STATE: Insurance Commissioner

(www.insurance.ca.gov) In 2024, “Insurance Commissioner Ricardo Lara and Cal Poly Humboldt announced that they will form a strategy group to undertake the nation’s first public wildfire catastrophe model. The strategy group will draw from California’s research and higher education communities to make recommendations for a new, publicly accessible data source to predict future wildfire losses. This effort will support California’s goals of building safer communities and expanding access to insurance coverage…

…This strategy group’s mission is enabled by a new regulation that Commissioner Lara is currently finalizing that will allow insurance companies to utilize forecasting in the setting of insurance rates. The Department will hold a public hearing today at 10AM to take public input on the proposed catastrophe modeling and ratemaking regulation. The regulation specifies that models must calculate wildfire safety benefits, such as forest-management actions by state and local fire agencies and work by public and private utilities to reduce ignition sources – something not required under current rules. 

(cahighways) “The California Insurance Commissioner
(1) oversees and directs all functions of the Department of Insurance;
(2) licenses, regulates, and examines insurance companies;
(3) answers public questions and complaints regarding the insurance industry;
(4) enforces the laws of the California Insurance Code and adopts regulations to implement the laws;
(5) and enforces the department mission to ensure vibrant markets where insurers keep their promises and the health and economic security of individuals, families, and businesses are protected.
The position is especially important right now, with the ACA and Health Insurance marketplace issues.

But note that the FOCUS OF THE JOB IS INSURANCE. This is not a job that deals with things like homelessness or public safety. This is also one of those positions that does require a legal background, as well as the ability to deal with numbers (although a CPA is not required). Lastly, the position requires someone who is not too close to the Insurance industry.”

CONCLUSION

Having done the investigation of the candidate, the field narrows quite a bit.

• Eric Aarnio can be dismissed out of hand.
• Eduardo “Lalo” Vargas and Jane Kim want to blow up the system, and that’s not realistic.
• Sean Lee, Robert P. Howell, and Merritt Farren really don’t have the experience or background for this job.
• Keith Davis has the background, but doesn’t appear to have a detailed plan or to be working hard enough for it.
• That leaves Ben Allen (D), Steven Bradford (D), Stacy Korsgaden (R), and Patrick Wolff (D).
• I’m eliminating Korsgaden because she attended Jan 6^th. She may abhor violence, but even attending that rally shows poor judgement.

That leaves Allen, Bradford, and Wolff.

• Allen and Bradford are termed-out legislators who are turning their attentions to the Insurance Commissioner office.
• Wolff is someone who knows the Insurance Industry by building his own brokerage, but who has no experience working with the legislature to achieve specific goals, or navigating the arcane halls of Sacramento to get things done.
• Narrowing this down further, I think Allen knows more about the Insurance world and its regulation than Bradford, although I do like Bradford’s notion of equity in the availability of insurance, as that is a significant issue.

This leaves us with a decision between Allen and Wolff (the same decision the Chronicle faced).

• For an effective Insurance Commissioner, which is more important:
  • The ability to work in Sacramento, to work with the legislature and the Governor
  • … or the ability to know how the Insurance Industry works from the inside.

I would tend to think the ability to work with Sacramento. However, to try to decide this, I decided to look into the funding.  

• Ben Allen’s funding profile is interesting: Real Estate PACs, unions, teachers, nurses, lots of PACs, Fanduel (sports betting, for some odd reason), gambling organizations, tourist organizations.  
  • I had been leaning towards Allen until looking at the funding profile. Why are all these PACs supporting him, especially the gaming PACs? They are clearly expecting decisions to go their way. That feels off to me
• Patrick Woff’s funding profile is different: Almost all individuals, with really no PAC funding and just a little entity funding.
• For the hell of it, I looked at Bradford’s funding profile. Again, lots of construction and gaming PACs, with the top contributor being RJ Reynolds Tobacco? The funding profiles just make me uncomfortable.

I don’t think we would go wrong with Ben Allen, I think the better, more independent candidate, would be Patrick Wolff. (Indivisible Ventura – we’re putting in for Ben Allen!)

