or non renewing homeowners in the wildfire affected areas, which now encompass over 104 zip codes and represents 924,000 insurance policies.

Since 2019 we have acted. We have enacted 361 year moratoriums in response to over 110 wildfires, protecting more than 4 million Californians from insurance non renewals and cancellations. This temporary protection will also help stabilize the market as the reforms we are implementing take effect.

This year I'm also sponsoring SB547, co authored by Senators Perez and Rubio, the Business Insurance Protection Act. This legislation aims to extend the residential moratorium to include commercial policies, so thereby protecting businesses, homeowners associations, condominiums, affordable housing developments and nonprofits, among others.

And something we did new this time is we established for the first time an insurance fraud strike team in partnership with the LA County District Attorney to combat scammers targeting wildfire victims. This team verifies contractor and adjuster licenses.

It educates survivors about their rights and warns the public about unlicensed public adjusters, fraudulent contractors and recovery scams, among other enforcement and investigation activities. My Department has allocated over $550 million in funding to District Attorney offices statewide, including 116 million to LA County to support local investigations and prosecutions of insurance fraud.

One of the last things we did which is equally important is I directed all health insurers to submit emergency plans outlining how they were going to ensure consumers continue to access essential medical care and their medications, especially if they lost it during the fires in the aftermath of these wildfires.

So what are we doing now in the aftermath of these wildfires? Let me give you a couple of things that we've been working on. So during and after the wildfires, again, our priority has been to ensure that every survivor receive the benefits that they are entitled to and to do so promptly.

This includes hosting weekend insurance support workshops last month and this month to help consumers understand their policies and access the assistance they need. Because as you all know, no one should navigate this process alone. In addition, our staff directly assisted consumers.

Many insurer representatives, including those from the Fair Plan, were on site at these workshops to help process claims and in many cases provided checks to survivors so that they could begin the recovery on site. We've assisted over 7,000 wildfire survivors directly, both in person and through the Department's Consumer Help Hotline.

I'm also working with on AB 597, authored by Sebur Harabedian, which aims to maximize the funds that consumers receive from their claims by proposing a 15% cap on adjusters contracted work only and prohibiting additional Ward fees outside of their contract.

We need to make sure consumers get all of their claim and that they're not, you know, unnecessarily giving claim to adjusters that didn't do the work for them. So I directed insurers, including the Fair Plan, to investigate all consumer smoke damage claims and ensure fair payments according with our law.

I know you, many of you have given me questions around smoke claims, which is the natural next step after these fires. And we've made it very clear that companies cannot deny smoke damage claims outright without a third thorough investigation and must properly and promptly assess these claims.

Once the presence and extent of damage are verified, insurers are required to offer a fair and reasonable settlement to make payments quickly.

So furthermore, our enforcement branch, which you know, do incredible work to fight fraud in collaboration with local law enforcement and the industry, continue to investigate leads regarding unscrupulous and unlicensed actors attempting to profit from fraudulent claims, especially from smoke damage.

We've also instructed insurers, including the Fair Plan, to continue providing additional living expenses for welfare survivors until their homes are deemed habitable. This ensures that coverage remains available while fire, debris, ash and other hazardous materials may render it unsafe to return. And this is also subject to legal timeframes and policy limits.

And following public health advisories from the LA County Department of Public Health, we've also taken steps to ensure that if property homeowners agree to participate in the LA County Wildfire Debris Removal Program, that there will be no out of pocket cost beyond any insurance proceeds allocated for the debris program.

This is important, again, making sure consumers keep as much of the claim as possible to help them recover. Additionally, we launched the first ever consumer Claims tracker to enhance transparency in the insurance payouts and guarantee companies fulfill their commitments to policyholders.

It was also important for us to put this information out as quickly as possible to combat misinformation, articles that are incorrect, and any other folks that attempt to to subvert our market during this emergency. So I'm happy to say that as of March 10, over $12.1 billion in claims have been paid out.

That's real money helping people rebuild their lives. Wildfire survivors have filed more than 37,000 claims and over 27,000 of them of these claims have been received already have received partial payment.

So we also have been proactively laying the groundwork over the past year for a stronger, more sustainable market, one that delivers actual real solutions for our communities and consumers. We have already seen progress as more companies, including Farmers Insurance, AAA of Southern California, AAA of Northern California, Mercury Insurance, continue to write new homeowners and commercial policies.

Allstate, USAA and Nationwide have all expressed their support of our regulatory changes through letters and testimonies at my department's public hearings. And we continue to anticipate that more companies will return and offer additional policies in our market as our strategy is fully implemented this year.

So for the next slide, sorry, I haven't said change the slide, but you're on it. So now I want to give for the new Members and you know, the strategy that I announced in September 23rd and give you a little flavor and of course we'll open it for questions.

You know, we, we began it, we began the strategy in September 23rd and committed to completing our regulatory work by the end of 2024. Last December, I fulfilled that commitment by finalizing our state's largest insurance market reform in 30 years, since the passage of Prop 103 in 1988.

I'm proud to report that we achieved this ambitious goal within one year, creating entirely new laws and procedures from the ground up in record time while remaining thorough, thoughtful and deliberate.

As I've mentioned Previously, under Prop 103, insurance companies can now set their rates at whatever level is necessary to cover future claims, but they're not obligated to write new policies. While Californians on average pay less for insurance than residents in other disaster prone states, those at higher risk face the steepest cost, making coverage truly unaffordable.

I'm actively addressing today's insurance crisis to meet the challenges for the future. And so as I reported to you, I can confirm that my December 312024 target, which was my target date on that date, our catastrophe modeling regulation, our California only net cost of reinsurance regulation and the complete rate application regulation was completed.

We also finalized our Fair Plan modernization plan. We completed administrative policies to streamline our rate filing process, something that hasn't been done and needed to be done with implementation expected by full in by this March. We have defined and identified the state's wildfire distress areas under the strategy with updates provided just, I believe two weeks ago.

So my Department is now moving with unprecedented speed and focus to implement the various regulations the strategy that the strategy requires and we're monitoring the response in our market by reinsurers and by insurance companies. Now let me be quick give you a quick update on what these actual different components mean.

So the first component of my strategy is incorporating catastrophic modeling into rate making. As you may know, California is the only state in the nation that still only requires the use of historical wildfire data. We rely on this data, which is not accurate and fails to account for the advancements we've made in mitigation efforts.

Under our new regulation, Insurance companies that commit to increasing their coverage in the identified and defined wildfire distress properties while removing policies again from the Fair Plan, right, they have to also depopulate the Fair Plan will be allowed to use catastrophe modeling in the rate filing.

This will change and enhance insurance availability for those who currently can only obtain coverage through the Fair Plan, facilitating the transition of policies from the Fair Plan to our regular market, which is one of our big goals of our strategy. In January, we introduced a pre qualification required information determination.

That's exactly how it's called a prid process, allowing my Department and the public to evaluate the integrity of these catastrophe models used in rate making worldwide and in other states. So within the first two weeks, once the process opened for model submissions, four major modeling companies requested a review of their models.

This suggests that the most widely used catastrophe models that are already in the market are undergoing my department's review. I also launched a public wildfire catastrophe modeling group last September chaired by the Dean of the School of Natural Resources at Cal Poly Humboldt.

This group is expected to provide recommendations to me by the end of by the next month. This is also aligned with our other Bill I'm sponsoring, SB 429, authored by Senator Cortese. This Bill aims at establishing a wildfire safety and risk mitigation program within the Department to foster partnerships for researching public catastrophe modeling.

I believe a public wildfire model would provide numerous benefits including serving as an educational workforce training tool, aiding local and regional planning, acting as an actuarial tool to rate making, and enhancing transparency by Providing a public benchmark for now insurers assessing risk in their own rates.

This is an idea we took from the Florida insurance Commissioner who are now trying to update their own model to do these different things.

Why not have it be a tool that we can all use to better look at planning, how we build, where we build and how do we obtain that information real time so that local governments, elected officials can have this data. By the way, this model on wildfire would be the first in the country.

It would also empower communities to prioritize actions that mitigate wildfire risk. The second component of my strategy involves incorporating reinsurance costs in the rate making. As you know, reinsurance is essential for insurance companies to manage the risks much more effectively. It also allows them to write more policies and cover losses despite the increasing threats of catastrophes.

So reinsurance groups act as financial backers for insurance companies and I'm engaging directly with global reinsurance groups as we speak. Last week I attended the Bermuda Risk Summit to directly meet with reinsurance groups and advocate for California. I also participated in my role as co chair of the National Association of Insurance Commissioners Climate and Resiliency Task Force.

I co chair that along with my colleague from Alaska. It is important to note that Bermuda is the headquarter for close to 40% of the world's reinsurance business. That is just the fact. And if you have issues with that, check with your Congress Members because they're the ones in charge of of these tax loopholes.

