Assembly Standing Committee on Insurance

Good morning. Welcome to the California Assembly Insurance Committee Oversight hearing of the Department of Insurance. This is the sixth hearing that we've held focused on the Insurance Committee Commissioner's sustainable insurance strategy.

And today I'd like to focus not only the current state of the SIS, but I'd like to spend time on where we go from here and what, what does the future of the SIS look like? Once again, we're going to receive an update from Insurance Commissioner Ricardo Lara.

And I want to thank the Insurance Commissioner for being here. We always look forward to hearing about the state of insurance in California and your updates. And for the Members, we will take questions after his testimony. So without further delay, Insurance Commissioner, you have the floor.

Thank you. Good morning. Thank you. Good morning. Madam Chair, Vice Chair Wallace and Members of the Committee, thank you for the opportunity to testify again and provide you an update on the implementation of our sustainable insurance strategy.

When I last appeared before you on July 22025 California was still in the immediate aftermath of the largest urban wildfire disaster in our state's history. And many of the reforms we had adopted were just beginning to take hold. And today I return with the clear picture when grounded in data implementation and measurable progress.

Let me begin with the reality still facing many Californians. This is there is real fear, frustration out there. Families are still navigating loss insurance claims and uncertainty. People are anxious about coverage recovery and affordability and they deserve answers.

I hear these concerns every day, just like you, from welfare survivors, renters, homeowners and small businesses from all across the state. But I want to be equally clear and I fully recognize that we are not out of the woods. This crisis was not created overnight and it will not be solved overnight.

We still have serious challenges to address, but we are no longer standing still. We are enforcing the law holding insurers accountable and we are implementing reforms that are beginning to stabilize the market and expand consumer options. Since our last hearing, we are, we are.

We have moved from planning to execution and we have overseen record fast claims payments for the Los Angeles wildfires, approved our sustainable insurance strategy filings for major insurance insurers representing a significant share of the market.

We launched new tools that reduce delays and increase transparency in rate review, advanced the world's first public wildfire risk model, strengthened enforcement and consumer protections, modernized the fair plan oversight and implemented reforms that other states and even other countries are now watching closely.

California is being looked to as a national and global model for how to confront climate driven insurance disruption while protecting consumers. And today, unlike previous hearings, I Can show you the data and the proof finally that our strategy is working and that we are moving in the right direction.

To understand where California's insurance market stands today, we must begin with the event that reshaped everything. The January 2025 alley wildfires. That disaster tested every part of our system. Insurers, local governments, first responders, public health agencies, and of course our very own Department of Insurance.

And I want to pause here for a moment just to have a moment of reflection. Because if we had not already begun the implementation of the sustainable insurance strategy when those fires struck, California would be in a very, very different place today. Without the SIS we would have been.

There would have been more insurer withdrawals, deeper non renewals, slower claims handling and far fewer companies willing to write today in our market. Instead, SIS gave us the tools, the authority and the commitments we needed to keep the market from further sliding into a full scale crisis.

So let me begin today by giving giving this Committee a clear data driven update on where the recovery stands and what the SIS prevented. The Los Angeles wildfires were unlike anything California had ever experienced.

As you all know, A dense urban catastrophe that displaced tens of thousands of families, contaminated entire neighborhoods with smoke and exposed long standing gaps in our insurance and public health systems. Survivors still living with the consequences. There are still real fear and frustration, especially for those facing delays, denials or communication failures from their insurers.

And I want to acknowledge this directly. Many families continue to face real challenges and including ongoing issues with State Farm and the Fair Plan. But it is also important to recognize a fundamental truth about the disaster recovery in California insurance.

Because of the laws this Legislature has passed, the regulations my Department has created and the enforcement actions we have taken remains the single largest source of recovery funding from four wildfire survivors. $22.4 billion has been paid to survivors compared to approximately 6 billion from federal, state and local sources. These payments did not happen by accident Members.

They happen because we enforce the law. 94% of the 4,121 claims have been paid fully or partially. $210 million has been returned to consumers through direct Department investigations of claims. Claim closure time is down 27% since mid-2025. These are the fastest claim results, claim handling results on record for a major California wildfire. But recovery requires coordination.

Insurance cannot do it alone. Let me say this again. Insurance cannot do it alone. Insurance cannot solely rebuild entire communities and cities. The Los Angeles wildfires made this clearer than ever. Insurance must be integrated into the local, state and federal rebuild strategy. When those systems are aligned.

Families recover faster when they are not survivors fall through the cracks. Smoke claims have emerged as one of the most significant unresolved challenges in the recovery.

This exposed a major gap in California's insurance and public health framework, one we are now addressing through the Smoke Claims Remediation Task Force and and the CDI sponsor AB 1795, authored by Senator Mike Gibson, which will establish the nation's first enforceable science based standards for smoke testing and restoration. And here is a reality we cannot ignore.

If the SIS had not been in place when the Los Angeles fire struck, California would have faced a far more severe insurance crisis. Without the sis, more insurers would have paused or withdrawn from the market. Nonrenewals would have accelerated. Rate filings would have stalled for more months or years. Companies would have not been required to expand underwriting.

Recovery would have been slower, more chaotic and less accountable. Intervenors would continue to hold rate filings hostage. Instead, because SIS was already underway, insurers stayed in the market. Companies filed under new rules. Approvals of major filings move faster than at any time in decades. Commitments to write more policies and high risk areas became binding.

The market stabilized at a moment when it could have collapsed. The lesson from the app from Ally is clear. Insurance is absolutely necessary but not sufficient to solve all the recovery problems. Recovery requires, like I said before, coordination across insurers, local governments, public health agencies and federal partners.

And it requires continued oversight and modernization to ensure families are not left behind. The Department has been relentless in enforcing the law, holding insurers accountable and and pushing for faster, fairer recovery. The data shows that our actions are working and that California is moving in the right direction.

With that update on Los Angeles, the disaster that continues to shape our work, I wanted to turn now to the broader questions before this Committee. How the Sustainable Insurance Strategy is being implemented, what progress we've made since July 2025 and what remains ahead of us in 2026.

When I announced the Sustainable Insurance Strategy in September 2023, California was facing what we call the perfect storm escalating wildfire losses, inadequate rates, outdated rules, and insurers pausing or withdrawing from the state. We already know this. You've heard me say this time and time again. We kept California's strong consumer protections, but we also fixed what wasn't working.

We closed loopholes that allowed rate hikes without coverage. We required real commitments from insurers to start writing again. We modernized outdated rules to reflect today's climate realities. And this is what reforms look like protecting consumers while restoring coverage for the first time in years, insurers are stepping forward instead of stepping back.

The sustainable insurance strategy is working and the market is responding. One of the clearest indicators that the sustainable insurance strategy is working is this. Major insurers representing significant share of California's homeowners market are filing, getting approved and committed to expanding their underwriting. They're not retreating.

This is the opposite of what happened after past catastrophes when insurers raised, raised, paused new business or simply withdrew from high risk areas with absolutely no obligation to return. So let's talk about who has filed under the sis. These are the approved SIS homeowner filings since we last met.

And these filings include the number 2 insurer in the homeowner space, Mercury Insurance, the number 3 insurer CSAA Insurance Group. The number 12, 13, 19 and 24 USAA group companies. The number 18th Pacific Specialty, the number 30th California Casualty.

The pending SIS homeowners filings include the number 5th, 6th and 9th three major homeowners insurers, pending SIS Commercial Multi Peril filing the number 16 Mercury. This is the level of participation across the top middle specialty segments of the market. It's really unprecedented following a major catastrophe. And let's talk about faster approval which is critical to the Recovery.

Every approved SIS filing to date has been completed within the 100 days of public notice. Except for specific Specialty approved within 133 days. This is the fastest, most transparent and most accountable rate review environment California has ever had. And I challenge any insurer to question this fact. And why does this matter for consumers?

These approvals are commitments to write more policies and high risk area zip codes, expand availability and wildfire distressed communities, grow underwriting and recognize mitigation. For the first time in California's history, California is no longer in a cycle where insurers disappear after disasters.

