Newsom unveils homeowners insurance plan

SACRAMENTO, Calif. - The Consumer Watchdog organization warns insurance for homeowners, businesses and vehicle owners will become even more expensive in California under a proposal unveiled by Gov. Gavin Newsom. 

Newsom said the state needs to let insurance companies make changes to their policies - including allowing them to increase rates - more quickly, otherwise more of them will leave the state.

He wants lawmakers to approve a trailer bill, which will be attached to the overall budget bill, that would allow insurance companies to have any proposed changes reviewed by state insurance officials within 120 days. 

Right now, if a carrier wants to increase rates or offer any type of policy change, the state's insurance commission must approve it. Sometimes that approval process takes months, even years.

Carmen Balber of the Consumer Watchdog organization said the "arbitrary" 120-day timeline gives insurance carriers no incentive to answer questions from consumer advocacy groups and customers, and justifies their proposed rate increases to policymakers and the public.

"If they [insurance companies] can get a 6.9 percent rate increase every four months, there's nothing to stop them from doing that," Balber said. "Faster, higher rate increases three times a year is not the way to stabilize the insurance market." 

Karl Susman, an insurance broker disagrees.

"Being able to make changes more quickly benefits the consumer. Are there going to be rates that go up? Sure. Are there rates that are going to go down? Sure," Susman said. 

He believes the governor's proposal will lure insurance carriers back to California.

"It doesn't change their ability to do anything differently," Susman said. "It just changes the amount of time it will take for them to get a response from the Department of Insurance."

In a statement, a spokesperson for Newsom said, "This proposal requires the Department of Insurance to modernize and streamline its rate application process. It makes no changes to the rules in Prop 103 for how much an insurance company can charge." The spokesperson added, "This is part of our larger package of solutions to ensure Californians have adequate access to insurance and combat market exodus that hurts consumers."

California voters passed Prop 103 more than 30 years ago.

It created the elected office of a state-wide insurance commissioner, and dictates that insurance rate increases cannot be "excessive, inadequate, or unfairly discriminatory." 

A 7 percent increase is the threshold for excessive.

Balber also warns there's nothing in the Governor's proposal to guarantee insurers provide more coverage and start offering new policies again.

"The problem with the governor's proposal, is that the insurance companies have no reason to justify their increases," Balber said. "It may actually push more homeowners into the FAIR [state-operated] insurance plan, because homeowners will no longer be able to afford new, pricier policies."

For months, insurance companies have been leaving California homeowners in the dark.

State Farm recently announced it would not be renewing more than 72,000 policies in the state.

The city of Orinda topped the list of cities in the state with more than 1,700 homeowners not having their State Farm policy renewed this year.

The governor wants state lawmakers to add his insurance plan to the overall state budget bill.

The state budget must be approved by June 15.

"This is now up to the state legislature to fix," said Balber of the governor's proposal. "We encourage people to contact their state lawmakers if they're concerned about this plan."