Other commissioners from catastrophe prone states have been engaging with Bermuda for years. With our ongoing risk, it's time that California starts doing the same. During the summit I presented a keynote address detailing our initiatives in California to tackle the insurance crisis and my collaboration with fellow state insurance commissioners at the national level.

As I'm saying, every insurance Commissioner across the country and in our territories is going through the exact same thing. We are, we are just feeling it much more because we are the largest market in the country.

We have to engage face to face which allows for more direct answers and I must confront the insurance industry to drive these results. If insurance companies are telling me that the cost of reinsurance is almost tripling, well then I need to trust and but also verify by directly meeting with the reinsurance companies who are their customers.

So we asked when are we going to see more policies being written? When are we going to stop the non renewals? When will you pay claims and honor your commitments? And it's really interesting because in response the reinsurance companies who by the way are not regulated by any insurance Commissioner in the country or any state agency.

They've actually agreed to expedite payments to wildfire survivors in accordance with my directive issued on January 23, and to strengthen our insurance market. Something also that I wasn't thinking on as I was talking to them, but they reminded me that they're also committed to collaborating with us in California on expanding earthquake insurance.

They're actually acknowledging that despite our ongoing wildfires, for them, earthquake risk is California's most urgent risk that we need to get to address. If we don't address the uptake in insurance for earthquakes, it is going to be left for governments to pick up the pieces for millions of Californians when the next massive earthquake hits.

So again, California is one of the few states in the nation that does not allow insurance companies to recover these expenses in the rates. The cost of reinsurance has significantly increased in recent years due to rising losses. This has led insurance companies to either limit policies.

I mean, this is things that you're all living, we're living this day to day in your own communities. They're limiting new policies, they're restricting their offerings to lower risk options if they're even writing any policies at all.

So under our new regulation, insurance companies, again, similar to cat modeling, if they agree to increase policies for the wildfire distressed properties while reducing again the reliance on the fair plan, we will permit them to include the reinsurance costs in the rate filings.

This strategy links the use of wildfire catastrophe models and California net cost of reinsurance in our rate filings, which with, I have to say, with the first in the nation, commitments from insurers to write more policies in the wildfire distress areas across California. No other state has achieved this type of commitment.

Other states allow for cat modeling, they allow for reinsurance and get nothing in return. We are getting a guarantee that they're coming back and they're not abandoning communities like paradise, they're not abandoning Altadena or the west side of LA because if they want to use these tools, they have to write policies in these areas.

And we're going to be tracking and monitoring that. So to identify these areas, we adopted a comprehensive approach, acknowledging the complexities of our market and designing a system to maximize benefit to consumers.

The more companies that make commitments to right in these distressed areas, the faster and more robust the relief to consumers will be because more companies will be writing and expanding coverage in the areas, thus fostering the competition. So, for example, let me give you a quick example.

If a large company already has substantial exposure above 85% in this distressed area, then we need that company to maintain that so that we prevent further retreat from high risk areas.

And at the same time, if a small or or regional company has very little exposure in a distressed areas, we need that company to grow writing more policies. And that's where the 5% growth target is critical. We need all types of companies contributing to reversing the Fair Plan growth.

This is why again, we've decided we designed more than one threshold for insurers commitments in order to align with the different size, risk tolerance and scope of companies in our diverse market. So in distressed regions, companies will commit to either an 85% threshold for writing policies or a 5% increase in the number of policies written.

So whatever the pathway an insurer picks in their filing, my Department will push to make sure that the insurance company is aggressive and it is held accountable for what we negotiated and approved and that we see immediate results, something that we do not have access to or the data to be able to track.

And in all these pathways, policyholders in the Fair Plan with moderate to high risk are eligible for commitments from insurance companies regardless of whether they reside in a designated wildfire distress area or not. So if you're in the Fair Plan, we're also allowing companies to take those policies even if they're not in a wildfire distressed area.

Again, the goal is to depopulate, deflate the fairplot, which is what everybody's goal is. So last June, we published preliminary zip codes and counties designated as distressed areas for both commercial and residential insurance. So just two weeks ago, and some of you were briefed, I believe the Chairwoman and staff were briefed.

We updated that the stressed areas based on more recently finalized data from 2023. So we've increased the number of residential zip codes to 662 and the number of residential counties to 29, while leaving commercial zip codes really unchanged.

These commitments from insurers to write more policies, particularly in distressed areas, will enhance insurance availability and eventually get us to affordability. Sorry, I have a lot to present, so I'm trying to go as quickly as possible. We've done a lot of things. Take your time.

The ongoing growth of the Fair Plan is also the third component of my strategy. It is the state insurers of last resort and poses a significant risk to the overall insurance market. This growth raises uncertainty and concern among many insurers rightfully about the potential for a Fair Plan assessment on their companies.

This fear alone stops them from growing in California and expanding their footprint so the reforms I secured for the Fair Plan include expanded coverage limits for commercial customers such as summer camps, homeowners associations for our ag industry and farms to promptly pay consumer claims and provide greater financial stability to maintain operations during a catastrophe catastrophic event.

I believe every insurance company, including the Fair Plan, has to handle claims fairly, fully and swiftly.

This is why I acted promptly last month to approve a Fair Plan request for $1.0 billion in additional funds from its Member insurance companies, known as an assessment, to uphold the Fair Plan's financial stability and to ensure that it can continue to pay claims to the SoCal wildfire survivors.

This action, I have to say, just to let you know, is mandated by law. The Fair Plan serves as the insurance safety net and required by the state for insurance companies to fulfill their obligation to pay claims and which is its primary responsibility.

In my February order, I implemented further measures to ensure that the Fair Plan continues to meet its role, including directing the Fair Plan to hire the necessary staff to process claims fairly, fully and quickly, requiring the Fair Plan to utilize all available funds, including reserves and reinsurance, protecting consumers from bearing the full cost of an assessment with the insurance companies responsible for half of the assessment.

Under the agreement that I reached in 2023. Thank you. Any fees imposed by policyholders by the insurance companies must undergo our Prop. 103 review process. These fees must apply fairly as a percentage of the policy premiums and it can be collected over the two years to again lessen the burden on individuals.

Furthermore, insurance companies cannot pass the assessment cost to consumers in future rates. So we are committed to maintaining a healthy Fair Plan Reserve. So as we're looking into approaching our summer wildfire season, I mean that's the reality. We have to strengthen the Fair Plan as quickly as possible.

The Fair Plan is required to comply with all the laws applicable to other insurance companies. This includes providing advance payments for living expenses, personal property without requiring an inventory, as well as well as managing smoke damage claims according to industry standards for our new Members.

It's been 30 years since the last Fair Plan assessment, which was prompted by guess where wildfires in Altadena, Topanga, Malibu and all areas of West LA fired up, followed by the Northridge earthquake in 1994. These were all the areas that were affected by then a lot of the similar areas that have been affected by these 2025 fires.

And at the time it resulted in three fatalities and the destruction of nearly 550 structure. Previous commissioners authorized 260 million at the time, which is equivalent to approximately 563 million today in insurer assessments for these fires and again for following the Northridge earthquake. So this historical context highlights the urgent need for reforms.

And if we don't prioritize building, rebuilding better, how we build, where we build, we risk repeating past mistakes. I'm going to be a bit controversial here and say when the fires in paradise happen, everybody was very quick to say, why should we let them rebuild?

To this day, nobody's asked me, why are we letting people rebuild in Malibu in these areas that have been struck again, are we going to let another 30 years go by and build the same without really addressing this issue or another insurance Commissioner? Other legislators are going to be back here having the exact same story.

We need to do the tough work now, and we need to do it and there is no other option. Again, my strategy aims to address these issues, especially in the light of climate change, which will only exacerbate the situation sooner than we anticipate.

So my staff is currently conducting again a comprehensive financial examination of the Fair Plan, ensuring compliance with recommendations from my department's 2022 Operational Assessment Report. Again, the Fair Plan has to come out of the shadows. It has to be more transparent.

And this is why it's important that we put a public Member on that board that we've been trying to do, Madam Chair, since last year, or adding other financial tools as well to protect it. So the Fair Plan called for significant changes. This report called for significant changes in the Fair Plan's governance, operations, underwriting.

We're looking want to look at their claims handling. I've heard time and time again that their claims are delayed. Risk management, customer service and financial planning strategies and policies. We're looking into all that in in that audit. I will release the findings in the next coming months. Our office is doing that audit currently.

The Fair Plan is also operated by insurance companies established by the Legislature and the Governor decades ago. Holding the Fair Plan accountable to serve Californians is really a shared responsibility amongst the Legislature and our Department. Modernizing the Fair Plan is crucial for maintaining a reliable safety net that customers can depend on when they need it.

I am proud to co sponsor AB 2026, which is jointly authored by Chair Calderon Assembar Alvarez. This Bill is long overdue again and it will enable the Fair Plan to assess catastrophe bonds and a line of credit, allowing it to utilize other financial tools to provide consumers with enhanced protections against potential assessments.