We are now in a cycle where insurers file, get approved and commit to grow under the fastest timelines in state's history. A central part of restoring the stability of California's insurance market is modernizing the mechanics of rate review itself. For years, delays and prop delays and Prop 103 process has created uncertainty for consumers and insurers alike.

Often driven not by policy disagreements but by preventable administrative bottlenecks to keep the market functioning, the insurer and insurer and insure Californians and continue to benefit from strong consumer protections. We are updating how rate filings move through the Department.

The next step in that work is to set reforms designed to bring greater speed, transparency and predictability in that process. Over the past year, we have taken major steps to fix the root causes of those delays. Just last month, the Department launched a new data reconciliation tool that insurers must complete before submitting a full rate application.

We developed this tool with early input from insurers and are conducting trainings to ensure smooth implementation. This system is already reducing incomplete filings and avoiding downstream delays for insurers. The benefits are real.

By reducing administrative delays in the rate reviews, we reduce the risk of unnecessary gaps in coverage, we support market stability and we create more room for insurers to stay and actually compete in California to make the improvements permanent.

Next month I will release a draft regulation that will require the Department's rate regulation experts to complete the rate review of the rate filing within 60 days of filing the public notice date after up to after up to a 30 day documented extension.

The Department will provide the insurer or any intervener with a calculation of an estimated rate that complies with Prop 103. This reform will significantly increase the transparency and speed up the rate review and approval in ways that benefit the consumer, the Department and our market. At the same time, we are strengthening internal capacity.

My rate regulation branch is completing its first ever bottom up organizational assessment to better align staffing with the growing volume and quite frankly, the complexity of these filings. We are also continuing to use actuarial and rate review consultants supported by your budget authority provided by the Legislature and the Governor.

So together the steps are about getting the process back on track, moving filings more efficiently, holding all parties accountable, maintaining stronger consumer protections and ensuring full compliance with Prop 103 while giving insurers the certainty they need to keep writing more policies in California. So let's talk about the Fair Plan.

The Fair plans, litigation challenging CDI's authority and my authority require a more comprehensive to require more comprehensive ownership homeowners policy remains pending. Recent rulings have affirmed key aspects of our oversight. Our market conduct examination of State Farm, the largest homeowners insurer in the state, is nearing completion.

Findings will be released publicly this spring, so stay tuned for that. California again is also building the world's first public statewide wildfire risk model. Based on recommendations from our partnership with Cal Poly, Humboldt and academic experts. This model will give California and eventually other states a shared transparent baseline for understanding wildfire risk and recognizing mitigation.

Let's talk about mitigation for a second. Mitigation is, as we know, one of the most powerful tools we have to stabilize insurance markets, reduce losses and protect lives. But Mitigation only works when every level of government is aligned, local, state and federal. When the rules are clear, consistent and enforceable.

So since 2022, my safer from Wildfire regulations have required insurance companies to provide discounts for home hardening and maintain defensible space. Defensible space includes having a non combustible first five feet around the structure. You all know this. We call that Zone zero. The Legislature also directed the Board of Forestry to establish statewide Zone Zero rules for homes.

The original legislative intent and deadline was January 2023. Then after the alley fires in January 2025, the Governor issued an Executive order directing the completion of these rules by the end of 2025. I've submitted two letters urging strong Zone 0 standards because they are essential to the future of insurability in our communities.

Yet these rules are still not finalized. We will continue to do our part to make our insurance incentives as clear and accessible as possible. But we need alignment. And I want to urge this Committee to respectfully but directly to join me in urging the adoption of the Zone Zero regulations without further delay.

This is where we need clear science based standards that strengthen homes, reduce losses and ultimately keep people safe. There are two bipartisan federal bills that are especially critical for California. The Disaster Mitigation and Tax Parity act and the Disaster Resilience and Coverage Act. These bills would reduce losses, improve insurability and support the sustainable insurance strategy.

I would respectfully ask this Committee to support these federal efforts so that California homeowners can receive full benefit of the mitigation investments, especially in AB888. And now I want to really move to the question I get not only from Committee Members, but from a lot of our constituents. When will consumers see relief?

Committee Members are hearing the same question. And I hear everywhere I go again, when will my constituents actually feel a relief? And that's a fair question and it deserves a clear, honest answer grounded in data. So early signs of the stabilization already visible.

Like I said, insurers filing under the SIS 5 SIS filings approved faster rate filings approval claims payments faster on record. So visible consumer relief.

I will say 12 to 24 months more insurers reopening or expanding more competitive options, slower non renewals, more predictable pricing mitigation discount scaling with AB888, a Bill authored by our chair last year and sponsored by me for for the Department to provide grants for home hardening a more structural recovery.

According to Swiss Re to OECD and the experts who have seen markets that are recovering from major climate catastrophes structural recovery around 35 years Market stabilization over 3 to 5 years after major reforms California we're already a year into that cycle.

Reinsurance costs should stabilize, risk mitigation continues to accelerate, fair plan exposure should plateau and then decrease and the availability should improve in the high risk area. So again, three to five years we're already in that. And so the honest answer we're starting to see the early signs now.

More visible relief should build over the next 12 to 24 months. A structural healthier market is a three to five year projection and we're already well into it, as I said. But every decision we make together will either shorten the timeline or lengthen it, quite honestly. So California's insurance challenges are not confined to any single problem.

Survivors, homeowners and communities have been clear about what isn't working. We hear it every day. And my 22x legislative package advances and operationalizes the sustainable insurance strategy by strengthening consumer protections, reducing avoidable delays and modernizing the system that underpins California's insurance market.

Each Bill carries forward a core element of the SIS improving claims handling, creating clear standards, reinforcing market stability and ensuring the regulatory process works effectively for both consumers and insurers. So the strategy's commitments remain real, measurable and reflected in people's day to day experience.

So SB876, authored by Senator Padilla, responds directly to what survivors have been asking for for the past couple years after several fires across California, faster payments, fewer delays and an end to the runarounds by insurance companies.

Key Provisions Requires insurance to insurers to maintain a disaster recovery plan doubles penalties during declared emergencies requires direct restitution to policyholders, requires status reports within five days when adjusters change expands additional level living expenses by 100% in a declared disaster Requires up to front upfront payments for actual cost value and replacement cost Requires insurers to offer extended guarantee replacement cost applies building code upgrade cost coverage at the rebuild, not at the loss.

And so SB876 will help families recover faster, rebuild safer and avoid the bureaucratic maze too many survivors have faced. AB 1795 authored by Senator Mike Gibson the Smoke Damage Recovery act the Los Angeles wildfires produced historic levels of smoke contamination.

Survivors reported severe health symptoms, conflicted experts, conflicting experts assessments unsafe living conditions and ensures denying or minimizing claims. Key Provisions Establishes science based standards for smoke testing and restoration.

Creates uniform claims handling practices provides immediate relief for the current folks facing these issues in the LA fires by allowing survivors to rely on local public standards while we develop the statewide standards, develop health based guidelines for reentry and designate state and local agencies to implement and enforce those standards while we take our time to develop those statewide standards.

So AB 1795 develops immediate relief while building the long term science based framework Californians deserve. AB 1680 authored by Chairwoman Calderon the Make It Fair Act CDI's comprehensive examination found the Fair Plan failed to comply with 17 critical recommendations to financial condition, corporate governance, claims handling and consumer protections.

The key provisions requires a comprehensive homeowner's policy requires increased staffing and improved claims handling fixes a clearinghouse program to help policyholders return to the regular market which is in line with what the Legislature had intended requires a three to five year strategic plan, something that insurance companies already required to do requires public access to governing Committee meetings, requires an annual report with key metrics, requires a climate risk assessment, requires a capital and liquidity management plan and AB 1680 requires authored by the Chair ensures that the Fair Plan finally delivers real coverage, real accountability and real help for welfare survivors.

Let's talk about Intervener Reform regulations. These reforms modernize California's Intervener and Administrative Hearing Bureau process to increase transparency, improve efficiency, protect consumers money and ensure meaningful public participation.

