An Obscure Political Race With Big Consequences for California

People with big political ambitions don’t tend to be drawn to the California insurance commissioner’s office. It’s one of the lower-profile statewide positions, charged with regulating the insurance industries that operate in the state and approving insurance rates. And it’s one of the less glamorous political jobs out there. Even when insurance rates are low and coverage is good, insurance ratepayers aren’t looking around for a politician to thank.

But this year, the California insurance industry is undergoing an upheaval following years of increasingly frequent, costly disasters. And the race for California insurance commissioner is crowded, competitive and expensive.

California has had an insurance commissioner since the 1860s, but the position has only been elected since the late 1980s, following voter approval of Proposition 103. In addition to making the commissioner an elected position, the proposition required the office to approve rate increases requested by insurance companies. Partly as a result, California, one of just 11 states with an elected insurance commissioner, has relatively low insurance rates.

Following disastrous wildfires over the last decade, insurers in the state have sought to raise rates while limiting their coverage. Current California Insurance Commissioner Ricardo Lara sponsored a bill as a state senator in 2018 that imposes a one-year moratorium on insurers dropping or declining to renew policies in areas affected by disasters. Insurers have continued to pull back; State Farm stopped offering new home insurance policies in the state altogether in 2023. Lara has also promoted a Sustainable Insurance Strategy to stabilize the industry and promote broader coverage in areas where property owners are especially reliant on the state-run FAIR plan, which provides last-resort insurance coverage. Critics have said Lara’s policies are overly generous to insurance companies, and that proposals meant to improve coverage in risk-prone areas are full of loopholes.

The next commissioner will have to respond to a knot of political problems: insurance industry demands to raise premiums to reflect growing risk, a statewide need to mitigate fire risk at the property and neighborhood levels, and voters’ focus on affordability, particularly in a state already beset by runaway housing costs.

The candidates are state Sen. Ben Allen, who represents parts of Los Angeles that were damaged in last year’s wildfires; Steven Bradford, a former state lawmaker and utility executive; Merritt Farren, a former lawyer for big media and tech companies who lost his home in the Palisades Fire; Jane Kim, a former San Francisco supervisor and head of the state Working Families Party; and Patrick Wolff, a financial analyst and political newcomer who’s spending a lot of his own money on his campaign. Farren is running as a Republican, while the remaining candidates are Democrats. Allen has the backing of many establishment Democrats and is getting support from an independent expenditure committee that recently received a $1 million donation from a cryptocurrency executive. The primary is scheduled for June 2, and the top two candidates will face each other in a November general election.

Candidates are trading ideas on how to address the state’s insurance challenges. Proposals have included allowing insurers to use catastrophe modeling in their pricing decisions while pushing them to offer more policies in risk-prone areas, limiting development in some areas, providing more state support for risk mitigation, and establishing new publicly run disaster insurance programs. The next commissioner will have to decide how much to allow premiums to rise. Some experts argue that substantial increases are the only way to stabilize the insurance industry long-term, while others say that would only be a short-term solution. Most agree that the insurance commissioner plays a limited role in developing the state’s overall approach to managing climate risk and mitigation.

“The biggest influence that the commissioner can have is making sure the pricing [of insurance] is right,” says Michael Wara, a senior research scholar at the Woods Institute for the Environment at Stanford University.

Higher premiums would encourage insurance companies to stay in the California market, and could help stem the flow of policy non-renewals. At higher base rates, insurance companies could also offer more meaningful discounts to homeowners who carry out home hardening projects, like clearing vegetation from the area surrounding the home or replacing roofs or siding with non-combustible materials. But there’s only so much room for costs to go up before “the political blowback is so large that the prices can’t be sustained,” Wara says.

It’s also not clear how far a premium discount could go to encouraging people to do some of the more expensive mitigation work, like replacing their roofs. Some of the necessary work at the property level is so expensive that it can’t be meaningfully offset by an insurance discount, says Moira Birss, a senior fellow at the Climate and Community Institute.

“The idea that the price of insurance is a good vehicle for incentivizing risk-reduction is, I think, a very flawed logic,” Birss says.

Jane Kim, the former San Francisco supervisor who is endorsed by the Democratic Socialist standard-bearer Bernie Sanders, has proposed a single-payer disaster insurance program for the state to supplement private insurance. The premiums would be based partly on a property’s wildfire risk, and Kim has proposed using the premium payments collected by the state to invest back in mitigation work. That approach has become a major faultline in the race, with skeptics saying California can’t realistically be expected to insure private property around the state.

“Kim has got a politically salient message for people who are frustrated with the insurance industry. And I think her solutions are a direct threat to our ability to get an insurance industry functioning in the state again,” says Matt Weiner, the CEO of Megafire Action, a 501(c)(4) advocacy group focused on wildfire policy.

The state of insurance availability has major implications for where housing gets built, how much and at what cost. The Los Angeles Times has found that less than 40 percent of the homes lost to wildfire between 2017 and 2020 have been rebuilt, partly due to insurance issues, contributing to the state’s housing crisis. Rising insurance prices have also become a leading cost for affordable-housing developers. Still, some housing advocates say letting insurers set higher prices based on risk is an important precondition for incentivizing housing production in safer areas.

“A good insurance commissioner in California is going to have to do some very unpopular things,” says Matt Lewis, a spokesperson for California YIMBY. “One of which is to let premiums rise. Not precipitously, but quite a bit.”