The fourth component of my strategy is looking deep down in our own processes at the Department. We need to hold everyone accountable, even our folks within our Department Again, looking at improving the efficiency of these rate filings, I believe it is vital to minimize unnecessary delays to get our marketplace to get our marketplace back on track.

It is unacceptable that rate filings can take months or even years longer than the timelines even set by the voters in Prop 103 over 30 years ago.

Last August, I issued a bulletin to assist my Department in conducting a rigorous and transparent review of the rate change applications to get them back to the 60 day time limit as mandated by Prop 103. This administrative process will also allow for 30 day extensions which is also detailed within Prop 103.

Consumer benefits from a thorough and transparent rate review which leads to a broader change in in insurance products becoming more available to meet our ever changing needs. So my actions create certainty in the insurance marketplace and hold all parties accountable for adhering to the original requirements of Prop 103.

So this is why I'm expecting I expect companies to request the rates necessary to cover future claims and submit complete rate filings in support of the request.

I expect any interveners to comply with the rules avoiding duplication of my department's experts work and provide meaningful substantive input throughout the process and to no longer holding rates hostage that only hurt our market. And I expect my Department to conduct a transparent and thorough review of each filing in accordance with the timelines established under Prop 103.

A crucial aspect of this initiative is the creation of a data reconciliation tool by my Department as soon as it's administratively feasible. This tool will serve as a necessary check for insurance companies to complete before submitting the rate applications for my department's review.

So no longer is the insurance companies using technology and we're still with paper and pen at the Department. My staff is currently developing the system and working with insurance companies to ensure the tool is actually effective. It's workable, it's practical and it's aligned with our objectives. So we aim to have it fully operational by this fall.

In the meantime, my Rate Regulation Branch, which reviews insurance company rate filings, is making significant process in hiring to enhance our new filing review process as well. So we're also conducting the first ever organizational assessment to determine the appropriate staffing levels needed to to manage the increasing demand of rates in the 21st century.

We know climate is changing, this is putting much more demands on our team and we have to be ready to be able to move quickly and no longer just wait to be the fourth or fifth responder after a catastrophe. In addition, thank you for the budget request approval we're hiring and our hiring efforts.

My Department has already contracted with several firms to provide actuarial and rate review services in collaboration with our rate regulation experts. This initiative is made possible again by the ongoing budget authority granted by the Legislature and the Governor a couple years ago. So we thank you for that.

It is essential that my branch, particularly my rate regulation branch, is adequately supported, staffed and equipped to successfully implement this groundbreaking strategy. Most importantly, we will continue to thoroughly review the rate applications submitted to my Department to ensure compliance with our laws and justification under Prop 103.

That's the law of the land, and if you want to reconsider that, I leave that up to you all. The fifth component is transparency and accountability for interveners. Under Prop 103, public participation is permitted in any proceeding before the Commissioner.

While the rate application process has always been open to the public, including intervenors, similarly, transparency has not been extended to the process of actually becoming an intervener. My Department now provides public notice on our website for individuals or groups wishing to become recognized as an intervener and for intervener eligibility for compensation for their participation in filings.

The goal here is to address and improve all aspects of the insurance crisis within my authority. This includes my Department and those who engage in it, such as interveners who participate and receive compensation for their involvement.

We have updated our webpage on our intervener process, enhancing public transparency regarding how the process works, the petitions and orders filed, and actually the amounts that are being paid to intervenors, so that it's all out in the open now.

My Department is also planning to hold a public rulemaking for future regulation this summer aimed at enhancing transparency, reporting, clearly defining compensation, and provide enhanced oversight for interveners. This is long overdue as taxpayers subsidize these interveners in the millions of dollars.

Before I conclude, I want to stress that wildfire risk mitigation, as we're all working on, continues to be my top priority and is a focal point in our strategy. Many of you and your colleagues have expressed the importance of this issue and I could not agree. Every insurance company or reinsurance that I talked to stress mitigation.

Mitigation, upgrading building codes, looking at land use policies. These are all critical things that the global reinsurance market is looking at and how we adapt and address to these issues. We've all seen that picture of the House in Lahaina. That was the only one that was fully mitigated. There's similar photos now in Palisades.

We've seen this all over the world again. So again, my strategy builds on my earlier initiative enacting the safer from wildfires regulations that we've talked to before.

This really sets forth our regulation that was developed through collaborative effort with multiple agencies, including my Department, CAL FIRE, Cal oes, the Governor's Office of Planning and Research, and of course the California Public Utilities Commission.

My Department has approved nearly 60 insurance companies, including the California Fair Plan, that are providing discounts to consumers and businesses that take these steps to harden their homes and mitigate wildfire risk.

SB616 Again, another Bill for this year, jointly authored by Senator Rubio, Senator Cortese and Senator Stern, aims at aligning all these statewide efforts so we're no longer siloed and every Department is working on different things so that we are aligning our statewide efforts on community wildfire risk reduction, looking at how do we streamline our mitigation efforts and how do we collect data thoroughly through a newly established community hardening Commission.

Mitigation often comes at a cost and not all Californians in need of assistance can afford it. So AB888, authored by Chair Calderon, establishes a grant program within my Department to help qualify qualifying residents cover the the cost of new or replaced fire roofs and other essential fire safety measures within 5ft of their structures.

Throughout my testimony this morning, I shared several bills that will further protect consumers and our communities during the wildfires as well as you know, again, help them on the road to recovery.

I look forward to being with you as we present your Bill, Chairwoman, hopefully with the Commissioner from Alabama and Louisiana who have really led nationally and have proven that a fortified home can retain its value, will cost more, and is actually investable. So if your home's not investable, it's not worth investing in.

And so really the south and the Southern insurance commissioners have really led in this effort and now the rest of all other states are trying to catch up. So it's important that we continue to urgently work together to promote thoroughly and impactful legislation. And we look forward to working with you.

So just to conclude, I want to emphasize that my strategy is a direct response to the extensive outreach efforts I have led with my staff since the beginning of my tenure, focusing on local communities, governments, consumers throughout the state, and in response to the recent fires in Los Angeles, our Department has acted more swiftly than ever to assist consumers and communities.

My primary goal is to ensure that claims are paid promptly, allowing individuals to recover. And my strategy prepares us for the future, for future wildfires, and to maintain the stability and solvency in our insurance market. Insurance is not just a financial tool, it is really a lifeline. When it operates effectively, it enables families to rebuild stronger.

When it fails, people can absolutely lose everything. As you all have seen firsthand. I'm committed to advocating for Californians around the world and will meet with whoever to ensure they have access to affordable, available and fair insurance. Thank you and I appreciate your time.

Thank you, Commissioner Lara, please drink some water. Good job. I hope you didn't feel rushed. You have plenty of time. I just want to give you a minute. We greatly appreciate you being here. This is the fourth time you've been here, just on the SIS update. And I appreciate the partnership and you taking time in your team.

So now I'm going to open it. Up to questions from. From Committee Members and I think we have one from Assemblymember Ortega and then Assemblymember or Chair Biania.

Thank you. Commissioner, good to see you this morning and want to thank Madam Chair for all the work she's done. I've been sitting on this Committee now for my second term, learned a lot last year in terms of the Fair Plan and what we were dealing with and preparing essentially for the worst case scenario.

Clearly, we have a lot more work to do when it comes to protecting consumers and dealing with climate change. So my question is related to the Fair Plan. You know, a lot of the constituents that I represent are constantly asking about the price of insurance, whether or not if they can get insurance, how much it's gone up.

So I know that you recently approved the $1 billion Fair Plan assessment that allows companies to pass on half of those costs to consumers. So my question is, where does this approval process stand and how much should my constituents expect to pay and when are we going to get those bills?

Yeah, so the process that already was approved, that was made through the assessment of our Financial Surveillance Bureau. And again, that's within law because the priority after a catastrophe is to make sure that every Commission, every insurance company, including the Fair Plan, have enough capital to pay out the claims.

In this case, our Department and the Fair Plan determined that it needed an extra $1 billion to be able to cover claims and make people whole from the Southern California wildfires. And so that has been. That's already done. The rate.

I cannot give you a specific amount because different policies have different protections, different companies have different exposures that vary. So I can't give you a ballpark number, but insurance companies do have two years to recover that loss. So that it's not so people don't get hit with one big Bill to cover the cost of the. The assessment.

And so this assessment also, it. This is why it's important to support the legislation that we have here in the Assembly to give them up additional lines of credit and other tech, other financial tools before they come to an assessment. Right. They have to. They have to spend out their entire profit. They have to pay.

Spend all their reinsurance money they have to make sure that insurance companies pay out their, their portion. And then we want to add a line of credit. We want to like, we want to add cap bonds to add more, more opportunities for them to access more capital.