• Calmatters) Who wants to be California’s insurance commissioner? Your guide to the candidates
• (LA Times): Your guide to the California insurance commissioner’s race: Who will replace Ricardo Lara?
• (Insurance Guide): California Insurance Commissioner Race Has Diverse Field Amid ‘Insurance Crisis’
• (insurance.ca.gov) California FAIR Plan – FAIR Plan is a critical insurance option for California residents and businesses

cahighways) “Ben Allen represents the 24^th Senate District, covering the Westside, Hollywood, South Bay, and Santa Monica Mountains communities of Los Angeles County. Ben was first elected in 2014 and is now serving his third term in the State Senate. Ben chairs the Senate’s Budget Subcommittee #2 (Resources, Environmental Protection, and Energy) and co-chairs the Legislature’s Environmental Caucus, is a member of the Legislative Jewish Caucus, chairs the Legislature’s Joint Committee on the Arts, and the Senate Select Committee on Aerospace and Defense. He previously served as Chair of the Environmental Quality Committee (2019-2024), Chair of the Education Committee (2017-2019) and Chair of the Elections and Constitutional Amendments Committee (2015-2016). Prior to his election to the Senate, Ben served as President of the Santa Monica-Malibu Unified School District Board of Education, lecturer at UCLA Law School, and worked as an attorney at the law firms of Bryan Cave LLP and Richardson & Patel and at the nonprofit Spark Program. While at law school, Ben served as the voting student member of the University of California Board of Regents and was a summer judicial clerk with the United Nations International Criminal Tribunal for Rwanda. Prior to law school, Ben worked in Washington DC for the Latin American team of the National Democratic Institute for International Affairs (NDI), and then as Communications Director for Congressman Jose Serrano (D-NY). Ben has a Bachelor of Arts degree magna cum laude in History from Harvard University; a Master’s degree in Latin American Studies from the University of Cambridge; and a Juris Doctor degree from UC Berkeley.

Before I explore further, the one thing that strikes me about this biography is that there is precious little experience or interest related to insurance and insurance issues. Three terms in the State Senate means he is termed out. This strikes me less of a desire to be Insurance Commission, and more the desire to retire a position in Sacramento. However, according to the LA Times, he represents the Palisades fire zone and, since the blazes, has authored bills that provide tax relief to fire victims and raise payments for personal property losses.

He does appear to have an insurance related plan. His ideas are a lot of what was discussed in the CBS Governors Debate: modernizing rate-setting; faster rate reviews; community hardening; data driven resilience; and climate accountability. He wants to improve insurer compliance, increase transparency, and get people off the FAIR plan. All of these are good ideas.

According to Calmatters, he “would take a more comprehensive approach to risk reduction, including by creating funding sources such as state-backed loans for hardening homes, and by bringing together insurers, builders, local governments, firefighters and the state to work on solutions. As part of reducing risk, he wants to restrict new construction in high-risk zones, saying developers who are building in such areas are “basically freeloading off the rest of us.” He also wants to “carefully and sensitively” find a way to incentivize those already living in risky areas to move elsewhere.”

According to the Insurance Journal, Allen “believes California’s insurance system is at a crossroads. To restore a solvent, competitive marketplace while keeping rates fair and affordable, we must strike the right balance between protecting consumers and ensuring insurers can sustainably operate in the state. [He] will stabilize the insurance market by modernizing rate setting and streamlining rate review timelines so decisions are made within months, not years, [wanting] to keep insurers in California and be able to write policies people can afford.” In terms of immediate changes, he would expand our on-the-ground claims support during disasters. He would bring more predictability to the rate review process, resolving filings in months, not years, with clear timelines and consistent standards. He would also implement forward-looking catastrophe models, with transparency and strong oversight.

He has a significant number of endorsements, including unions, environmental groups, significant elected leaders (both Senators, both congresscritters that cover Northridge). He seems to be the favored Democratic candidate.

(Indivisible Ventura) We’re suckers for a “Fill-in-the-blank” For All” solution, like Medicare-for-All. But we may not be ready for “Insurance for All” yet. We checked out the referenced Consumer Watchdog reference, and what is really happening in New Zealand and Japan.

WHAT HAVE OTHER COUNTRIES DONE?