The key provisions provide prospective applications for fairness, replaces vexatious with objective wasteful standards, strengthens scrutiny and excessive billing, requires timely online postings of all documents, establishes firm tie lines and and ALJ status updates, streamlines hearings and reinforces the Commissioner's authority. These reforms uphold the core purpose of Prop.

103 while ensuring the process remains efficient, balanced and focused on consumer benefit. I want to talk about California in the national and global context because we're not going through this alone. Insurance is connected nationally and globally. As I said, California is not alone. States like Florida, Louisiana, Colorado face similar pressures.

Australia, Canada and Greece face similar climate related insurance issues as our market and are similarly as are similarly as our market. But unlike many jurisdictions, California has a comprehensive regulatory strategy forward looking catastrophe modeling, mandatory mitigation discounts, a public wildfire model in development, a Fair Plan modernization plan and insurers returning, not retreating.

We are not immune to global pressures, but we are leading in a way, in a way and responding to them appropriately. So let me close with this. California is facing a generational challenge, but we are meeting it with generational reforms.

We are enforcing the law, modernizing outdated rules, strengthening consumer protections and restoring stability to a market that millions of families depend on. We are not declaring victory by far, but we are moving decisively, transparently and with measurable progress and the World is watching what California is doing next. And I want to add something personal.

From the beginning of my tenure, one of my core goals has been to leave the next insurance commissioner with the tools, the data and the modernized regulatory framework needed to confront the challenges ahead, not just the ones that we inherited. For far too long, California has tried to manage 21st century climate disasters with 20th century insurance rules.

Today, because of the work that we have all done together, that era is ending. We are building a system that can withstand the climate pressures of the future, not just a crisis of the past.

A system that gives consumers clear protections, gives insurers clear expectations, and gives the next commissioner a stronger foundation than the one I walked into. A commitment. My commitment has always been to leave California better prepared to face an uncertain future. And through the hard work, partnership and persistence, we are succeeding in that goal.

I'm committed to working with each and every one of you to ensure that every Californian, no matter their zip code, has access to fair, reliable and affordable insurance. So thank you, Chairwoman Calderon, Vice Chairman Wallis and Members. And I look forward to your questions. Thank you.

Thank you, Insurance Commissioner Lata. We really appreciate that very thorough and comprehensive update. So now I'm going to bring it back to the Committee Members for questions. Assembly man Harabedian.

Thank you Madam Chair. Mr. Commissioner, good to see you. Thank you for being here and thank you again for your continued work and everything you're doing in this space, especially for wildfire survivors. And some of the bills that you highlighted that you're running this term I think are really important. So appreciate all your work.

And I have a few questions and some of this you might not even have the answers to follow up. But really a lot of it's just focused on, sort of on the ground, what we're seeing in the distressed areas. And we get, we get anecdotal kind of reports about what's going on.

And I just was wondering if you or the Department have any additional data. So I'll ask a few. And, and it's okay if we don't have these answers right now.

The moratorium that you put in place ended a few weeks ago and we are hearing anecdotally in Altadena and the Palisades that a number of people are being non renewed.

I don't know if you have any sort of aggregate data or we know how many wildfire survivors have been non renewed since the moratorium ended, but I would be interested to know if we know what those numbers look like, how many folks are now moving over the fair plan versus staying on original plans that they had.

Yeah, we can definitely get that data and I'll have Mike from our climate branch but we have seen a slight increase in the fair plan. Nothing overwhelmingly that would justify people over only being moved to the fair plan but we can certainly get that data. But Mike is there and introduce yourself for the record.

Thanks for the question. Mike Peterson, senior deputy on climate and sustainability at the Department of Insurance. I think what I'd say is that when the moratoriums end that tends to impact the adjacent zip codes.

But those who are actually wildfire survivors, once the governor's declared a state of emergency the first time, there is a two year window in which those folks wouldn't be non renewed. So I think we can check into the data but I do think that there are or total losses. Right, right.

It's helpful to think of this in two categories because we don't get immediate notification of the nonrenewal. It'll take some time before we get better data on that issue. But it is something we're watching carefully. Just like we do after every moratorium ends we watch for surges of non renewals over the past three years.

We haven't seen that happen in particular areas. But as the commissioner said, this is an event that is quite, is unprecedented and sort of is sort of reshaping a lot of thinking. So we can get back to you?

Yeah, we can, we can, we'll track it because if you have a total loss, you have 24 months, so it's a total of two years before you get non renewed. So what we can start looking if there's any anomalies now and we'll, we'll track that data for you.

Super helpful, thank you, that would be perfect. And then are we tracking claim handling timelines and complaints in the wildfire impacted areas in real time or is it I guess just how does the reporting work to know what's going on?

So do we have two sources? Thanks again for the question. We have two sources of information that one is the complaints that come in that the Department gets how quickly those are resolved. And so that gives us one indicator of issues that go from being an outstanding issue to a resolved issue.

The other piece of information we have is through our claims tracker we are getting approximately quarterly data on the number of claims and those that are partially paid, fully paid and in what status they're in. And so we do get more information on a more quarterly basis.

And so we try to blend that information in Sort of how we understand which issues are still outstanding, which are being resolved.

Perfect. I sent a number of other just kind of related questions that we can follow up with in conversations. But I will just say that I think that the sustainable insurance plan strategy is great, and I do think it's gonna take time to work, obviously, and I appreciate you highlighting that. And we need some patience.

And obviously we need. To your point, we need more insurance companies able to write policies here in the state. And I think we're on this side of it. We're trying to figure out that balance. Right. We're trying to help you and everyone involved strike that balance.

And so I guess on that note, is there anything that we can do? The bills that you highlighted are great.

A number of us have other bills, but is there anything that we can do to help with, obviously, consumer protections for all the reasons that we've highlighted, but also bring people back into the fold, make sure that they stay here? Is there anything that we can do additionally, legislatively wise or otherwise?

Yeah, I think, you know, in the testimony I highlighted some of the things that we need to work on immediately is the mitigation and making sure that we could do everything we can to stand up the mitigation programs as quickly as possible.

There's two federal bills that would again, alleviate and remove some of the federal taxes that are important so that people get the majority of the money tax free. Additionally ensuring that we create just universal, systematic mitigation standards so that there's no confusion within the consumer, and that we also look at this issue around Zone zero.

And then we've also seen what IBHS studies, specifically in Eaton, that has said that if we invest, what is it, 2%? Was it, Mike? Was it 2%? Around 2 to 3% of the cost?

Yeah, 2%.

2 to 3% of the cost of the homes that were lost. And we fortify each of those homes, which roughly cost. What was it, like, $5,000 per home?

Between 5 and 9,000.

Between 5 to $9,000 per home. We could fully fortify the homes that we lost. And so that is a very. That's a great study by ibhs, because now we put a dollar amount to what fortification would cost to every home in Eaton.

And as we talk about, you know, foundation money and all the money that's being raised, and that's really 2 to 3% per home.

least we have a figure that we can work with and we can help neighbors and homeowners actually invest some of that money that we put together to to help them fortify those homes that we know go a long way especially for those ember driven fires.

So we, we can give you a fact sheet on, on what we feel is critical and how the Legislature can can really help us on all of these things because that report from IBHS specifically on Eaton was really telling for us.

Yeah, appreciate that both of the all of that are great ideas and let us know we can help. Thank you again for being here. Thank you for all the work. Look forward to talking to you again.

Vice Chair Wallis.

Thank you. Madam Chair. Thank you. Commissioner Lara, I appreciate the significant work you've put in over the past couple of years to develop the sustainable INS strategy regulations. I know it comes from a place of wanting to strengthen the market for all Californians and I think we share that goal more stable and reliable property insurance market.

That being said, I am a little concerned about the timing and volume of some of the new legislation. We've already seen a wave of new bills. You mentioned a few of them. It seems to me they'd add substantial new requirements around coverage, claims processing and other mandates on insurers.

At the same time, these companies are just now only starting to navigate the new rate filing process under the sis. So I was just wondering, do you worry that layering on these additional costly requirements could unintentionally set us back destabilizing the market that we've been working so hard to study?