Before we go to the assessment, if we, if just this fear of the assessment and if it's not shared through the taxpayers, the insurance companies are going to be 100% on the hook and will refuse to write new policies in California or will restrict further their footprint in the state, which would then make insurance much more unaffordable.

So all these strategies are getting them back. And honestly now, you know, taxpayers know that they're on the hook.

Maybe we actually get serious about building better, implementing key policies at the local level that look at how we build, where we build and that we build back stronger so we're not here another 30 years and hopefully with another assessment.

As I said earlier in my testimony, the last assessment was in 1993 for fires in the exact same areas we had fires a year ago or a couple months ago. So we cleared it in learn our lesson.

So we have to be, and I will implore the Legislature that as you're looking at maybe removing some of these environmental protections, that we also look at how we're building, how do we reimagine these communities so that we're not back here, if we're lucky, 30 years, but with climate change, we could be back here 567 years from now.

And we can get you more details in terms of the process itself, but it's pretty much defined within state law already.

Assemblyman Harabedian.

Thank you, Madam Chair. And I just want to start by thanking the chair for all the work that she has done and in concert with the Commissioner and Commissioner Lara, it's great to see you. Obviously, I see you a lot in our district.

You were there all the time helping the wildfire victims in the Eden fire and the Palisades fire. And I just want to say thank you. You know, you've been relentless. The workshops and everything that you have done with the insurers has been really phenomenal.

And you have been relentless in being there and speaking up for consumers and speaking up for the victims of these fires. So appreciate seeing you here. I will probably see you again in the district this weekend.

And whatever we can do here to help stabilize the market, do what we have to do to make sure the market will be there for these folks when they rebuild.

And obviously, unfortunately for the next catastrophe, make sure that the insurance market is stable and providing relief and as you know, you hear from the same people as I do. I know you have friends and family Members who are affected by this fire. Everyone in uniform voice has said, we are willing to pay more.

And that is somewhat controversial in a time when life becomes really unaffordable in California. Many of these victims, many of the folks that are dealing with insurance coverage problems, have really expressed a willingness to pay more as long as the market is stable and they are fully insured.

And so I think that we as a body need to help you get to a place where the market is right sized. It's an effective, fully functional market. And then to your point, deflating the fair plan as much as possible in that process.

So appreciate everything you're doing, appreciate you being here, and thank you again for everything you're doing for the fire victims.

Thank you. Gallagher. I'm sorry. Gallagher.

Yeah. Thank you, Madam Chair and Commissioner. Thank you for being here today. And, you know, I'll start by saying, you know, the things you laid out about responding to disasters, you were there in paradise, helped, you know, my constituents with recoveries and making sure they were getting, you know, their payments out of their insurance.

I think all that has been really good. But the thing that we're here really to talk about today is the bigger picture. And we have a crisis, you know, and the problem is, I think we've known about it for a long time, and you're bringing up, you know, 30 years ago, we had these same fires.

So this is not new. Right. And I think the really frustrating thing is that, you know, we're seeing we're moving in the exact wrong direction right now. Like, so as we sit here today, Fairplan, total exposure has increased 217% since 2021. You know, $526 billion of exposure. So that means. What does that mean?

That means people aren't writing policies. So people are going on to Fairplan, and that exposure is getting greater as we sit here today, like, exponentially. Right. And we have a lot of insurers who have said we won't write policies any further. So we're losing that.

And I think many of the things that you're outlining in the plan and the emergency regulations are good things. But I'll start with the biggest question. Why has it taken this long? And I'm not putting the whole thing on you. I'm saying, why has it taken this long?

You know, why didn't the Governor act quicker on this issue? Is there things the Legislature should have been doing more of because, look, the campfire was in 2018, okay? The year before that, we had the Sonoma North Bay fires. So my frustration is with the lack of real urgent action.

And now, only now, are we finally getting these regulations, you know, well, in place, let alone implemented.

Yeah.

What? So to you, why is this taken?

So, you know, Prop 103 really details the process by which we need to do these regulatory. These regulations. Could I have moved quicker? Absolutely. But at the fear that I might lose this in court over process, and it was my own, you can ask my Department, why is this taking so long?

I come from where you sat and I don't like to wait. I want answers now. But what's different in the regulatory process? That the regulatory process is finally very detailed within Prop 103. And I am prepared to lose some of these reforms in court because I'm assuming some folks even in this room will challenge them.

I do not want to lose it over process. I want to lose it over the meat and potatoes of this policy because I believe in them. So hardly. I was in the campfire. I was in paradise the day before the fire started, announcing that Mercury was coming back to paradise on that flight. We started getting the.

The details of the fire.

And so again, we have to be real, we have to be bold and not buy into the old paradigm that you should not be communicating with the insurance companies, because at the end of the day, they are the ones making the decisions and the reinsurers are the ones deciding if they're going to back the insurance company that wants to do business in California.

And so I'm going to take heat for that. But I know it's the right thing because as Commissioner Arabedian said, as many of your constituents said, I would rather pay more, but I need certainty. I know where I live.

And the goal for us is to make sure that everyone pays for the amount of risk of where they live. And we're not anywhere near that. And you're absolutely right. We're here again 30 years ago for fires that happened in Southern California. And it's heartbreaking to see that you live this.

And when people tell me these must be the most devastating fires that you've seen, unfortunately, no.

Going to these communities in the Sierras that have completely lost everything, there's not even a building standing to hold a community town hall, I mean, we've seen it all, unfortunately, all those actions allowed us to be prepared for LA and respond quicker for just the gravity of what that was.

But we have to get serious about the Housing element law, should all communities be building the same, you know, or should we give other incentives? Again, should we look at building code upgrades, should be looking at land use policies? These are all things that I leave to you all to be bold. Because we cannot be here, brother.

Nature is not allowing us to wait another 30 years. Sorry. Yeah.

And look, I mean, nobody more than me has outlined the mitigation that needs to be done, only to have bills not heard in Committee.

By the way, on that front, over my last 10 years here, which has been very frustrating because you're exactly right, if you want to bring down insurance rates, you better do something about risk and fuel reduction. You better do it quickly. And. But this is.

That's my frustration is, hey, after these recent fires, the governor's acting with Executive order after Executive order remove things to even go against the Coastal Commission, like, thank God, finally. Right? But how come that wasn't happening after the 2018 campfire? How come I didn't see the Governor with an Executive order immediately on insurance? And could have.

I mean, is that something the Governor could have done with you? Have you. Did you guys have those kind of conversations?

We're in constant conversation. But, you know, it's, it's the, it's the, it's the argument that I hear now with folks from Northern California saying, well, we don't want to pay for the LA fires. And I remind them that we.

When the fires were happening in the Bay Area, it was the LA people who were telling me, I don't wanna pay for the San Francisco fires. And that's why I keep saying, we all need to pay for the amount of risk of where we live. And this is a statewide issue.

And so I can tell you that after every fire, we communicate with the governor's office. And again, this is why I'm being bold and very controversial about. I've really gotten to know a lot of the communities in Mariposa, El Dorado and all the Sierra communities. And everybody was so quick to say, why should we let them rebuild?

Right. I'm not gonna tell you. You can't rebuild your community. It's like somebody coming to east la. That was very frustrating. Right. But then nobody's asked that for Malibu, for Palisades. Right. And it's just kind of the irony around that.

And I just put that as, this is the information that we receive and the amount of misinformation that happened after the fires, which is the fair plan's going to go under the right was, zero, overregulation. The Left was, zero, no, they're, they're all greedy.

Wasn't that part of it, though? Isn't it overregulation over the last 30 years that has led to the current crisis?

I think it's outdated regulation and I think it's regulation that hinders the ability for the Department to get these rapid, these, these rates actually to reflect the rate and the risk. And that's why we're changing that within the paradigm of Prop 103. That only could be changed through another Proposition. Right.

So we're trying to weave these changes within and we got them approved in a year. Now we're full implementation. We'll get those implemented.

But now I can wholeheartedly, before a judge, stand and defend the process, which is one of the things that I was very particular with my staff, that we want to make sure we defend it because when the lawsuits come, that's where they're going to try to get us.

And I appreciate that. But emergency action, my point is emergency action should have started in 2018, you know, at the very least. And so Now State Farm, 22% increase before you, you know, you did stall that increase. You're in discussions there.

Should we anticipate more of these pretty significant increases out of insurers coming and like, I guess maybe that's my question. What's next and what. And on average, like, what should our consumers expect in terms of rate increases that are going to be coming before you?

So State Farm is a unique company as it's the largest writer not in California, but in many states. One of the challenges we've had with State Farm at our national Association is the lack of data to look at what's really happening with State Farm financially. Right. And this is happening.

Red, blue, purple states, we don't differentiate under statewide Association. Our job is to protect consumers, protect our market. That's it. And we need to do that with data. And I usually do not engage in these rate meetings, informal meetings, because that's the Department.

