This is why LA fire survivors want Ricardo Lara out

By Joy Chen and Jill Spivak, especially for CalMatters

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A New York Times recently revealed an investigation that California Insurance Commissioner Ricardo Lara cut a secret deal with insurance companies giving them regulatory services while allowing them to dump tens of thousands of policyholders.

It was a bomb. But for those of us living through this crisis, this was not news.

As survivors of the Los Angeles fires, we spent 10 months in the collapse of California’s insurance system. In a survey of insured fire survivors in Los Angeles, 70% report that their recovery has been hampered by delays and refusals.

A system that is supposed to be a safety net has become a wrecking ball, destroying our finances, our health, and the future we have worked so hard to build for our children. California’s recovery has been slowed by the collapse of its insurance system and the failure of one official to stop it.

California has some of the strictest consumer protection laws in the country. Insurance Commissioner Ricardo Lara simply did not enforce them. Even after the survivors sent more than 400 reports of delays and denialshe approved a billion dollar rate hike for State Farm in May while delaying an investigation into his misconduct.

There’s a name for this: regulatory capture. This is when an official charged with regulating an industry ends up serving that industry instead. In California, this concept is personified by Ricardo Lara.

For nearly 10 months, we have been calling on Lara to perform the duties of his office. In August we gave him a a clear road map outlining five urgent actions he may take immediate action to put an end to the unlawful delays and refusals. Among our recommendations: that he freeze insurers’ rate hikes until fire survivors are healed, and that he require insurers to be transparent in their loss estimates.

So far he has failed to act.

The situation is critical. More than 8 in 10 in Los Angeles fire survivors remain displacedand most will lose their housing coverage within months. Every day of inaction pushes more families into housing insecurity and despair.

Two crises now define California’s insurance system: families can no longer buy or renew coverage, and those who still have it often can’t access the benefits they’ve already paid for.

Lara failed on both fronts.

Like the New York Times reports, Lara’s secret 2023 deal allowed insurers to dump tens of thousands of policyholders in exchange for future rate hikes — and the insurers did, just months before the Los Angeles fires. Families were left scrambling for coverage or pushed into the state’s expensive low-income FAIR plan.

The deal was sold as a way to keep people out of the FAIR plan. instead enrollment has doubled. And for those who still have insurance, another disaster begins the moment they try to use it. FAIR sued for rejecting smoke damage claims and users have been complaining for months about customer service, payment delays and slow response times.

We know what happens when insurance fails. California’s five most destructive wildfires between 2017 and 2020 destroyed 22,500 homes, and as of this year only 38% were recovered. The data is clear: when insurance pays on time, communities recover. When this is not done, families are broken up forever.

That’s where the recovery of Los Angeles is headed. Progress has stalled because the system meant to protect us has become an obstacle.

As insurance erodes, California’s housing market is beginning to show strain. Without coverage, homeowners cannot buy, sell or refinance. Lenders withdraw, property values ​​fall and construction stops.

What began as an insurance crisis quickly turned into a credit and housing crisis that threatened the stability of the entire state economy.

Lara failed to stop illegal insurer delays and denials and encouraged mass dumping of policyholders. Whether his failure stemmed from intent or incompetence is a matter for the investigations currently scrutinizing his conduct.

What is of urgent importance is that he leave – now. We call on Governor Gavin Newsom and other state leaders to call for his resignation and appoint new leadership at the Department of Insurance.

Californians deserve a functioning insurance system that protects us all.

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