And what are your ideas on how we would best balance addressing these real constituent needs without making the current challenges on insurers even tougher?

Vice Chair Wallis, I think you bring up a really interesting point, but I wanted to have this honest discussion in the Legislature because I think, you know, when we go home and consumers, you know, and kind of, I don't want to say this, but I wanted you all to experience the daily challenge that the insurance commissioner faces, right.

Trying to balance the consumer protections and strengthening the market with trying to entice insurance companies to remain in this market. Right. Which is challenging and in a hardening state. But also have those, those honest conversations about what these reforms cost. Right.

And so let's have these conversations in a public setting in the Legislature so that when we talk about these bills, we also have an honest conversation about what this costs and how this impacts the market and how this impacts potentially insurers appetite to grow in California.

And so where best can we have this conversation but through the legislative process and as we weigh in all those different dynamics that you talked about, I feel that through the legislative process and the end, we will come up with a balance, which is what we've always tried to strike, which is the consumer protections, enhancing consumer protections, but also looking at balancing that with the need to continue to strengthen our market by incentivizing more insurers to enter our market.

Right. And so we're going to have those discussions. We're just in the beginning, and this is why I think this is the best place to have these conversations, through the Committee process, through the deliberate process.

But you are gonna engage in what we've been engaging since 2019, since the first fire that I was able to experience in paradise.

And so we're gonna have it through a deliberate process with consumers engaged, because I think it's important for them to also understand that in order for us to have a strong market, we need to have insurers writing. And so we're gonna have that through the legislative process.

Thank you. I appreciate that and appreciate the presentation and you being in here to have this discussion with us. That's all I have.

Assemblywoman Krell.

Good morning, Commissioner. Thanks so much for your presentation and for being here with us today. Thinking about the vice Chair's question and also your testimony earlier about, I think you said there was a 27% case closure reduction, time amount.

And I'm interested in the context of that, you know, in terms of that timeline and also how you think this bill package would impact the. The, you know, the decrease that we've seen, which is a good thing, but concerned that the claim process additions could. Could reverse the. The. The ink, the. The decrease that we're seeing.

Well, let me add a little more flavor to that, because we were operating, again, when I say we were operating with like, you know, 20th century regulations, I mean, we were still working with binders when I got here. Right. And so I literally got a binder my first day as insurance commissioner. So we've now modernized our systems.

We are now operating with technology where insurers and the Department are operating with the same data sets, for example. Right. So that was a big issue where we were operating with different data sets. We reconciled that.

And a lot of that, I would say 80% of that, was just trying to figure out what data we were working with. We've already hired folks, we've hired outside consultants to help our staff, staff up. We're dealing with all that kind of red tape, bureaucracy. And so we're dealing with all the internal stuff.

And then to keep us to the letter of the law within Prop 103, and then we're reforming the intervener process. Right. So intervenors can no longer hold these rate filings hostage and use other issues that are not germane to the intervener process, which is unique to California, by the way.

And so we're in, we've done, we're introducing that regulation and to hold our own Department accountable, I'm going to introduce a regulation to hold our own staff accountable because the last thing I want is when I leave that things go back to the status quo. Right. So we're going to put this in a new regulation.

So we're going to be introducing that next month. So I'm also trying to leave all this done. And so again, once we entered, when all these cadre of bills are introduced, because we expected that. Right. And Department of Finance and your very able Committee staff start reviewing this, all that's going to be taken into consideration.

And I want that, I want you all to have that available to you all. And so as you look in, you look at what's being proposed, you all now have a sense of how you're going to determine what moves forward and how the market's going to react to some of these changes.

And not only are we being looked at, but it's being looked at internationally because these decisions are made from abroad as well. But I think it's important for you all to look at all this as a whole.

But I think the Department and I've done over the last couple of years left the internal processes in a way where we've done all what we've cut. We can now let's talk about what these bills are and how they're going to impact the overall market.

But there's still things we need to do to further protect consumers, especially during these catastrophes. Right. We're not saying let's put these in place year round. Let's just do it when they need it the most during the catastrophe and then they go back after it's done. Right. Maybe that's where we find some common ground.

But we can have those discussions during the deliberative process.

Thank you, Commissioner.

Commissioner Lara, We've had several Assembly Members join us. And so before I go to them for questions. And you've gave a very thorough update of kind of exactly where we are and you gave a lot of data.

Can you just repeat when people will see relief and also talk to a little bit about the structural recovery for those Members that just got here late?

Okay.

That was very helpful to hear that. Structural. That's okay. But this was important and I think.

You built in a quiz.

I think you'll want to hear it. It was towards the end. It was towards the end, after you went through the bills. What moment?

Page 15.

Okay. Page 15. Thank you, Mike. Okay. Okay, perfect.

So she wants you to tell me when I'm going to finally get insurance.

All right. Because all about RVK right here. Good. Okay. So we were talking about when we will see some signs of recovery for consumers and the overall structure of the market. And so we're seeing early signs of stabilization. So we're already starting to see this. I went through this earlier. Insurers already filing under the sis.

We have five SIS filings approved, the fastest rate filings in state history. Claims payments are the fastest on record. So visible consumer relief, we're thinking, according to the experts who examine markets that are in similar situations around the globe. 12 to 24 months more insurers are reopening and expanding more competitive options for consumers.

Slower non renewals, more predictable pricing, mitigation discounts, scaling up AB 888. And so we're seeing all that starting to happen. So we're thinking two years, which we're already kind of in more structural recovery. We're thinking three to five years market stabilization after these major reforms. We're already into that one year cycle of the implementation of the sis.

So we're going to start seeing reinsurance costs should be stabilizing. Those are the signs that we're looking at. Risk mitigation continues to accelerate. All the money that we've put into risk mitigation, fair pen exposure should start to plateau. We're starting to see that.

We saw a little minor increase, but we should start seeing that plateau and then decrease and then availability should improve in high risk areas. That's one of the things that we're looking at, particularly in your district. The honest answer is early signs are early. Early signs are starting to. We're starting to see those.

So more visible relief should build over the next 12 to 24 months and more structural, healthier market closer in a three to five year project, which we're already already well in.

And so why Senator Carell was asking and Vice Chair Wallace is because every decision we make and the bills that we're looking at in as a whole can make it either shorten the timeline or lengthen it because you know, it all depends. So that's, that's. Is that what you wanted me to.

Yeah, that's. I wanted you to just repeat that. Thank you. So do we have any questions from this side of the deck, Assemblywoman Bauer-Kahan?

Well, since we already started our conversation Commissioner, let's continue. No, I appreciate that and I think I probably more than most understand the delicate balance you're trying to strike here and the hard work that has gone into this. As most people know, I was non renewed.

I am now, I think last I checked, the only of the 120 Members on the Fair Plan.

And when I called my broker recently because I'd read some of the news articles, I think the chair even shared with me about people re entering the market, my broker literally laughed at me and said, well, not where you live, that's never going to happen.

So I mean, I appreciate that we're sitting here worried about the insurance market and that is critical. I was saying long before my non renewal, frankly, because I was hearing from my constituents, we know we live in a higher risk area. We're willing to pay more. We understand that. Why doesn't the market work?

Why aren't we letting the market work? And so I want to say that I am a believer that the work we're doing to make the market function is critical.

I also think that the commitment that was made years ago when we started this process that we were going to allow insurers to start to do risk modeling and raise the rates beyond the approved rates if they were willing to take on some of the risk, is the commitment I understood we were making when we went to risk modeling.

I'm concerned we're not fulfilling that commitment, frankly. And that's how I come at this. And that is because my own broker laughed at me. And.

When I read what had happened in the regulations and I want to really dive into the distressed areas question because my understanding was that they were going to have to write 80% of their policies and in distress areas, frankly, that seemed high to me, but great. I'm in one of those areas, so that was beneficial.

And then when I started to read what actually happened, I have questions. How did we decide what a high fire zone was? How does that overlap with these distressed zip codes? I understand my zip code doesn't even count despite the fact that we had the highest number of non renewals in the state. So that's confusing to me.