If there's an intervener and the insurance company, and then they come to me and we look and make sure that it's actually sound and admits. But this time I got engaged because we still hadn't received and this was months of negotiations between the third parties and we still don't know.

Okay, you're saying rates are not the only solution to get them out of this financial problem. I've yet to try to understand what other solution is an insurance company going to use to get their financial house in order if it's not constricting their policies or raising rates. So I'm curious, what else are you going to have planned?

We're also looking at what is your data outlook, what, what is your parent company doing in other states? I can give you a laundry list of what the parent company has done to give loans to the insurance company so that it doesn't, you know, bear the total cost of this doesn't just go to the taxpayer.

So in coordination with the Texas Commissioner, she outlined some instances where State Farm came in and provided loans. So Mike, why aren't you doing that? And if we give you that, if I give you this rate, are you going to stop non renewals? Are you going to, you know, protect consumers for a year?

Those were all questions that I was digging in because again, if, if you need the rate, I have no other option but to give you the rate because I need you. Because protecting 11,000 consumers, over a million policies, you know, that's the, that's the balance and the job.

So what do they say to that?

So what after, after my own negotiations, I felt that we still, they're still playing around. So we're going to have a hearing with the administrative law judge who's going to dig in deep and ask these questions and then provide me the final recommendation.

So as you remember, they call the ask for, I think it was like a 30%. Our Department recommended a 22% and then we'll see what the administrative law judge. What I don't want is two things.

I don't want to create precedent where other insurance companies could come in without giving me data saying they need an emergency rate and to take advantage of another catastrophe, which they're bound to happen. And two, that we actually force this juggernaut of a company to give us information so that we know firsthand if you're in trouble.

I'd rather need to know that now, then wait for another catastrophe and then you try to come up with more rate without fully understanding what you're doing to put your financial house in order. So that's more than I should probably legally say. But, but it is my, but that is a concern.

I mean, because you 22% and we're like, hey, what's next? What's going to be the next ones? Right? And, and, and I'll tell you right now, they're not writing policies up north. You know, they're not writing policies in paradise. I mean, Mercury came in.

I give them credit for, for doing that and acknowledging the work that's been done. But there's a lot of places in my district where a lot of these big insurance companies are not writing policies. Absolutely. We saw in the Palisades a lot of people non renewed. Right. So the accountability has to be there as well.

You know, in terms of, I think, I hope we can all agree that the reason why we're having these huge spikes is because we overregulated the insurance market and now we're going to have these huge spikes in insurance.

But at the same time, that shouldn't mean that we're getting people that are getting non renewed and dropped from their policies. And so far that's what's going on. And that's my biggest concern. We have to turn that around.

That's why it's the policies, the reforms that we put in place that will go into place this year will, with that commitment that they're going to use these tools and go back into your district. Your district is one of our priority wildfire distressed counties. And they have to demonstrate that.

And we'll be able to have now for the first time the data to actually follow that.

And so I wish we had all these components in the past, but if an insurance Commissioner in the past would sit here and say we're going to allow for a CAT model and we're going to offer reinsurance, they would be skewered in the press. I went from reporters asking me why am I allowing for these rate increases?

And then literally the day before the fire, why you suppress, why are you suppressing rate increases? So it's like, you know, it's a difficult job.

Indeed. Last question. Madam Chair, sorry is just on the reinsurance front. Are you planning to work with the Trump Administration and the Federal Government on, you know, because I think they could play a key role. Absolutely. Yeah.

So we are, we are, we are. We're going to have our what Washington D.C. fly in. One of the things we want to do is look at one. There's a great Bill by Congressmember La Malfa and Thompson to remove the federal taxation of the money that we can get for mitigation.

We're also encouraging them to put another $10,000 in there. It's a great bipartisan Bill by California. We are supporting that nationally, we're trying to get that done. We're also trying to look at what, what reinsurance pools we can try to create maybe at the federal level. We also haven't even talked that something that affects all our districts.

Flood the re upping of the Nfip. Nobody's talking about flood which is another issue that the reinsurers brought to me is earthquake and flood. You guys are ignoring these two risks which are gonna be again on the dime of governments. And we're already starting to see those impacts.

Those are some of the issues that we're working with the Trump Administration. And we also have a former insurance Commissioner from Montana who is now in Congress who's also leading a lot of these reforms for us in Congress. So the beauty about our Association, we come from everywhere. We have somebody for you.

And so we're using our best assets within the Association to work with the Trump Administration, which maybe we can get something done this year.

Thank you, Assemblywoman Avila Ferris.

Thank you.

Thank you, Madam Chair. Appreciate all your work that you've been doing diligently on this Commission and you know, welcoming us new Members here that are playing catch up on all the hard work you've been doing with the Commissioner Latta as well.

And thank you for being here today and welcoming us newbies to catch up on all your years of it's fun. I promise of work. I have a few questions. Number one, you brought, you know, previous fires up and in regards to advancing how we build and improving, you know, lessons learned, best practice.

I'm not sure if you've seen a Bill AB306 that is considering and proposing stalling the building code due to the LA fires.

And just curious if you've had a moment, if you haven't, we can talk offline about that because it does tie into your earlier comment about, you know, building to better standards to be preventative of in high risk fire areas. So not sure if you had a comment on that or if you weren't familiar.

It's okay, we can talk off of that.

I know I'm not familiar with the Bill yet, but I will tell you we need to, we need anything to build to the highest standard. But we also that comes at a cost.

And for our middle income families that are rebuilding or that want to improve their home, again, why we have to put money in people's hands to actually do the work. But it's critical that we do it. It saves lives. We know it works. Insurance companies recognize it.

After years of working with them, they recognize that a home that's mitigated is going to be safer and it's going to retain its value. So that also works for our real estate industry as well.

Correct. And I think it's probably just the high level of this Bill is pausing the building code from advancing on the latest construction technologies, which is probably of. To code. So it's in conflict of kind of what your vision is. So I think we just.

There needs to be some cross pollination of a discussion of policy before we move forward. Because it's the opposite of what you're envisioning. You don't want to rush to. And then my other question for you, I was really interested. It was not in our pack. It was on the rate review process.

And you know, the interveners and the data behind that, of who these intervenors are, where they come from in the state, the demographics and the social equity around that. Because what is the impact and what are they doing and who are they benefiting? When we talk geographically throughout the state.

So I'm curious if there's data on that and curious what reform and oversight and compliance has happened in that space.

Yeah. So we actually are, are gonna do the first attempt of doing an actual regulation defining what interveners should be. Should you actually go out there and talk to consumers or do you just represent your own interest? Do you have Members? It's so vague in terms of what does it mean to intervene.

Do you come here and opine on something and then we have to give you $300,000 or do you not provide any crucial feedback and just oppose everything the Department is doing? Is that intervening? And then should we give you millions of dollars for that? Interveners were written into Prop 103. I think it merits a revisit.

What we're going to do is actually define it so that there's clear roles and responsibilities. I think they do play an important role, but I think they, they, some of them, I think have just, for example, just cutting and pasting the work of our Department, saying they're going to intervene. We are the experts, the Department of Insurance.

The men and women at the Department are the public and are the ones responsible for being the voice of the public. And so we need to put that back in the Department. And that's what I'm working on.

Great, great. I look forward to seeing that data because, you know, the limited data that I did review on that space, it looked like it can be tightened up and cost savings and then really who are we representing? It is for the people.

Then you know, there should be a lot more scrutiny on those interveners because it also delays public policy and you know, the hard work that you are doing. Overall. Thank you for your presentation, very enlightened. Looking forward to working with you. I think overall the message here is we all have to pivot.

It really doesn't really matter what happened. We can learn and become best practices. But we're here, right. And we are in a crisis. And we need to ensure Californians and we need to keep companies and business as well.

And so there's a delicate balance here of providing insurance to Californians and being able to have multiple options for our homeowners or commercial insurance, but we also have to mitigate risk for insurance companies as well. Right.

Nobody wakes up in the morning to say, I want to go out of business or I'm going to create a business to not be profitable or sustain. So we have to have that delicate balance. And I know it's very difficult to have that delicate balance in this space when it's a very fragile economic ecosystem. Right.

Of balancing communities, balancing human needs and balancing a business entity.

So I love the progress that you're making and I hope that there's a middle lane here that we return to a space that we have multiple options for Californians versus very limited in us having to go out of state for many of us, depending where we live, or no options or out of the.

Out of the country.

Correct. And so I think we, again, we all have to be cognizant that it's a balancing act of risk for everyone and investors and then also balancing the community needs. And it's difficult.

And again, we are here and we need to move forward and work collaboratively, bipartisanly, to address the current crisis so that we all have insurance throughout the State of California. So thank you.

Thank you, Assemblywoman Addis.

Thank you, Madam Chair, and thank you for your immense amount of time and for the lengthy hearing today. And thank you, Commissioner, for all of the knowledge that you bring.

