The race for California insurance commissioner is set: Kim vs. Allen

from Levi SumagasaiCalMatters

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For the first time since California’s insurance commissioner became an elected position, two Democrats will compete for the post in November.

The two top vote-getters in the June primary were former San Francisco Board of Supervisors member Jane Kim and state Sen. Ben Allen, who received about 27% and 20% from the vote, resp. One of them will succeed Ricardo Lara, a former Democratic lawmaker who served two terms as insurance commissioner. Lara has led the insurance department for the past eight years, during which the state has seen some of the deadliest and most devastating wildfires.

Either Kim or Allen will take on complex, huge challenges that impact local communities, people’s ability to buy homes and start businesses, and the state’s economy.

Over the past few years, insurance companies have stopped writing new policies or renewing old ones, especially in high-risk areas, citing the rising risk of wildfires due to climate change and inflation that has followed the COVID-19 pandemic. This prompted homeowners to turn to the latest FAIR plan, which is mandated by law to provide fire insurance. The plan, run by an alliance of insurers, grew to more than 684,000 policies in force as of March, a 152% increase from September 2022. It has warned about its ability to continue paying claims after major disasters.

Proposition 103, a law approved by voters in 1988, means that, among many other things, the elected commissioner has the power to approve rate increases. This has kept the state’s rates from rising too much over the years—California homeowner’s insurance premiums are hovered around the middle of the pack across the country – but that could change. Last year, the commissioner introduced regulations that include new factors that insurers can use in setting their premiums, such as catastrophe modeling and reinsurance costs. Some companies have applied and been approved to raise their rates, so they’re starting to write policies again.

Keeping insurance affordable but affordable will be the most pressing issue for both Kim and Allen, whose responsibilities will also include regulating auto, pet and some aspects of health insurance, plus workers’ compensation.

Another issue that will need a lot of attention: making sure that insurance companies pay their claims on time, which helps communities recover. Los Angeles area fires shine light on insurers’ practices that delay and deny claims, as well as underinsurance and lack of smoke damage standards that have lingered recovery. Upcoming legislation — such as those created by Allen, whose district was affected by last year’s wildfires — and lawsuits will address some of these issues. Well organized fire survivors who called on Lara to resign over his department’s response to their concerns is sure to keep the pressure on his successor.

Here’s a look at each candidate’s record and how she or he would approach the job, based on their interviews with CalMatters and what they’ve said publicly, including at candidate forums.

Jane Kim

Kim’s proposal to create “natural disaster insurance for all,” inspired by a program in New Zealand, has attracted a lot of attention. It plans to finance such a system with part of the insured’s premiums, which the insurance companies will collect and transfer to the state. The state would then guarantee fire and flood coverage, while insurance companies would continue to cover other risks.

Skeptics, including consumer advocates, wonder why she hasn’t released any details about how much capital such a fund would require. Kim told CalMatters that it would have to be studied, but that at its core, her proposal would generate revenue.

Opponents of her proposal, too say it’s a bad idea to shift a catastrophic burden to the state, citing what they say is the failure to separate earthquake insurance from homeowners insurance — most California homeowners now have no insurance coverage.

“We (taxpayers) are already on the hook,” Kim said. “When insurers and utilities refuse to pay, they just pass it on to us anyway. Risk sharing is important.”

Kim also told CalMatters that an idea proposed by Merritt Farron, a Republican candidate for commissioner — that the state create a reinsurance authority to encourage insurers to write policies in the state — “may prove to be a more effective model.”

Among Kim’s near-term priorities if she wins:

• Create public dashboards to show how insurance companies are spending policyholders’ premiums and which show their claims record.
• Expand eligibility for a program that provides low-cost insurance to drivers making less than $38,000 a year.
• Match the company’s ability to sell auto insurance in the state with its willingness to write policies for homeowners.
• Make the FAIR plan more transparent by requiring the list of board members to be public and its board meetings to be public.
• Rate freezes when policyholders make claims.

The former San Francisco elected official, an attorney, touts among his accomplishments free community college for the inhabitants of the city; the first $15 minimum wage ordinance in the state; and a tenant protection ordinance to avoid unfair evictions. She served as the California Director for the 2020 US Presidential Campaign for Senator Bernie Sanders and most recently as the California Director for the Working Families Party.

Kim has a long list of guarantors, including many unions such as SEIU California. In addition to Sanders, another US lawmaker, Representative Ro Hanna of Silicon Valley, also supported her.

Ben Allen

The state senator, who will be out of the Legislature, wants to bring together the state, insurers, builders, local governments and firefighters to work on strategies to reduce the risk.

“I think that’s ultimately going to be the way we’re going to get out of this mess,” he told CalMatters.

What he calls a comprehensive approach involves thinking about where people live and build: “We shouldn’t be building new construction that is irresponsible in high-risk areas. We should be looking for ways to carefully and sensitively encourage people to move out of high-risk areas.”

If he wins, Allen’s other plans include:

• Create a consumer advocate position in the insurance department and increase customer service staff.
• Require insurers to explain claim denials and provide real-time reports on delayed and unsettled claims after a disaster.
• Increase oversight of the FAIR plan and ensure it complies with the Commissioner’s orders.
• Ban the insurance commissioner and staff from working for the industry as soon as they leave the department.

Allen used his experience as a legislator, including writing and passing bills related to seeking liability from insurance companies. for example, law he wrote now requires insurers to pay 60% of contents coverage to policyholders without a detailed inventory and gives consumers more time to provide that inventory. He also touted the writing of Proposition 4, the bond measure approved by state voters in 2024 “for safe drinking water, wildfire prevention and protecting communities and natural lands from climate risks.”

Other pending bills he authored include one that requires insurers to give homeowners 90 days notice before they intend not to renew their policies, along with a clear explanation. Another would sanction the insurance companies who fail to correct their practices after the insurance department finds they have violated laws and regulations.

Allen also has many endorsements, including the two leaders of the state legislature, Senate Pro Tem Monique Limon and Assembly Speaker Robert Rivas. U.S. Sens. Adam Schiff and Alex Padilla, both of California, unions and the California Consumer Federation also support it.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.