And how are we going to then depopuLate the Fair PLan? Because as we saw in La, ratepayers bailed out the Fair PLan. That's what happened because it couldn't withstand the risk that it had borne.

And when we talk about depopulating the Fair Plan, part of the reason we're doing that is to make it work for consumers across the state. And my Fair Plan cost just went up as I'm sure many people Did.

And I still don't think that if there is a wildfire in my neighborhood, the Fair Plan will be able to withstand it because so many people have now been put on the Fair Plan. And then I learned that we're not even covered in this 85%. So how is that all make sense to you?

And how does that mean that we are going to make the Fair Plan function the way it was originally intended, as an insurer of last resort, not the main insurer in areas of risk. And how do we make sure that people in those communities can get back into the admitted market?

Perfect. Great, great questions. And so we'll talk about the New York Times article that you're talking about. And that's great because they got it all wrong. Let me explain to you how we.

The early part of my testimony is that we are now moving into the implementation of the sustainable insurance strategy this year, which was always the case for us. We are just implementing what we passed the year before.

Right. I'm just talking about how the regs will function. Yeah. In the future.

No, no, we're implementing it now. And so the report today is letting you know what insurance companies SIS filings were just approved to show you the commitments that are now going to be in that they just got approved to meet those numbers. And then I'm going to explain to you the wildfire distress areas.

And then I'm gonna off the record, off this meeting, get your zip code and exactly tell you why you may or may not that zip code not qualify as a wildfire distress area right now and why that may change because we're always updating those numbers.

Well, and I guess I should also say that when you started the regulations we looked and I did qualify. And as the regulations progressed we fell off the map.

Yeah, because that means so and not. Because less people are on the fair plan. Well, that is exactly what probably happened.

We've increased. We have not decreased. The regs changed. The regs changed.

So but we'll, we'll. So since now that we've approved. So since we finally now moved into the implementation, we have a big, a big market share of California riders that are now approved with the guarantees under the SIS to grow in the welfare distress areas. So I mentioned this earlier.

The number two largest homeowner in California, Mercury Insurance. Three CSAA Insurance Group121319 and 24 USAA Group Companies number 18 Pacific Specialty Group, 30th California Casualty. There's three pending approval number 56 and nine. These are three major homeowner insurers. And then there's pending a commercial multi peril filing number 16.

This is the kind of across all top, middle and specialty segments in the market.

And these are all have been every of these filings to date have been completed within 120 days which is the fastest, most transparent and most accountable rate review in California that California has ever had under the rate filing, which is as you remember, one of the biggest issues.

Huge kudos to you for that I want to say for sure. So we were able to get that done. So now that those are approved, those go into effect and now we're going to start tracking where they start growing. So we're going to start to see those.

And that was the report because now we finally got those done and we have more of those companies in the pipeline. And then how we came up with the distressed areas that these and these regs have not changed whatsoever. So again there's three criteria. Again fair plan policyholders with moderate to very high risk, high risk, that's statewide.

There's zip codes with greater than 15% fair plan penetration rate or high or very high hazard and then counties that have above 50% percentile of structured risk scores. And so that ensures the relief reaches the areas with the highest concentration. And so I know we did an update of those maps and that kind of slightly changed.

So I don't know if that might have kind of changed that one specific zip code because I know we got, we got questions from a couple of other Assembly Members. But I don't know if you want to further elaborate on that because the criteria I know has not changed.

But I know how often do we update that data.

So again, Mike Peterson, I'm our senior deputy at the Department of Insurance on climate sustainability. So the I think that just as a starting point, if you are in the fair plan, you have fire risk, you're eligible as part of the distressed areas.

So that is where we want insurance companies looking for policies that's the incentive to do that we updated.

But can I just ask a follow up question on that? Nothing in the regs requires them to take people off the fair plan. It merely requires them to have 85% in the distressed area maps as you define it is my understanding in the.

Regs they have to make a commitment that can be to write 85% or to grow 5% and then it's who counts towards that growth or maintenance. So as a fair plan policyholder in a moderate to high fire risk area, that counts as a policy.

So that is one of those policies that would go into those commitments, we make the insurance companies keep the data, and so we hold them to those commitments.

So fair plan, no matter whether you're covered by the maps, if you're on the fair plan, you count towards 85%.

If you have that moderate to very high risk. Yes.

Moderate to very high fire risk.

Yes.

And those maps, the fire maps were not Department of Insurance maps. I assume you're relying on somebody else's fire maps or are they your fire maps?

No, there's. So for that fair plan policy, that's the risk score for the fair plan policy.

Zero, got it. The fair plans defines me as very. As modern.

No, the risk scores used, like, by many companies, all as one. Not the fair plan itself, but the risk score system that they're using.

Okay, so those are not maps that are drawn by an agency. No.

And if I could just add one more thing, it's important because the challenge with California is we have big cities, small towns, and so the population centers can wash out or dilute any effect.

If you said, you know, this area, city A is distressed, and there are a million policies in it, insurance companies aren't necessarily going to be able to find the needles in the haystack of the fair plan policies.

But if you say every fair plan policy with fire risk is eligible, then they can target those policies either by looking at their differences in conditions, policyholders, or else or elsewhere. So it's sort of our way of trying to reach those areas that don't match the maps as perfectly as other areas might.

Got it. So I appreciate that, but. Okay, so let's use the example of Berkeley or Oakland. Right. Which has very high fire risk hills and also some flats where the risk is negligible.

My understanding is that the entire zip code, despite whether you're in the high fire part of the city or the low fire part of the city, would be covered by that 85% because it's in the zip code. Am I right or am I wrong?

I mean, that's one of the criteria. But if they are in the fair plan and they have a high risk area in high risk number, they're covered.

Right.

But if I'm an insurance company and I'm trying to maximize profit and reduce risk, and the people who are in the low fire areas in those zip codes, in the flats where there's less fire risk in downtown Oakland, for example, versus the Oakland Hills, I can count that towards my 85%, which is the choice I would make because it's less Risk.

That's a logical business decision and that would count towards my 85% because it's in the zip code. I think that's what the New York Times was saying and that's my understanding of the regulations. Am I wrong? Because I would love to be wrong.

I think that the particular example is not accurate because the Oakland hills are not in the zip codes that are covered.

So it's the Fair Plan policyholders in the Oakland hills that would be eligible, but we don't have those zip codes covered for that very reason is that the greater population in the lower risk areas would wash out the effect. So that's why we designed it this way. Is that. Exactly.

So those zip codes are not at all covered by your distressed areas, but.

The FairPlan policy are. So that's our way of tailoring to this urban rural challenge.

So the number of zip codes in the distressed areas is almost a quarter of California zip code 600 and something, which is a quarter of. I mean, somewhat.

Yeah.

I mean I just looked up how many zip codes are in California and it's about 2600. That's accurate.

The challenging with the zip. The challenge with the zip code is because they were made for like postal. Yes. It's not great. Yeah. We were trying to come up with some sort of hybrid system that would capture the zip codes but then capture this whole big city issue. And look at the end of the day, Assembly Cahan.

We're trying. We're going to have the data to monitor how the insurance companies are reacting to the wildfire distress areas. Something we didn't have before as we're attempting to launch these first ever regulations. And then quite honestly, like I told the Times, we're expecting them to try to, you know, look, find loopholes, make.

Logical business decisions, as I said.

Right. But name one regulation and one Bill that, you know, that has been perfect from the get go. We're gonna constantly be monitoring it to try to tweak it so that we capture these anomalies. Right. And that's what I kept telling the New York Times.

Can you come back a year or two when this is actually implemented and then help us look at these loopholes? Why are you already looking at these potentials when we haven't even implemented any of this stuff?

So we've been trying to come up with these formulas to try to capture all these different scenarios, but we haven't implemented any of this until this year.

Right. No, and I appreciate that. I do think. Look, I'm not going to throw Shade at the journalists who are trying to keep us honest. I think it's important, but I do hope they come back to your point.

