Democratic Insurance Commissioner Ricardo Lara was slow to react to the state’s long-brewing insurance crisis and he’s also recently proposed a few rules that will make matters worse, but overall his plan is on the right track.
Californians are struggling to get property insurance because the state’s regulatory system caps prices and limits insurers’ ability to set rates based on actual risk.
The answer, of course, is to let the market work, which in the short run means allowing insurers to raise prices.
No one likes to pay more for insurance, but it’s better to pay more than to not have insurance — or to rely on the tottering state-created insurer of last resort.
The FAIR (Fair Access to Insurance Requirements) Plan has insufficient reserves and is getting a bailout.
Along comes freshman Republican Assembly member Carl DeMaio of San Diego, who has introduced Assembly Bill 567 to deal with the crisis. DeMaio’s assessment of the current problem is accurate. He’s right to call for reforming regulations and boosting fire-prevention efforts.
But his main “solution” involves price controls and subsidies. He’s even pushing for federal intervention.
Most significantly, the legislation “would cap rate increases at no more than 7% a year for the next 4 years — and would force the state government to cover any insurance costs above the annual cap,” his office explains. Price controls have gotten us into this mess, so more of them will make it worse.
We oppose using public funds to pay insurance costs. It would also be inflationary, as insurers could raise rates knowing taxpayers would pay.
In his pre-MAGA days, DeMaio was a free-market advocate who would have understood this.
He wants “to penalize the politicians for the financial costs of their policy failures by taking funds from the state’s budget.” That’s the worst part of this bone-headed bill. Politicians have failed to act, but voters are the ones who approved 1988’s Proposition 103. This won’t penalize politicians, but taxpayers.
Any lawmaker who is serious about an insurance fix should laugh this one out of the Capitol.