• NEW ZEALAND: “New Zealand’s program only covers $300,000 NZ in damage, which translates to $176,685 in US dollars. The average home value in California is $755,000. New Zealand’s limited cap reflects deliberate design: the New Zealand fund applies across multiple natural hazards and is intended as a thin first-loss layer, appropriate for events—such as many earthquakes—that often cause partial damage rather than total loss. Wildfires are different. As recent California fires have shown, wildfire losses frequently result in near-total or total destruction of homes, making a thin, capped layer far less effective as a meaningful source of consumer protection.”
• JAPAN: Earthquake Insurance (Mixed / Limited Coverage)
  • How it works: Earthquake insurance cannot be bought as a standalone policy; it must be purchased as an add-on to standard fire insurance. The government reinsures these liabilities with private insurers to guarantee massive payouts, but coverage is deliberately capped. Policies typically only pay out a maximum of (50%) of the property’s insured value, even if the home is completely destroyed. The government-backed scheme has a cap on total payouts and if claims exceed this level, all payments are reduced pro-rata.
  • Some providers (Sony) offer the option to pay for an additional 50% if the house is badly damaged/destroyed. While theoretically that would mean 100% coverage, and it certainly offers peace of mind, it’s difficult to predict whether such a scheme would fully pay out should there actually be a large scale disaster in, i.e., Tokyo.
  • Effectiveness: It provides vital emergency cash to help survivors relocate or rent temporary housing, but it does not fully cover the cost of rebuilding a home. Furthermore, participation rates remain relatively low because it is an expensive, optional add-on.
  • The system works exceptionally well at saving lives, providing medical care, and keeping citizens out of total financial ruin. However, homeowners are often unpleasantly surprised to find that their property policies leave a massive funding gap when it comes to fully replacing a destroyed house.

(cahighways) “Kim is a former San Francisco Supervisor. She also served as the California Political Director for Bernie 2020 and as a Senior Fellow at both the Sanders Institute and the Young Elected Officials Network, a program of People for the American Way. Over the last four years, Jane Kim served as the California Director for the Working Families Party. She received her B.A. from Stanford University and her J.D. from the U.C. Berkeley School of Law.

According to Calmatters, Kim “has three main proposals around more government involvement, the main one to create “natural disaster insurance for all.” It would be funded by a portion of policyholder premiums that insurance companies would pass along to the state. The state would manage the fund, which would guarantee fire and flood coverage. Insurance companies would continue to provide coverage for other risks. It’s not her idea — New Zealand has the same system, and it allows the country to invest the premiums in preventive measures, she said. Establishing such a system in California could allow the state to invest profit from premiums that would have gone to insurers’ shareholders in its communities instead.” She would also establish a public option for auto insurance by expanding eligibility for an existing program that provides low-cost insurance to drivers who make less than $38,000 a year, and she wants to provide Medicare for kids believing that California should centralize all insurance authority within the insurance department instead of having managed health care handled by the Managed Health Care Department.

In their endorsement of Wolff, the SF Chronicle noted this about Kim: “The most aggressive is former San Francisco Supervisor Jane Kim, the California director of the Working Families Party, who wants to effectively blow up the system by establishing a state-run single-payer disaster insurance program with guaranteed coverage. She would also require insurers to pay interest on delayed or underpaid claims and push the state to offer guaranteed health care coverage for children.” The Chronicle noted that “her proposals are almost certainly dead on arrival — the fiercest consumer advocacy group, Consumer Watchdog, opposes the disaster insurance idea.”

Despite that:
(knock-LA.com) “Here’s one you didn’t think you had to think about. The insurance commissioner runs the Department of Insurance, responsible for licensing insurance companies, investigating consumer complaints and insurers, and punishing insurers for regulatory noncompliance. The Department of Insurance impacts home and auto insurance, life insurance, worker’s compensation, and some aspects of health insurance (California, uniquely, splits oversight of health insurance companies between the Department of Managed Health Care, run by the governor, and the independent Department of Insurance).

As insurance rates rise and home insurers abandon the state, working people are being shut out of the economy in a most basic way. Kim wants to create a nonprofit public disaster insurance plan, create transparency around costs and coverage, and use regulatory powers to hold bad actors in the insurance industry accountable. 

Look at this race like Kenneth Mejia’s first run for Controller, but with fewer corgis. Insurance Commissioner is a technical and regulatory office that most people wouldn’t look twice at, but also offers significant opportunities for a mission-driven public servant to make material improvements in people’s lives.

The race has eleven names on the ballot, mostly offering more of the status quo. Lalo Vargas and Jane Kim are the two offering a bolder vision that isn’t a deregulatory fever dream, and between them the only one with the statewide network of support to win is Kim. The former San Francisco supervisor carries endorsements from the California Teachers Association, the Working Families Party, and local and national elected officials from Bubba Fish to Bernie Sanders.”