I think they should continue to the journalism and continue to maybe admit they're wrong, if they're wrong, which is why I said I invite you to say I'm wrong. But so I guess, I mean, the example I gave you is a, is a regional example where I am, obviously.

But they gave an example in that article of, I think it was the Sacramento area where a similar thing would happen where they could concentrate in low, lower fire risks and get their 85%. You think that's not true? I mean, is that what you're telling me? Because I.

I think so. I can't speculate as to everything that will happen. Right. But let's say that 10 companies decide that that's what they're going to try to do. They would be competing for that business and that would drive other companies into the other areas.

If we are able to get all 118 companies to participate in this collectively, they are going to have to reach all of these areas. And so I think that's the key, is one company can try to find a path.

But all these companies together are going to have to write in more than just the flats in order to meet the commitments that they are making and that we're holding them accountable to.

And like the commissioner said, if we're tracking this through data, we're going to figure it out and we will update the distressed areas once a year. So if, or at least once a year. So if we do see that there is a pattern that's emerging, we can address it.

And then, so you mentioned, which I was going to ask about. So it's 85% or 5% year over year. What are, I mean, what would that entail for the companies you've already approved? Like what percent are they currently at in distressed areas? Do you know?

We don't know because we are just implementing this as we speak. This is why we're giving you an update today.

So that wasn't in the rate. Will you approve the rate? So I just thought maybe that was in the right.

We've literally just approved these rate filings and we're just about to launch. We're now in the implementation, the beginnings of the implementation stages of the sis.

Okay. So we don't know how many years it would take for some of these companies to get to 85% if they did five year over year.

Now the plan is to get as many companies as possible to start getting the Rafales in.

And so today we're, again, this is why we're saying we're speeding up our Ray file process so that we can get these done as quickly as possible so that we can get as many companies to submit the Ray files, getting them approved.

And we're starting to see that the companies, the worst case scenario, which I would always to Aluchair, is we set up all this system and nobody comes to play. But we're seeing that companies are coming in and actually some of the biggest writers in the state are coming in and making these commitments.

So now we're, you know, we're, we're going to start seeing, well, and it's.

Going to raise rates. I mean, let's, and I, you know, like I said, my constituents for a long time have been saying they want the market to work. And in order for the market to work, we need to be paying for our risk. And so, you know, I understand why they're coming to play.

But, but we've got to make sure that we're fulfilling the commitment of insuring California as a result of that.

What would be the other option as a Member, that we actually hide the actual true cost of climate or that we defer the cost and then we have another massive climactic disaster in the state and then we go insolvent and then that really harms the consumers.

And so I could sit here and do what's politically expedient and, or do what's hard and then ultimately get more insurance companies to come and then eventually drive the cost down for consumers. And, you know, you just gotta open the paper and see how, you know, how climate change is changing our market here.

And so I could do what other commissioners have done in the past and just hold onto the rates and wish for the best, but I can't do that.

And so we're all in this together and the rate has to reflect the risk and we all have to pay for, you know, for fair rates and for where we, we live. And, and, and that's the hope. And so, but by getting more companies to come in, we'll eventually get the rates to come down.

And this is what we're saying, it'll take us, you know, three to five years to hopefully stabilize the market.

When I was, I was not suggesting that we not do this. I've been supportive of, as you know, and also I will say the status qu keeping things affordable. My insurance, when I got dropped, my cost went up 300%. So not having insurance was not an affordability scheme.

Let me just clarify that for people like me in California. So I think. So. Last question. So you. I appreciate what you're saying about tracking the 5% to 85%, whichever they choose, and really seeing how that works. What kind of transparency will there be around that?

Yeah, no, our plan is to make sure that when we have these updates, we're going to be posting it on the website. And you want to clarify on how we're going to. Because we absolutely want to make this transparent and we want to make sure you all know and that we use this tool.

Again, this is also important as we're developing the public wildfire model so that local governments know how to use the tool. We know how. And this is going to inform local planning issues, how we build, where we build. So go ahead, Mike. This is a good. That's a great question.

Yeah, no, no, thank you for the question. I think there's two areas of transparency that are good to note. One is that in the rate filings themselves, you'll see we designed a template for the insurance companies to make their commitment. So you can see we're going to grow 5% and we're going to do it in these ways.

And this is where we're headed. And then in our data collection, we'll be able to kind of show two things. One, the distressed areas, as they change, you'll see whether certain zip codes continue to increase in their Fair plan percentage or decrease. And so that'll show where some insurers are writing.

The second thing is that as we look statewide, the number of Fair plan policies in any given area will go up or down as well.

And then we will be able to take that data and show that to you by district, by your zip code. Yeah. Or by your county.

Yep. So you said in the rate filing, they lay out how they're going to meet the commitment. Yes. And then do they have to come back at some point and show that progress?

Yes. And. And we post approval, obviously. Correct. And we will. And we have already the statutory. We already have, you know, the, the authority to be able to go after them legally if they don't meet the requirement.

Got it. And so you'll be tracking sort of where they're doing that. And that will also be transparent. The next commissioner will be able to. Zero, yes, fair. Fair commissioner. You're like, I'm gonna retire. But so that will also be transparent is the vision.

Yes.

Okay. And. And how will. And you said that'll be. There'll be a Website or.

Yes, the plan is to make all that public.

Not gonna be a binder anymore.

No, hopefully not. Do not want you walking with a binder.

Yes, I appreciate that. And if you want to follow up on our zip codes, I know there's a lot of concern in my district that this will not be benefiting the areas that are most distressed.

And honestly, I mean, I. I do know that, you know, we do have concentrations even within zip codes, as I'm sure you're aware, like the Palisades was, where if there is a firestorm, the fact that another part of the zip code didn't have a high fair plan will not help save.

And we'll be more than happy to. To talk to your staff or your constituents and dive into the formula of how we did the formula and how we could address. Because I know there was a lot of discrepancies within the New York Times article. I just wish they would have. We sat with them for months.

This article just didn't come out of the blue. We sat with them and met with them to really go through the data. I just wish they would have allowed us to implement it, to actually showcase what we were trying to do. Again, we don't want.

We welcome the scrutiny, but I just wish they would have allowed us to implement it first. And we were just saying name a regulation that we're starting from zero to fully implementing this. We've never done this before. And so is it going to go right 100%? We have no idea.

But we have the data now to track it and to be able to mold it as we go. And so that's the plan.

But I do think that our.

I mean, our regulations and the models need to be defensible and show the plan is going to be implemented as the promise was again that we would allow them to do catastrophic modeling, that rates would go up, but that the market would continue to work and we would depopulate the fair plan so people don't get hit like they did after.

The last couple once we implement it.

Thank you. And. And this is the sixth time that you've been before my Committee. And so I hope that you will come back later this year and give us another update because this is very helpful for. For me and for the Members to have this discussion and dialogue in a very transparent public way. So I appreciate that.

Rbk any day. We'll invite her back, too. I know she invite me back. I always. You always are invited in my Committee.

You know, a Member of the Committee. I'm Joking.

No, but she's like, you know, ex officio Member, so she's still a Member. Assembly woman Schiavo, you have a question?

Thank you. Thank you. I'm also sitting in. Thanks for making space. This is a huge, as you know, huge issue for our community. The Santa Clarita, San Fernando Valley and Castaic area where the Hughes fire was a year ago.

We are riddled by fires in the hills that surround our valleys and have a lot of high, high risk areas. My insurance, where I live, our whole HOA of over 700 units was dropped years ago.

We've had to get catastrophic insurance and suffered multiple thousand dollar assessments and had to expand our own personal insurance to cover for what our HOA is not covering anymore. So, you know, in the boat of RBK over here, there's a lot of us suffering. This boat, right? Yes. We went off the boat. And.

And it's an issue that I hear in my community. You know, every time I'm out and about in the community, someone's talking to me about insurance.

So I am incredibly grateful for all of the hard work that has gone in to address it because I know, you know, legislatively the chair has been working on, you know, was working on this through the Legislature, and then you kind of took on doing it through the regulations and we saw that it was a crisis in front of us that we could not ignore.

