Newsom Executive Order To Fix State’s Insurance Crisis Released

Sacramento, CA – California Governor Gavin Newsom is praising recent changes to the state’s Fair Access for Insurance Requirements (FAIR) insurance plan, saying the changes will help stabilize the insurance market.

“California’s all-of-the-above strategy addresses this decades-long crisis to give people the reliable and affordable insurance they need. Strengthening the state’s FAIR Plan has been a key priority, and these upgrades will help stabilize the entire market while providing more stability to those who already rely on it,” Newsom said.

However, a consumer group called the changes to an agreement between the FAIR plan and the insurance commissioner a bailout that will force homeowners to pay losses under the new agreement. State Insurance Commissioner Ricardo Lara argues that the changes to the FAIR plan are part of his sustainable insurance strategy and calls it the biggest overhaul of the insurance market since a 1988 voter-approved proposal.

“Modernizing the FAIR Plan is a critical step in our strategy to stabilize California’s insurance market,” Lara said in a statement. “It is critical that Californians understand that a growing FAIR Plan is contributing to our insurance crisis.

The changes increase the current limit of $20 million in commercial property insurance per location to $20 million per structure, with a maximum of $100 million for a location. This benefits homeowners, condo associations, farms, builders and other businesses with multiple buildings on the same site. The second big change could mean higher bills for taxpayers.

Currently, if the FAIR plan’s funds are depleted by a massive event like a wildfire, the plan can levy a tax on insurance companies, which would then have to pay the FAIR plan. Under the agreement unveiled Friday, insurance companies can recover those costs if they meet certain criteria. If the FAIR plan imposes up to $1 billion in taxes on insurers in a calendar year, they can ask the insurance commissioner for approval to impose temporary costs on their policyholders and recover up to 50 percent of their tax. If the tax levied by the FAIR plan is more than $1 billion, insurance companies can recover 100 percent.

Newsom has long advocated for reform in the insurance industry. Lara’s sustainable insurance strategy includes requiring insurance companies to submit all of their materials when submitting an application for a premium.