Commentary: Our farmers sounded the alarm on the urgency of insurance crisis

During the California wildfire season in 2020, flames scorched vineyards, farms and ranches, destroyed structures and damaged crops. Soon after, farmers and ranchers faced a different kind of firestorm as insurance companies canceled coverage or denied policy renewals, leaving some agricultural areas unprotected.

The California Farm Bureau and the Napa Farm Bureau, whose members endured huge losses as the Glass Fire burned vineyards and wineries and tainted winegrapes with smoke, went to work on an insurance solution. We sponsored the successful Senate Bill 11 in 2021. For the first time, it gave farmers and ranchers access to the California Fair Access to Insurance Requirements Plan, allowing commercial farm structures coverage through the state’s insurer of last resort.

We weren’t done. This month, Gov. Gavin Newsom signed Senate Bill 505, sponsored by California Farm Bureau and state Insurance Commissioner Ricardo Lara. It adds commercial policies to the California FAIR Plan’s clearinghouse program, allowing farms and ranches to re-enter the competitive market to get better insurance coverage.

Yet California’s insurance challenge continues to worsen as more insurers cease issuing policies in the state due to catastrophic losses from wildfires and other events.

I had been hopeful this month as SB 505 was signed into law and insurance companies, legislative leaders, the California Department of Insurance and the governor’s office negotiated a last-minute bill to restore some stability to the state insurance market. Unfortunately, those talks broke down, and the legislative year ended without a deal to bring insurers back to the state to do business.

Then last week, that doomed legislative deal sprang to life in the form of an executive order from Gov. Gavin Newsom. It was followed by an announcement from Insurance Commissioner Lara, who will implement a negotiated agreement between the state and insurers by December 2024 to enhance insurance coverage in communities with high wildfire risk and transition more homeowners and businesses out of the FAIR Plan.

What is evident is that insurers have taken a new stance on risk, and California is not alone in this crisis. In Florida, insurers are leaving that market or raising rates as much as 40% due to impacts of hurricanes and other severe weather events. More than 1.35 million Floridian homeowners buy insurance policies directly from a state provider called Citizens Property Insurance.

While Florida administers and financially backs a state sponsored insurance program for non-renewed policyholders, the California FAIR Plan is backed by the competitive market insurers. The FAIR Plan should work as just a backstop to the admitted market, not a permanent insurer. Farm Bureau sponsored SB 505 in hopes of depopulating commercial property insurance policies from the FAIR Plan.

Unlike Florida, California’s 1988 Proposition 103 initiative mandates consumer protections from rate spikes through arbitrary rating plan increases by insurers. Companies must provide regulators with data on risk factors used to justify policy cost increases. The group closely identified with Proposition 103, Consumer Watchdog, offered extensive media comments as lawmakers failed address California’s now burgeoning insurance crisis.

California Farm Bureau may not have the word “consumer” in its name, but we represent farmers and ranchers who are consumers of tens of thousands of residential and commercial policies.

With days left in the legislative session, we joined a coalition with the California Association of Realtors, California Building Industry Association, California Mortgage Bankers Association, California Apartment Association and California Association of Winegrape Growers.We informed legislators how lack of access to insurance impedes all of our members’ ability to conduct day-to-day business.

While a bill never materialized, we are now feeling hopeful because California Assembly Speaker Robert Rivas, D-Hollister, announced a series of fall public hearings, acknowledging the role the Legislature must play in addressing access to comprehensive coverage for wildfires and other catastrophes and an insurance system still in need of fixing.

Insurance Commissioner Lara said, “Our current path is unsustainable.” We agree and are encouraged that Gov. Newsom and Commissioner Lara are seeking to balance consumers’ interests in defending Proposition 103 with the absolute need to have a robust, competitive insurance market.

Farm Bureau members who braved showering embers from wildfires and a deluge of insurance coverage denials and non-renewals sounded the alarm and called for action. We are happy to see elected officials recognizing this crisis, with the Legislature, governor and insurance commissioner playing a role to structure a fair market that provides consumers multiple choices for comprehensive insurance.