California homeowners battered by the meltdown of the Golden State’s home insurance market will have a new place to voice their frustration in 2024 — at the ballot box.
The troubling issue is emerging as a key focus in the tight race for the U.S. Senate, drawing hopes and concerns — and possibly money — from consumer groups, industry leaders and soon voters in disaster-stricken parts of the state.
Now, Rep. Adam Schiff, the frontrunner in the March 5 primary, has introduced a bill in Congress aimed at easing home insurance woes across the country and especially in California, where officials are struggling to stabilize a market that in the wake of record wildfires and destructive winter storms in recent years has seen insurers cancel coverage, limit new policies and sharply raise premiums, particularly in areas deemed high wildfire risk.
Insurers say California hasn’t allowed their rates to keep pace with their rising costs, including for reinsurance — policies insurers buy to limit their own liability exposure to catastrophes.
The Burbank Democrat’s “Incorporating National Support for Unprecedented Risks and Emergencies (INSURE) Act” would create a federal option for reinsurance, which advocates say would cost less because it wouldn’t have to make a profit. The law would require participating insurers to offer homeowners coverage for all natural disasters, including wildfires, severe storms, wind, hurricanes, floods and earthquakes.
“My INSURE Act addresses the urgent crisis in the home insurance market, particularly in California, where the cost of insurance has gone through the roof and insurers have stopped writing new policies,” Schiff said. “Climate change has significantly increased the risk of natural disasters, and insurance companies are shifting the costs to consumers who struggle to purchase disaster coverage. My bill is a critical step forward in the effort to ensure homeowners and communities have access to affordable and accessible coverage.”
Consumer groups support Schiff’s bill, H.R. 6944.
But insurers are opposed. Nat Wienecke, senior vice president of federal government relations for the American Property Casualty Insurance Association, the primary national trade association for home, auto, and business insurers, said they appreciate Schiff’s efforts and “are still analyzing the legislation.”
But Wienecke said various factors driving up insurance costs across the country “cannot be overcome by a broad federal program.” And though bill supporters say its impact on taxpayers would be limited, Wienecke raised concerns it could “put federal taxpayers at an even greater risk” than the National Flood Insurance Program established by the federal government in 1968 to help residents and business owners in high-risk areas obtain flood insurance. That program, which is subsidized by FEMA, is now more than $20 billion in debt.
Insurers complain that regulations California voters toughened with 1988’s Proposition 103, written by Harvey Rosenfield, founder of Consumer Watchdog, have made it too hard for their rates to cover rising costs, prompting companies to limit coverage to avoid overexposure to catastrophic disaster losses. They have demanded faster action on rate hike requests, and for the state to let them include computer catastrophe modeling and reinsurance costs as a basis for them.
Last fall, Gov. Gavin Newsom urged Insurance Commissioner Ricardo Lara to develop solutions along those lines and Lara announced plans to do so by the end of this year that would include a commitment from insurers to provide at least 85% of coverage in wildfire risk areas.
Rosenfield said without airtight coverage guarantees, Lara’s plan would just be a giveaway to insurers that would cost California homeowners. Consumer advocates have opposed letting insurers bill California homeowners for reinsurance as other states do because it’s purchased from what they say are unregulated and erratic global markets at costs that would raise premiums by hundreds of dollars per home.
Rosenfield called Schiff’s bill “a clever approach” that would expand protection for consumers from a variety of disasters that many policies now exclude.
“This would solve an industry problem — they claim they can’t afford to make insurance available because reinsurance is so expensive — and force them to sell a policy that covers everybody’s needs,” Rosenfield said. But he also acknowledged any federal legislation in a divided Congress is years from being enacted.
The bill escalates the home insurance crisis as an issue in California’s U.S. Senate race, which Schiff has consistently led in both fundraising and polling.
David McCuan, a political science professor at Sonoma State University, in the heart of the Wine Country devastated by recent wildfires, sees it as a savvy play by Schiff to build support at the expense of his chief Democratic rival for the Senate, Orange County’s Rep. Katie Porter, known for her whiteboard interrogations of CEOs.
Porter and Schiff both released their first TV ads this week. Porter’s says “Katie Porter’s whiteboard is one way she’s often seen grilling top executives” and that she’s “focused on your challenges” including “lowering housing costs.” Schiff’s touts a record of “results,” arguing “Californians deserve a senator who is going to deliver for them every day, and not just talk a good game.”
While the bill won’t provide any insurance rate relief before the election, McCuan said it puts Schiff in the driver’s seat on an issue important statewide and across party lines while also pressuring his top Democratic rivals, Porter and Oakland’s Rep. Barbara Lee, to support his proposal. He also noted it helps Schiff gain traction with voters in wildfire-stricken areas of Northern California who are less familiar with him.
“This allows him to cut into that consumer persona that Katie Porter has cultivated,” McCuan said.
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Campaigns for Lee and Republican frontrunner Steve Garvey did not respond to queries about Schiff’s bill. Porter’s campaign deferred to her congressional office, which said Schiff is playing catchup on an issue Porter already has taken on with October letters to insurance companies and a bipartisan December meeting with company leaders.
“Congresswoman Porter is focused on delivering real solutions for California homeowners,” said Jordan Wong, a spokesman for her office. “She led the first and only congressional effort to get answers directly from insurance companies, working across the aisle with Republican Rep. Doug LaMalfa. She will continue to work with colleagues and stakeholders so that Californians can get insured.”
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