And I know it's still in its infancy and just getting started. I am hopeful because I think we are all hopeful because we need this to work. Right.

And I also wanted to thank you because I know after the fires last year, you put in, you know, the moratoriums that folks couldn't get dropped and included the area around the Hughes fire, which was so critical for people in my community.

In the Castaic and Santa Clarita area. But it's a year later. I think Assemblymember Herabiden asked about that. I'm really concerned I'm going to start hearing from constituents that their insurance is being dropped.

And I, I still am hearing, you know, from realtors especially are telling me the stories of how they have folks who are trying to buy homes and can't get insurance policies.

And so can you tell me a little bit about is there any relief in there for folks who did have this moratorium and then once a year is up they could just be out of luck and get dropped?

Well, it all depends on the amount of the damage. So if they had a total loss, there's a two year window.

None of the homes in my community were burned, thank goodness.

What we could do is let's go back and we'll have Mike run some numbers to see if we could see if there's any anomalies in those zip codes and we can get back to you and make maybe do an analysis for your district and see if we've seen and see who are the writers there, see if there's any uptick on the fair plan.

Again, we haven't seen any big uptakes of the fair plan and but if we can catch anomalies there, we can look at it, maybe do an analysis that maybe that could be something we could do for her for a district and we could do a follow up again.

And we've been working with the realtors, as you know, on this plan and they support it because obviously we understand how important that is and especially for the local economy, you can't sell a home. It just impacts the local economy, has that domino effect.

So if we can do that and we can schedule a meeting with you that we can go over and go over some of the numbers.

Yeah, that would be wonderful. Thank you. I appreciate that. And so for folks who, you know, I certainly have folks in my district who are on the Fair Plan or whose rates are going up.

And you, what I hear you saying is that you've, in the next 12 to 24 months there should be some relief that people are feeling or is that.

Yeah, we're seeing, you know, visible consumer relief builds over the 12-24 months and kind of bigger structural stability will take like three to five years consistent with kind of global reinsurance cycles.

And that's what we've seen with like kind of Swiss Re, Munich Re, which are kind of the big global reinsurers that look at this and and with Wharton School at University of Penn who all show that catastrophe exposed markets tend to stabilize over three to five years and California is already in the two year cycle into that.

But again, it depends on the bills that we pass, depends on how we react and of course mitigation is key to that. And we've studied Swiss re, Munich re, Wharton and Oecd and the SIS is really built into what they've recommended we do. So we didn't just kind of think of all this stuff out of thin air.

And really it's really grounded on global research and on data and that opinion, that's what we're kind of tracking and they've been tracking it with us and so they still feel hopeful even with what's happened in LA.

And this is why I spent the earlier part of my testimony on what would have happened if we didn't have the SIS and we had the LA fires. So they feel we're still on that trajectory. Again, it depends on what we passed this year.

We did build in some, a couple months to understand that, you know, the Legislature was going to have some eagerness to build some to pass legislation around this that could impact how the market kind of responds. But like I said, we're starting to see the insurers already coming back into the market.

And one of the biggest questions as the chairwoman kept texting me, is when are these going to get approved? When are we approving this? We need to get these, you know, rate files approved as quickly as possible.

And why I'm going to be introducing this regulation to make sure that when I'm gone, we keep to the letter of the law and get these rate files done as quickly as possible so that we get insurers writing back with the commitments so that, you know, your wildfire distress area gets, you know, those insurers writing back again and get them out of, get your, your consumer, your, your constituents out of the fair plan.

And have you. I'm, and I'm sorry I was late. Have you, you've already started approving some of these rate filings.

Yeah. I'll tell you again, I'll tell you quickly who we have approved and, and we have a big, we have a significant, we have a significant chunk of the market and some of the biggest players already. So we have the second largest homeowners insurer, Mercury Insurance has been approved.

That's the number two, number three CSAA insurance group, the number 121319 and 24th USAA group, number 18 Pacific specialty was 30th California casualty and then pending 56 and nine, those are three major homeowners insurers. And we continue, our Department continues talking to others.

So again, it shows that the reforms that we did are welcomed by the insurers. We've worked with all of them. And you know, to tell you that, you know, all the heat that I got for, you know, meeting with the insurers, all this was built with talking to everybody.

And the last thing we wanted to do is build this new system and not have insurers respond. And so they've responded, they filed, and we're trying to. And against the level of participation across is top, middle and specialty segment of the market is what we want.

What we don't want is, is what has occurred over the last couple of years all over the country where you have one insurer who is the largest insurer across every state in the country. And so now we're in a situation where if that insurer, something financially goes wrong with them, what happens to the entire country? Right.

So we don't want that to happen. We want a mix of, of insurers riding in your district. You will want small, medium and large in your district because if God forbid, something happens, that diversification is what's going to protect your consumers.

Yeah.

Right.

Just one last question.

So how I have been explaining it to people in my district who are worried about their, you know, high cost of insurance or inability or getting dropped is how we're addressing it in California is that because of the high cost of disasters in this state and California doing an amazing job at keeping cost of insurance down, the insurers have not been able to keep up with the increased cost of covering these disasters.

Right. And so we had to change that to be able to allow them to cover the costs.

And that means that rates are going to go up, but it also means that people are not going to be pushed into the fair plan as much because where their rates are going up 500% and instead it's going to go up what3040%.

What is, what is the percentage that you think people are going to be seeing?

I wouldn't go into specific numbers. I think as of today, I will tell you what you could tell your constituents is tell them that help is coming. You could tell them that the market is already showing signs of stabilization.

You could tell them that more options are on their way, as I told you, and I can give you a fact sheet on what's happening. You can tell them that every reform we pass, that we've passed shortens the time of relief. And I can give you what's happening, what we're seeing.

I think consumers want to know that insurers are not abandoning the state.

Right, right.

And if we show them who's committed and that commitment to. Right. In the. In the state, that's the big difference. Right. Other states don't have this commitment. They're coming back and. And we can show you who's coming back.

Right.

And that their area is under these new rules is a priority and that it's going to take, you know, it's going to take a couple months for them to come back and get them out of the Fair Plan. I think that just brings them a sense of relief.

It's that fear that they're going to get either put back or stay in the Fair Plan. And that we're reforming the Fair Plan. Right. To get them out of there as quickly as possible.

Yeah. I mean, certainly I hear from people that they'd rather pay an increase that they can afford versus something more catastrophic or like the Fair Plan or, or not have insurance at all. Right. It's a little bit of a rock and a hard place situation, though.

Nobody's like thrilled about it, but it's better than what we were facing, obviously. So what are the rates at which you. So far, the people who have gone through this process of the rate increases, what kinds of increases are there?

That's a great question and I'm happy you asked that because that's another thing that the media almost also misrepresents. The rate increases have been around 6.9s. And that coincides with, if you look at the previous years have been, I would say, thousands of 6.9s.

I imagine insurance companies are saying that's still not enough.

Well, but the difference though is that if you look at my predecessors that have approved rate findings around this time of year, it's been successful, SF 6.9. But the difference under the SIS is that now under the new rules, the requirement to write in high risk areas is binding.

So that is the big difference in the requirement that no other state has but us under the sis. And that's a big difference. Right. And that is the commitment where I said earlier, insurance companies are now filing knowing that that is the requirement. So they're no longer abandoning these communities. Right.

And so they're demonstrating that they're acknowledging that in the rules. So they're committed. They're recommitting to California, which is different.

And the. And I mean, it means it must be enough if they're doing that, I assume, and it's moving.

I think what they're doing is they're testing, they're testing the waters to see if we're going to get these rate filings actually done on time and see how the rates are going to be implement how the.

Because that was one of the problems before. Right. Is that the rate filings were taking so long that by the time it was approved, they already needed to go up again.

Correct. And by the way, all these rates, all these rate filings were approved within, under, under the 120 rule. Only one of them was 133 days. 133 days, which one was a test run for our staff, one that we were fully staffed, that we were understanding these much more complex rate filings. Right.

Cause now we're operating under the new rules with the cost of reinsurance, with the complex modeling rules now. And so these are all kind of test runs. So I think insurance companies are also testing us to see if we're actually, we know what we're doing and how we're going to implement the sis.