And I also wanna say to our colleagues who have lived through wildfires, really wanna appreciate your expertise and your leadership, both the Minority leader as well as Assemblymember Harabedian. And so I represent the Central coast, as you know, Santa Cruz, Monterey and San Luis Obispo counties.

And many of the things that you talked about, I hear almost daily in my office. Concerns around the housing element, concerns around the attitude of build everywhere and do it faster, and concerns around flood, having lived through the atmospheric rivers of 2023.

And so I just want to say thank you for uplifting those issues because certainly there's a lot of concern across many regions of this state around how we approach the desperate need we have to build housing, but how we do that in a way that doesn't increase the problems that we're having in the insurance market and the catastrophic climate related events that we're having.

So when I went on the Fair Plan website, I think this is where I found this data. I saw that from 2020 to 2024, the Fair Plan growth in Monterey County has been 300%. In Santa Cruz County it was 530%. And in San Luis Obispo is 560%.

And I know that you have a strategy around the Fair Plan, but in four years we've seen this amount of growth.

And I'm wondering if you can speak to any kind of timeline, metrics, goals for moving those folks a percent that that might decrease and get them back into the market or, you know, what are these folks looking about, looking at? Since we've had such momentous increase, I.

Would say we'll hopefully start seeing some, some relief and some stabilization of our market by 2026 at some time because that allows. So we're waiting for the catastrophic models to be approved. Then insurance companies come in, submit their new rates using the tools with their commitments. Obviously, you know, your district's part of again, our priority area.

And then that's when we start tracking insurance companies expanding one, taking policies out of the Fair Plan and expanding options for consumers. And if that's not happening for the first time, we'll be able to actually track and say, hey, why is this happening in this area? What is unique to this part of California?

So we'll be able to start having that data. So we'll have the, the CAT model review and their integrities reviewed and approved by, by June. And then we would. We're going to start seeing the rate increases. What we're trying to do, we'll see the rate files.

What we're trying to do now is dispense with the rate files we currently have and, and so that we're able to quickly approve those rate files. Unfortunately, some of those rate files are intervened and therefore taking a long time to approve.

So we're asking everybody, the intervener, the company, the Department to act quickly to get this done so that we can get to a point where we're approving the new rate, the new rate files with these tools so that we can start seeing some reprieve.

I still, I'm hopeful that by 2026 we'll start seeing some, some stabilization of our market.

Thank you for that.

And then the other question we've talked about before, and I know that it is tough to get at this data, but for those folks that are underinsured by choice, and I'll just explain it because others may have not heard the question that some insurance companies haven't necessarily dropped people from their roles, but they have said, we're just not going to insure you for as much.

So maybe you want to be insured for, for the cost to rebuild right now, but we're gonna insure you for the original cost to build your home, which is five times less. And those folks aren't showing up as, zero my gosh, they've lost insurance.

They also would be willing to pay the cost to insure right now, but the insurance companies have said, we're not even gonna offer that to you anymore. And this has also happened across the Central Coast.

And it's, it's really difficult, I understand, to get our hands on the magnitude of the problem, but what is the help for folks going through that?

So one of the things, and they would most likely require to get wraparound insurance from somebody else that's going to cost them much more money. One of the I didn't forget your question.

One of the things we're actually working now nationally with climate scientists and data scientists from around the country and other departments is how do we get to identify who's underinsured and who's not insured, which was another big question I got from the chair and the mayor in La, which was who's not insured?

Well, I don't know that because I know who's insured because they have a policy.

But we're trying to triangulate the data that we do have to try to see if we could come up with how do we identify who's underinsured or not insured so that the millions of dollars that are being raised after these catastrophes are actually going to the people that need it.

So it's something that we're working on as well. And I know it's something that is important because the last thing we want is for the people that don't need it to get the resources at the time of the catastrophe and for folks that are underinsured to have more options.

You'll start seeing that again as well once the strategy starts in full implementation later this year, because you're going to have people, you know, competing for their piece of their 5% or to meet their 85% to be able to use these tools.

Thank you so much. And thank you, Madam Chair.

Thank you, Assemblewoman Krell.

Thank you.

Thank you very much, Madam Chair. And thank you, Commissioner. My name is Assemblymember Maggie Krell. I represent Sacramento, like pretty much everywhere in the state. We're facing a housing affordability crisis here.

So my question has to do with the rate increases, 22% for what State Farm is asking and then 38% for rentals, which will probably have a trickle down effect on potentially increasing rent for folks.

So this is a two part question and part one is what are you looking for State Farm to show in terms of data to justify these rate hikes?

And then part two is probably the harder question long term looking at stability, looking at the new catastrophe model that we're using here and how other states like Louisiana and Florida are using that modeling.

How do we ensure that this doesn't lead to more rate increases, more rate increases down the road and pretty big jumps as opposed to gradual 3% a year. We're suddenly coming in with 22% which is less than they asked for.

So what's to prevent three years from now a 40% rate hike, you know, and are we kind of hostages in this situation?

Yeah. Thank you.

Those are great, great questions assigned Member and just, you know, further reflecting on Assembly Gallagher's question on, you know, with this current rates regulatory structure that has really led for us to increase the protection gaps because insurance companies would come in and undervalue the risk that they need because they didn't want to go to a rate hearing or because they have this impending fair plan assessment that they're going to have to cover by law.

And so they're going to decrease their population, their risk. And the increase of course is for State Farm policyholders and not that it should the homeowner, the renters is a much smaller the bigger question is the 20% for the homeowners. What am I looking for?

Well, first the rate has to meet all the already established consumer protections that are in statute within Prop 103. And also me and particularly I want to know what the parent company is going to do and what their commitment is to California just like they've done to other states.

Also the commitments to pausing these cancellations give people an opportunity of reprieve so that we don't see these big spikes.

So I think it's a combination, a combination of insurance companies for years really downplaying the amount of risk that they actually need because I tell you that I know that happens because now I'm the first Commissioner to actually start looking at all these rate filings and I'm able to see how much they should be asking, but they're not asking for and we're able to and why and I said why aren't they asking for the amount.

Some of them have heeded my call and said, okay, we're going to, we're going to do this.

And some of them are saying, because of the regulatory scheme and process that we have now, which we're trying to, we're trying to contract so that you do do this in 60 days, every business owner will tell you, I don't care if you own a daycare center or if you're a CEO of an insurance company, they need market certainty, make sure to see where they're going to invest and just the volatility in the length that it takes to approve the rates in California.

Now they have to check. Well, we don't know if this rate's going to get approved. By the time it gets approved, it no longer reflects the risk. And so it's an endless cycle.

So this is now why we've been able to do some cost sharing on the most egregious and most devastating circumstances within the fair plan that will allow them to free more capital to continue to grow in California. So on your second question around, can.

You remind me, how do we ensure that there's not another big jump in.

A couple of years? How we ensure that is by one working on the mitigation and really getting serious about how we empower communities to actually do the work to mitigate their communities, their properties, not just their parcel anymore. Because those days are over. Insurance companies are now looking at entire communities ingress, egress, can firefighters get in?

How many fire hydrants? What is the topography? And also we continue to encroach out. But I always ask myself, why is it easier to just build out in a swath of land and not invest in the urban core? So what are the red tapes?

As we're now looking at removing all the red tapes for building, why are we not removing red tapes? For cities to actually reinvest in the urban core and rethink of those high rise buildings that should be condos or should be apartments.

So hopefully the big, the big increases will stabilize after now with the insurance companies getting some market certainty in California through our new reforms. But also, you know, I don't have a crystal ball and I don't know what the future holds if we're looking at floods, earthquakes, and we haven't even entered our fire season. Right.

And so those are all things that we all need to be looking at and we need to. And the thing also remember is that there are things we can actually do. We're not helpless here. We can invest in the mitigation put serious money, remove the red tape for people, get money, as Gallagher was saying.

So there's things we can do and things that are already proven in science to bring down the risk, and then the certainty within the new regulations will hopefully prevent all these spikes. Because insurers have to, by a regulation, have to go back into these communities. Right.

If they want to use these tools, and also say, look, this might not be the end all be all. This might not be the silver bullet. But what I do want to guarantee to you is that these regulations are meant to be fluid.

They're meant to be amenable, so that we're not here in another 30 years with these like archaic regs that no longer meet the needs of our market or what our consumers need in the over changing and the changing economy and climate that we have.

Thank you, Assemblywoman Petrie-Norris.

Thank you, Madam Chair. And thanks, Commissioner. And I think while the context for this hearing has been LA wildfires, we recognize that every community in the State of California has been ravaged by climate disasters. Communities all across the country have. And with our current 2025 reality, these reforms are certainly necessary.

I think, as you've acknowledged, as Assemblymember Gallagher acknowledged, I think in some cases they're long overdue. However necessary they are. This is going to be very painful. This is not going to be a smooth transition.

