Insurance

businesses

has collected more than $150 billion in premiums from California homeowners over the past 25 years and has made profits four times the national average. Now they are demanding an unprecedented bailout from the California legislature as the price for continuing to do business here in the wake of wildfire losses.

Industry lobbyists are reportedly negotiating with lawmakers, insurance commissioner Ricardo Lara and governor. Gavin Newsom’s office toward a deal that would be unveiled in the final weeks before the legislature was adjourned on Sept. 14. The industry’s plan would continue its decades-long push to undermine the protections of Proposition 103, the insurance reform measure passed by voters for 35 years. past.

The proposal W

could allow insurance companies to raise rates without full transparency or justification; forcing policyholders to take on staggering costs from insurers as backup cover for unexpected losses; and use secret algorithms to set bounties.

These currently illegal practices are likely to increase property insurance premiums by 40% or more. Many more customers could be forced to participate in the California FAIR (Fair Access to Insurance Requirements) plan, a state-founded, industry-controlled association that offers less generous coverage as a last resort at higher prices.

Even worse, the proposed bailout relieves insurance companies of their responsibility to cover all losses under the FAIR Plan, forcing the states’ policyholders to shoulder the burden through mandatory surcharges to their insurance accounts. The proposal would encourage insurance companies to include their riskiest customers in the FAIR Plan and allow other policyholders to subsidize their claims. Insurers would keep only their most profitable customers.

Some lawmakers have suggested that capitulating to industry demands for deregulation, much higher premiums and zero risk is necessary to lure insurance companies back to California. Companies like State Farm, Allstate and Farmers have orchestrated an insurance shortfall in the state by refusing to sell new policies and improperly dumping existing customers. But the company’s proposal doesn’t guarantee that everyone who wants to buy insurance coverage will be able to do so.

Giving in to industry demands has not worked in Florida either. Under Governor Ron DeSantis, rate regulation is weak, insurers are opaque and companies are allowed to pass on the cost of reinsurance and impose surcharges on policyholders if the state’s equivalent of the FAIR Plan falls short. And yet homeowners’ premiums are two to three times higher than in California, the share of policyholders with last resort insurance is five times higher, and companies are quickly leaving the state anyway.

Under the California Constitution, the legislature is prohibited from changing the terms of Proposition 103 except to further the objectives of the initiative. Courts have repeatedly invalidated legislation that weakens these reforms, as the industry’s latest proposal does. Whatever their personal views, lawmakers should respect the will of voters and insist that insurance companies do the same.

By waiting until the final days of legislative work to negotiate such a rescue package, legislators are cynically trying to evade public scrutiny and debate, while undermining the credibility of their institution. As the 1996 deregulation of energy rates demonstrated, poorly vetted industry-backed proposals can become costly debacles for California consumers and taxpayers.

There are many legitimate ways to deal with the impact of wildfires and other extreme weather events without saving the industry or allowing transparency and accountability to be shied away from. Our leaders need to take the time to look at it.

For example,

money from a proposed climate bond and the state’s cap-and-trade program could be used to help homeowners take precautions that reduce the risk of loss from extreme events such as wildfires. Instead of allowing insurance companies to dictate land use policies through rates, state and local authorities should develop rational rules to guide construction in high-risk areas. And insurance companies should be given a deadline to stop insuring and investing in the oil and gas companies that are fueling climate change.

Finally as a condition

for

Because they have the privilege of selling any kind of insurance in California, companies should be required to cover all homeowners who have taken appropriate steps to protect their property. And insurers who choose to leave the state may not return for the next five years. Companies that collect our premiums for decades and then suddenly decide they don’t want to obey our laws should not be allowed to do business in the nation’s largest and most lucrative insurance market.

Harvey Rosenfield is the founder of Consumer Watchdog and the author of Proposition 103.