So I think everybody's kind of like trusting but verifying. And we're in that space together. And that's why I said I want to make sure before I leave that we also leave this within statute and that the regulation we're introducing next month is that we also hold ourselves accountable, that that 120 days has to remain.

And by the way, that was already law within Prop 103, but somehow we got away with that. And, you know, if you look at the average, it took years. So that's also, you know, we can't do that anymore, not in the age of climate change.

Thank you.

All right, thank you, Insurance Commissioner. Thank you so much for coming back to be with us for the sixth time. And like I said earlier, I hope you'll come back later this summer. And now we're going to take public comment. So please state your name, organization, and provide a brief remark.

Thank you.

Give me this.

Thank you very much, Chair and Committee Members. My name is Will Abrams. I'm with the Utility Wildfire Survivor Coalition. And I was around in 2019 when Commissioner Lara came on and I appreciate his presentation. We don't share the optimism.

We're seeing a lot of the same on the ground issues that we saw in, in 2019 after the campfire. SCE is looking to pay the least amount of people, the least amount of money. Commissioner Lara identified mitigation as the primary way we are going to drive insurance Rates down.

When we're paying victims 50 cents on the dollar after attorneys fees and after utilities try to pay them the least amount of money, they're not going to have that 2 to 3%. To be able to address mitigation, we need to make sure we see each time there's a utility cause wildfire, there's a spike in the reinsurance rates.

These things are tied together and we need to make sure that we're doing comprehensive mitigation. That's the only way that we're going to have insurability in the state. One last point. Commissioner Lara talks about legislation in terms of streamlining intervenors and I would just point out. Streamlining for whom? Streamlining for the insurance companies. Great.

But this means less participation from the public and less engagement. We need to be making sure that fire victims are fully compensated for their losses. We cannot wait around for SB254 study to get after that. Victims are suffering on the ground.

I urge the Committee to consider those issues, those underlying issues of how victims are going to be able to recover because otherwise we will not have insurance in the state. Thank you.

Good morning, Chair and Members. Kim Stone of Stone Advocacy on behalf of Consumer Watchdog. Thank you for the hearing and the opportunity to make comment. Consumer Watchdog urges consideration of policyholder and consumer issues at the same time that we consider sustainable, sustainable insurance strategies.

We believe that insurers should respond to claims in a timely fashion, that insurers should communicate fully and transparently with policyholders about documents and about decisions. And we question if the sustainable insurance strategy is sufficient to address the crisis that California faces.

Insurance companies have dropped three times as many policies in distressed areas as they have committed to sell by 2028. So under the sustainable insurance strategies, we urge the Legislature to consider doing more in order to keep California insured.

We urge insurers who sell in California to offer insurance to everyone who needs it, who also hardens their home to state fire standards as one possible way to depopulate the fair plan and provide insurance to people who need it and keep us all safe. Thank you.

Madam Chair. Members John Norwood, on behalf of the Independent Insurance Agents and Brokers of California, want to thank the Committee for having this hearing and the Commissioner for all the work that they've done and commend them on a really positive report. Our Members are just like everybody else in the public.

They can't wait for insurers to come back and re establish a competitive market. It is very positive to hear that these five companies have been approved and the line of other companies, companies that are ready to make filings. We heard several independent agency companies in there, so we're anxious for that to take effect.

As the commissioner said, it's going to take some time and it's doubtful that these approvals are actually in the marketplace yet. We're actually just going out with a survey to all of our broker Members to find out if they're starting to see any relief.

I can guarantee you when there's insurers out there that want to write, we're going to pull people out of the Fair Plan as quickly as possible. There's no positives for our Members to have their clients in the Fair plan.

We just want to again thank you for this and commit that we want to work with commissioner and this Committee over the next few months on the number of bills that are out there to try to achieve the balance that I think you're all trying to do. Thanks very much.

Annie Thomas on behalf of the California Alliance of Child and Family Services. In addition to the insurance crisis due to wildfires, the liability insurance crisis has already already resulted in the closure of more than 25 foster family agency sites since October 2024.

These closures reduce placement options for youth, disrupt relationships with trusted caregivers and place additional strain on remaining providers. Last year's 31.5 million allocation provided temporary relief. However, these funds will run out this year.

We're thankful for the support we've received from CDSS and CDI thus far, but we look forward to working much more closely on long term solutions we can send to the Legislature to stabilize the insurance market, protect survivors and ensure providers can keep their doors open. Thank you.

Katie Pettibone on behalf of Pettibone Government Strategies and my client Century Insurance and other commercial insurers such as Zurich Insurance and AF Group.

Although this hearing is focused on homeowners, I would like to highlight that the work that the Department has been doing on rate filings on the ground up, work with employees and training of employees and certainly the budget support for the Department to do their job is actually not only helping the personal lines, it's helping the commercial lines, which commercial lines is what insures all of our companies and makes the economy go.

So we're encouraged and really want to make sure that everyone keeps an eye on as we move forward the things that will have trickle down effect for liability insurance and appreciate the committee's work. Thank you.

Yes, good morning Madam Chair Members. Seren Taylor on behalf of the Personal Insurance Federation of California. We do want to thank the Committee and the many stakeholders who have worked constructively over the past two plus years to implement the Commissioner's sustainable insurance strategy. This collaboration is essential to restore a healthy and reliable insurance market for Californians.

With regard to the point that Assemblymember Wallis and Assemblymember Krell made, I do want to say with the recent SIS filings that are just coming into effect, it's important to steer the ship carefully toward our share goal and not do anything to undermine the progress that's being made. So thank you.

Good morning. Mark Segner with the American Property Casual Insurance Association. Like, thank the Committee for their Work and the Department for all their work. I also want to commend the Department for their Work on Zone Zero. We know that the only way out of this is to bend the risk curve and Zone Zero is key.

And I think when you enjoy the frustration that the Department has and we have the challenges that the Department of Forestry is having doing Zone Zero, which is among many of the easiest things we can do for mitigation, we need to continue to work on that.

There's been a lot of time about how much this going to take. I think it's important to note that the catastrophe models weren't adopted until this summer. Companies are just starting to review them and as the Department said, companies are getting rate filings that are getting approved relatively quickly.

It's going to take a while to roll these products out in the market, so we just have to take patience for that.

I also want to point out that the need for adequate rate continues and that we need to make sure that these quick timeframes also apply to companies that are not able to use the SIS filing restrictions because not all companies, either due to geographic or other issues, may be able to participate in the sis.

And we have to remember that when you look at the distressed areas, while it covers a lot of zip codes, it only covers about one in every seven policyholders. So we need to remember that there's a lot of other people out there that need to maintain insurance.

I want to acknowledge the Commissioner when he said the Legislature has a chance to make good decisions or bad decisions. And if somebody Member Wallace has cautioned as we go forward that and people are looking at California to see what the Legislature does.

We know CIS is a step forward, but still a lot more work to be done. Thank you.

Good morning Madam Chair and Members. Karim Drissi on behalf of the California Building Industry Association, our primary focus and concern continues to be the availability and affordability of insurance in the private insurance market for home buyers and in particular, first time home buyers. We appreciate the chair and the committee's. Leadership on these and we look forward.

To continuing to be a resource to. The Committee and to the Department. Thank you so much.

Good morning, Chris Rosa here on behalf of NRDC, the Natural Resources Defense Council, we appreciate the focus this Committee is having on climate related affordability issues.

And here to share concerns over California's current approach to wildfire risk, which means that ratepayers electrical bills are the largest funders of IOU wildfire prevention in the state, which low income households disproportionately pay for. Progressive sources like the General Fund are contributing significantly less to preventing and reducing wildfires in terms of the IOU programs.

And California needs holistic intervention on this issue this year to prevent another utility bankruptcy that will increase further cost pressures on Californians with their increases in their electricity bills, worsening the affordability problem for both utility and insurance bills and discouraging the adoption of climate technology. So we thank you for your consideration on that.

Thank you. This completes our oversight hearing. We're adjourned.