And I do think it's really important that we're honest with Californians and that we level with our constituents and that we're able to set expectations for them. And I know we covered a lot of ground. I know that all the work you've been doing is very complicated.

But when I talk to constituents, the two things they want to know is, number one, am I going to get canceled? And number two, how much are my rates going to go up? So help us simplify this and set those expectations.

Absolutely. I think being honest with consumers is the number one thing you, you have to do. Consumers are not, you know, they understand what's going on. They also see the paper and understand how these wildfires are ravaging our communities. And I'll tell you, I'll give an example.

I was in Laguna Beach or Laguna Niguel, I believe, where we had 300 consumers who were angry at me because of what's going on. And the rate increases the minute you start level setting. And let them understand that this is gonna be painful because we should have done these changes years ago. Right.

And so now I'm responsible now. So I'm gonna do these changes.

And when it comes to am I gonna get non renewed now, what's happening is consumers are actually afraid to seek the benefits within their policy because they somehow think they're gonna get non renewed if they file a claim for something that legitimately they need, which is unacceptable in the largest market in Cal, in the country.

So we're tracking, we're tracking to make sure that these companies meet the letter of the law when it comes to non renewals and cancellations. And so anybody who feels that they've been unfairly canceled, they can call our Department and we're on it, trust me.

Secondly, how much they're going to pay is, we're going to, you're going to see, again, the stabilization of these. And it also depends who your carrier is, what your policy is, the type of home you have, and so forth. But Everybody understands.

And I tell them the goal is for you to pay for the amount of risk of where you live. And that is what we're trying to get to and to make sure that companies, we keep them to the word for what they're contractually obligated to give you in the contract that you signed. Right.

And that might not be making you whole because you need to also understand what you're signing. This is a business contract. So I've been honest about how these rates need to reflect the risk and that hopefully again, by 2026, you'll see some stabilization of the market because these reforms are happening.

But right now, the last thing I need is to make sure. And I tell them the last thing I need is an insurance company to go insolvent, and then we're all on the hook for them. Right, Right. And again, bring Assembly Member Gallagher and I have been in the trenches in this for years now.

It's, you know, updating these regulations, looking at every aspect of the process for these rate filings. Who's making money off of it. Because if you're making money off the process that is coming off that is coming, the taxpayers are going to pay for that eventually. So we're looking at everything and holding my own staff accountable.

Why are these taking so long? Right. So no longer, for example, the intervener can come in and say, well, we're going to intervene in this rape filing. And the letter of the law says when you intervene, you're ready to intervene day one, not three months from now, not five months from now.

And so we are very clear, our legal counsel sends them a letter saying you're ready to intervene. These are the three dates we need to meet and we need to regulate.

We need to put that in statute and regulation so that they're no longer holding rates hostage because we either we're delaying the pain, and then it's also a death by a thousand cuts. Constant 6.9, 6.9, 6.9's.

And so there's no reprieve for the consumer who constantly is seeing a rate increase and seeing their coverage diminish or seeing their neighbor lose coverage, because we're still playing games with the amount, the, the cost of the risk that we're absorbing as a State of California, where every day is a new threat.

And insurance, as you know, Senator Petrie-Norris, is global in nature and reinsurance is tied to the global market. So I'm not worried about the fires in Oklahoma that the insurance Commissioner just called me about and said, I know how to handle hurricanes or tornadoes. I don't know how to handle fires that they just lost 200 homes.

Right. Or there's the insurance Commissioner in Alaska can't travel because there's about to be an eruption of a volcano. Right. So it's like we have to stay on top of all of this because it's all connected and why California has to be at the table at these discussions.

We're too large of a market to not be part of these global discussions when they're determining where resources are going to go to enhance these markets that are critical for the world economy.

Okay. So just bringing it back again to something that I think, you know, constituents can understand. So to my first question, am I going to get canceled? So if I understand correctly, you have required all of the insurers to write at least 85% of policies in their area.

They're going to, they're going to as a, as a floor in the wildfire distress areas. As a floor.

Okay. So we would expect that very few people are going to get canceled and very few people see, give me the, give me like the five year picture.

So the five, I'll give you a, hopefully a two year picture. Good, great. I'll give you a two year picture. By the end of this year we're going to start reviewing and approving the rate files with the new tools and the requirements and the reforms and the fair plans already performed.

So then if the company, the companies need to get to the 85% or the smaller companies need to get to the 5% increase. So where are they going to get those homes from? They're going to get the homes that they've, not that they've canceled and sent to the FAIR Plan. Those are the first.

And then prioritize the ones who have done the wildfire mitigation.

They're going to be. So you're going to see less cancellations in 2026. You're going to see a department that's going to be able to get these rate files done quicker and actually going to be honest and true to the risk of what's, of what that company has.

Because we also don't want an oversaturation of just one insurance company like we are having with State Farm. Right. So you'll have a more diverse mix of insurance players in your district that's going to bring down the cost of the policies.

I say that happens starts to happen and you'll see start seeing some of those modifications by 2026.

Okay. And so ballpark, two years. What is your forecast for what percent of Californians are going to have to be on the FAIR Plan?

I hope it's a lot less and that the FAIR Plan really remains as the insurer of last resort for those homes that truly can't find insurance or for industry commercial policies that are still struggling as the market, the homeowners market is still, is still balancing out.

But definitely we're going to be able to track which homes are being taken out from where and what communities are getting more options now. So that when you ask me in 2026 what is happening in my district, I can actually tell you with data.

Okay. All right. So a smaller number, but we don't. Really have a.

I don't know. It's just because I can't give you absolutes because the market's forever changing. And I don't know if we have another massive fire in Southern California in the summer or somewhere else or if there's a massive earthquake, all that changes. Yeah.

I think part of what makes people anxious right now is the fact that things just feel so out of control and it's this kind of constant Drip, Drip, Drip.

And so I guess recognizing that we live in an uncertain world and that no one has a crystal ball, I do think that it would go a long way to even just ask the, you know, the big insurers across the state, what is their best guess today? About two things.

Number one, what percentage of California families they're going to be able to cover, you know, on their normal plans. And number two, what are increases likely to be over the course of the next two years? Is it we're going through a moment of pain right now. And provided we have some kind of stability, that's it.

I mean, I have people asking me, is my insurance going to double every single year? So we've got recognizing we can't predict that to like, you know, 10 decimal points.

I think we do have to be able to provide a little bit more certainty for people about the reality of where we are today and where we're likely to go.

Yeah. And this is why I always push the insurance companies when they talk to me or our team and say they're ready to grow and come back to California, that they put that in some sort of communication to the media. So one, they could see that one, their support.

And all of them, primarily all of them have supported our reforms. And that's why I did. The tough thing is actually sit down with them and have a conversation that other commissioners wouldn't do because they would get skewered. Right. But I had to do the tough, tough job and meet with them.

And so you've seen, like I mentioned, a lot of the companies coming back and growing their footprints, but they're still not in the wildfire distress areas because they're growing now more cautiously.

Because what the other thing too is that we are monitoring is their overall footprint and exposure to make sure that they can pay out 100% of their claims at a given moment. So, but I will, I will take back your message in terms of what the plans are.

But I can tell you, even with the reinsurers are saying we're not scared of fire if it's priced accordingly. We're scared of an earthquake, of what that's going to mean to the insurance market in California, but we can take on more wildfire. It's got to be priced accordingly.

And you need to get these rate, rate files done as quickly as possible to give certainty. And that's just the fact they're moving capital around the globe. And I'm just trying to fight for our piece of the pie in California. Thank you.

Thank you, Assemblyman Gipson.

Thank you very much. I appreciate you being here. Mr. Commissioner, I have 16 questions.

Bring it. Let's go.

But I'm not going to ask the 16 questions. I try to prioritize these questions. And for many of us, even though I don't represent a wildfire area, but I do know you represent a flood area. I do also.

I have a friend who couldn't get to his wife soon enough and she perished in the Eaton fire in Altadena. Then people that I know intimately going to church lost everything. And they attend church in Pasadena. They lost everything they've owned. And the wife looked at me, please help. Right.

And so people are absolutely suffering from this catastrophe. One question is, will the. My mother always said, when I was old enough to drive a car and I questioned her about insurance, why do I need insurance? She said, baby, she said, it's better to have it than not need it, than need it and not have it.

And so I think people are all in that same predicament right now that we need to have it. But then when those who are forced to go on a FAIR plan and then find out that their losses is more than $3 million, you also, and I quote you, you said a business contract know what you're signing.

A lot of people signed that contract not knowing what they had. And those people are now suffering because the value of the contract they signed is not enough to cover their losses. Right.

So my question is what do I say to them, those individuals who have insurance but it's not enough to cover their losses for one. Two is a FAIR plan going to run out of money for they, they, they cover what's needed up to the $3 million and then the position that you have available is a public position, a public Member on the board.

Where are we at in that process to have such a thing? I understand there was a bill ran and it didn't go.

