Stacy A. Korsgaden

Insurance is the foundation of a robust financial strategy and is vital to securing a prosperous future for California. However, recent events, notably the wildfires in Los Angeles, have exposed severe systemic issues plaguing our state’s insurance industry. These issues highlight the cracks in governmental policies that have led to this crisis.

In recent years, many insurers have either exited or drastically reduced their operations in California, choosing to minimize their market presence. This is not a mere business decision; it’s a survival tactic. When companies forgo potential profits and sever longstanding policies and relationships, it prompts a deeper examination of the underlying causes.

Unlike government entities that can levy unlimited taxes to fund inefficient programs, private industries require sufficient financial reserves to fulfill their obligations. If these reserves are insufficient, companies fail. Thus, maintaining a healthy insurance market is crucial, especially in a state where home prices are among the highest nationwide.

The problems stem from long-standing issues unaddressed by Proposition 103 of 1988 and the subsequent regulatory framework established by the Department of Insurance. This legislation, intended to control rising insurance costs through price caps, acted more like a band-aid than a cure, addressing symptoms rather than underlying causes. As a result, California’s insurance market is akin to a patient prescribed medication that allows an unhealthy lifestyle to continue rather than addressing core health issues.

California’s current policies exacerbate these challenges, prioritizing environmental concerns over human necessities and handcuffing the insurance industry with aggressive regulations. These policies hinder insurers’ ability to accurately assess and price risks, leading to financial unsustainability. The result? A vital industry forced to retreat under the strain of untenable conditions.

It’s time to confront and reverse the socialization of economic activities and risk management. We must critically evaluate and reform these policies to ensure the long-term financial and economic stability of California and the welfare of its residents. The ongoing exodus of insurance providers is a glaring symptom of deeper governance failures that demand immediate and decisive action.