CA Insurance Commissioner Ricardo Lara: Stabilizing Insurance Market, Overhauling Regulator Overhauling Regulations

In a comprehensive 45 minute presentation to the Assembly Insurance Committee Wednesday, California Insurance Commissioner Ricardo Lara gave a thorough rundown of the many issues he and his agency are working on following the wildfires in Pacific Palisades and Los Angeles.

Lara was heavily criticized last week when he missed a Senate Insurance Committee hearing because he was at an insurance industry summit by the reinsurance carriers in Bermuda. Lara said the summit was in Bermuda because that is where reinsurance carriers are located – thanks to US tax laws.

Bermuda is referred to as the “world’s risk capital,” the Association of Bermuda Insurers & Reinsurers says confirming this.

Insurance Commissioners from many other states were at the same summit, and are going through much the same insurance turmoil as California. Lara said California is the largest insurance market, therefore is impacting more consumers.

This was the fourth such hearing with the Assembly Insurance Committee since 2023 in what Committee Chairwoman Lisa Calderon referred to as a “partnership with Insurance Commissioner Lara.”

Lara said the California insurance market must be stabilized and something he has been working on before and following the Palisades and Los Angeles wildfires.

He said his agency has already helped 7,000 wildfire survivors. “No one should go through this process alone,” Lara said.

Lara said his staff members on the ground after the LA wildfires created 135 disaster centers to facilitate getting insurance claims moving. He authorized advance payments on claims without requiring itemized lists of lost possessions and property, and has encouraged insurers to continue this and has even proposed legislation, AB 475, to make payouts without detailed lists.

Lara said they have also notified insurance companies they cannot deny smoke damage claims.

As for overhauling insurance regulations, Catastrophe modeling is option insurers can use, but must provide more coverage in wildfire risk areas.

Lara said the Department finalized new regulations on catastrophe models in December 2024. “Homeowners and businesses will see greater availability, market stability, and recognition for wildfire safety through use of catastrophe modeling,” the Department of Insurance says. “Giving people more choices to protect themselves is how we will solve California’s insurance crisis,” said Commissioner Lara. “For the first time in history we are requiring insurance companies to expand where people need help the most. With our changing climate we can no longer look to the past. We are being innovative and forward-looking to protect Californians’ access to insurance.”

Commissioner Lara said that one of his primary goals is to “depopulate and deplete” the FAIR Plan – getting more consumers off of the FAIR plan, and back into the full insurance market. The FAIR Plan provides basic fire insurance coverage for high-risk properties when traditional insurance companies will not.

“It’s been 30 years since the last FAIR Plan assessment,” Lara said.

Notably, Lara said growth of the FAIR Plan stops fighter insurance companies from expanding in California.

“The FAIR Plan is operated by insurance companies, and is why it needs a public member,” Lara said discussing the need for more transparency in the FAIR Plan.

Lara said that after the Paradise fire, people asked why the state should allow such a high wildfire risk area to rebuild. “I’m going to be a bit controversial here,” he said, noting that no one is asking if Malibu should be allowed to rebuild. And he says overhauling the system is imperative or we will be back in the same hearing in 30 years again, after more fires and losses.

Lara is addressing the insurance regulatory complications, and said mitigation, building codes, land use policies must also be addressed. But also said his own agency needs to look inward, “deep down” at its own policies and regulations. “We need to hold everyone accountable, even everyone in our department.” Lara noted how long it takes to get resolutions on rate filings, and how long it takes to pay out, acknowledging that the DOI is part of the problem.

Lara said he aims to have changes in place by fall.

Lara said that the insurance market is global, and with California the 4th largest market, as California’s Insurance Commissioner, he “will go anywhere and engage with anyone for the insurers and consumers of our state.”

During his presentation, Lara named several pieces of legislation he’s sponsoring to dispel myths and misinformation, fighting fraudsters and scammers, the Business Insurance Protection Act to protect business properties, enabling a line of credit, among others.

Lara spent time after his 45 minute presentation answering lawmakers’ questions. Assembly Republican Leader James Gallagher asked why it has taken so long to make these changes. “Why didn’t the governor act sooner – after the Camp fire in 2018, or the Sonoma fire 2017?”

Gallagher noted that Gov. Newsom bypassed Coastal Commission regulations with an executive order after the Palisades and Eaton fires, but never made moves like this for earlier fires.

Lara said Proposition 103 details the process, and he is working on making changes for another ballot initiative. “Could I have moved quicker? Absolutely,” Lara said. “But I could lose it in court over the regulatory process.”

Lara, a former Assemblyman and State Senator knows the legislative process and told lawmakers that with so many overdue changes needed, they need to be bold with legislation. Gallagher noted that he and Republicans have proposed legislation, but the bills were never heard in committees.

Gallagher asked Lara about State Farm’s 22% rate increase. “What’s next? What should consumers expect?”

Lara said State Farm is one of the largest insurers, but there is a lack of data with State Farm. Lara said he does not want to create a precedent with insurance companies asking for things without producing any data proving accountability.

Gallagher said while the state over regulated the insurance market, consumers shouldn’t be getting non-renewal notices.

Gallagher asked Commissioner Lara if he will work with the Trump administration on insurance reforms. “Absolutely,” Lara said, and told the committee that California Congress members Doug LaMalfa (R-CA) and Mike Thompson (D-CA) are working on legislation. And Lara said the former Montana Insurance Commissioner is now a member of congress and working with states’ insurance commissioners.

Assemblywoman Dawn Addis (D-Morro Bay) told Lara that FAIR Plan coverage has grown by 300%, 500% and 560% in the three the Central Coast counties she represents (Santa Cruz, Monterey, San Luis Obispo), in just the last few years. She asks about how to move these people off of the FAIR Plan. “Hopefully by 2026,” Lara says while the catastrophe models are approved.