Can you we, we reintroduced that bill. Actually that bill was inspired by the fires in Northern California where we were trying to get information from the FAIR plan and couldn't get anything and said why isn't there a public member or an appointee from the Assembly and the Senate? So that bill got reintroduced this year.

It's part of our bill package as is yours and hopefully it gets a speedy look because we need it. You know who the author is of that? Yeah. Your neighbor.

Yeah, actually that I did run that bill yesterday but it last year. Yesterday it feels like yesterday it was last year but didn't go anywhere. And so it'll be here be heard April 2nd.

Okay.

AB234.

Gibson for the folks in Eaton, I'll tell you my main responsibility is to get their claims paid as quickly as possible so that they can make the financial decisions that they need to make for themselves and their family. That is my obligation.

I'm not here to question how the fire happened, who started it, why it happened, how are they going to rebuild, are they going to move My just to following sender Petrie-Norris question. I'm just being blunt.

I'm going to give you the money that you're contractually obligated to have so that you can make the best decision for yourself and your family.

Great new homeowners. I also ran to someone who wants to buy a home. They have enough for the down payment closing costs but their mortgage, their insurance rate is exceeding their mortgage payments. Right. And that's the reality that people are faced with in California.

So to have a first time home buyer saving enough money to put a down payment closing costs and their insurance is more than their house note is going to be. And we're trying to deal with the unhoused, trying to encourage, you know, new dwellings being built in the whole nine yards. What would you suggest?

Three points that the Legislature need to do immediately during this session and it may be some of the bills you already described.

But what else Because I think we're in a point right now where I was told because I was been at the fire six times and there was a blue ribbon Commission that had been established on Jerry Brown that it's no longer in effect right now to look at these kinds of situations.

And this Commission would be could take the playbooks from Eden and Dixie and all the other fires and they have conversation but also they provide recommendations so we won't be here again 30 years from now. And so, you know, building the bills, we can't do it now.

But I guess my again my question is do you understand the blue ribbon or heard about the blue ribbon under Jerry Brown and then two give me three points that we should be acting upon now because I know everybody's watching, listening.

So I would tell you that I don't recall the blue ribbon Commission under Jerry Brown, but I can tell you that we're actually under Senator Rubio's Bill is going to construct the actual in statute a new Commission to do exactly what you just talked about, provide recommendations, lessons learned, best practices, bring all the different state agencies that touch disasters so that we're not just relying on information for fire because we need to look at sea level rise, we need to look at extreme heat, we need to look at atmospheric rivers.

Of course earthquake and God knows what else is coming. You know, we had a tornado in Southern California that day and so we're going to finally get to do that. I'll tell you the three things that we need to focus on in the Legislature is mitigation. Mitigation, mitigation for the old housing stock.

The new homes are being built to standard. You're seeing that the new homes in many cases are the buffer for the older homes that are most vulnerable. And that's where we need to transform those homes and make them much more fire safe and hardening them.

This is also why the regulation Commissioner that we have been talking about for the first time we engaged the California Building Association. The Realtors now understand what we're doing and we asked them. We met with realtors in the 58 counties that I visited and the local homeowners and local developers.

Nobody had talked to them before because now they're realizing insurance is becoming an issue and it's a detrimental like domino effect because like you're saying you're investing in a home that you're not going to be able to afford because of the insurance. Then therefore it's not sellable, it's not investable. The realtor gets a get you.

The realtor is affected because they can't sell homes, the home builder is affected and you get less property, less property taxes for the community that needs to hire the firefighters to fight the fires.

So it is just I've seen this time and time and time again in other outreach that I've done, which by the way, no other Commissioner has ever done. But this is why we engaged AG industry, because the farmers were losing their coverage.

So it's an unprecedented amount of outreach and support that we've gotten outside of the entrenched interest that make money off this process.

Well, let me just conclude by saying again, thank you very much.

I'm sure these are other more discussions that are to come, but I think the time that we need to make sure that this doesn't happen or we are trying to write in the playbook, we need to look at what we're doing right now and being able to make sure that the playbook is intact in case there, well, when there will be another disaster moving forward.

So thank you very much and certainly my office and I look forward to working with you on any way that you possibly can. We have to stop the hemorrhage. We have to stop the pain that people are experiencing. Thank you.

Thank you. Well, thank you so much, Insurance Commissioner Lara for giving us so much time today. I think the members had a lot of good questions for you and I'm grateful that you took the time to be here and also to answer some very tough questions.

And we appreciate you always coming and I look forward to seeing you in a few months.

Thank you. Thank you. I appreciate you. Thank you so much.

Thank you. Okay, we'll now take public comment. Please state your name, organization and provide a brief two minute remark.

Madam Chairman, Terry McHale with Aaron Reed and Associates representing USAA. First of all, Madam Chair, I sat through the truncated Senate hearing and this one also, this was maybe one of the best hearings I've ever seen.

And for the Commissioner, if he was a distance runner, I think we could say he shows one heck of a kick in the stretch. This was really an informative hearing. Two things. I sat through the hearing a year ago when Jim Wood asked the question on the FAIR Plan.

If the FAIR Plan had been a Wall street program, would it be allowed? Would it be legal? And the answer was no. Since that time, I think we've written hundreds of millions of dollars of more exposure on the FAIR Plan. That continues to be a nightmare situation.

So for my friend Dan Dunmore, I want to say it is so urgent that we pass your AB226 and start thinking of what we can do to buttress this FAIR Plan because it has gone from a nightmare to something that is totally nightmarish. Thank you very much.

Good afternoon, Madam Chair and Members. Seren Taylor, on behalf of the Personal Insurance Federation of California and the National Association of Mutual Insurance Insurance Companies, we appreciate the Committee's work today and over the past six years. Really, as we arrive at this, I'd say critical inflection point.

Understanding that you're looking at the sustainable Insurance Strategy, or sis, through the post LA wildfire lens today. We want to recognize that it has taken several years of hard work by the department and all stakeholders to develop the sis. And we've appreciated the ability to work collaboratively with, even if we don't always agree on every detail.

Before the LA wildfires, some carriers had already agreed to grow their business in California because they had confidence in the Commissioner's reforms. In response to the recent wildfires, insurers remain committed to implementing the CIS and serving California. However, it's important to understand that turning around a market of this size, it doesn't happen overnight.

Restoring the market's health is going to take some time. There are still technical aspects of the regulations that need to be put in place before carriers can make CIS filings.

And so, as noted in the very thoughtful and thorough Committee background paper, it's important to have patience and understanding as we move forward together to restore a healthy insurance market. So thank you.

Madam Chair, Members of the Committee, Denni Ritter here on behalf of the American Property Casualty Insurance Association. I won't belabor the points already made. I do just want to thank you very much for continuing to hold these hearings.

I thought today was very informative and I think from the insurance industry's perspective, we do just want to reaffirm our commitment to the State of California, our commitment to continuing to work with policymakers, the Commissioner, the governor's office and all of you on meaningful reforms.

And I, and I do think the comments raised by Assembly Member Petrie-Norris are worth flagging. Setting realistic expectations on how quickly this ship will be turned around I think is really important.

You know, we're very interested in as much urgency as we can inject into this process and certainly look forward to working with the Commissioner's office on urgently implementing these reforms and turning things around as quickly as we possibly can.

And we're also really excited to hear about some of the other future reforms and regulations he's looking at working on. Certainly anything we can do to streamline the rate approval process and get it more in line with the timelines that were contemplated under Prop 103 would be hugely, hugely important.

So really look forward to working with them on that as well as better defining the intervener process. Thank you for your time.

Madam Chair, Members, John Norwood, on behalf of the Independent Insurance Agents and Brokers of California, want to thank the insurance Commissioner for everything he's doing to try to bring the insurance marketplace into reality and to deal with the types of futuristic estimates that companies can and should be able to deal with.

Our Members are desperate for an insurance market to come back, as is all their clients. They've been dealing with companies pulling out of California since 2021, long before State Farm made the announcement, and they hope yesterday this market will return to a competitive market. The Commissioner is right.

Companies will come back when there's actual oil rates and geographic diversity. Those are the keys. The other key component of this whole thing we haven't talked about today, but if you look at any study looking at California, it's all about fire resiliency. We have to do much, much more in the area of fire resiliency.

I know the budget is challenged. This is a $2 or $3 billion a year problem because you don't do it once. You have to keep coming back and doing it again and again and again. And every academic, every consultant study will tell you the same thing.

We're not going to extinguish what or ensure our way out of this problem. That's what we have to deal with and hope the Legislature will also look at that area as well. Thank you very much.

Thank you. This completes the business of our oversight hearing and we will now reconvene the bill hearing for additional Members to add on. Please call the roll. Secretary

This is item number one, AB597. The motion is do pass and we refer to the Committee on Appropriations. [Roll Call]

That bill's out 17-0. And we're now concluding our hearing. Thank you so much.