How Newsom ended up siding with insurers

Your afternoon must-read briefing on politics and government in the Golden State

May 29, 2024 View in browser   By Camille von Kaenel Political pressure is increasing on Gov. Gavin Newsom to fix the state's wildfire insurance problems. (Photo by JOSH EDELSON/AFP via Getty Images) | AFP via Getty Images HITTING A CRISIS POINT: The wildfire insurance problem in California has gotten so bad that Gov. Gavin Newsom is taking a counter-intuitive stance for a top Democrat: siding with industry in its long-standing feud with consumer advocates. A legislative proposal the Newsom administration published late Tuesday would keep the Insurance Department’s review of insurers’ rate requests to a stricter timeline — which consumer advocates say would limit their ability to intervene. The administration’s goal is to stabilize the spiraling property insurance market, in part, by speeding up the state’s decisions about rate hikes. Newsom has typically left insurance policy up to the Legislature and Insurance Commissioner Ricardo Lara, who is developing a suite of new rules to entice insurers back to the market. But political pressure on the governor has intensified this year as property insurers continue to flee huge wildfire losses in California, sending tens of thousands of home and business owners (including Newsom himself) to the state’s bare-bones insurer of last-resort. “I don’t think we have that much time,” Newsom said while introducing the insurance proposal during his budget presentation earlier this month. “We've got to move this.” Newsom spokesperson Alex Stack, in an email, described the governor as neither on the side of the industry nor consumer advocates: “We’re on the side of Californians who can’t get insurance.” To no one’s surprise, the consumer advocacy group that stands to be most affected by this change is crying foul, arguing the move would lead to runaway rates. “This will be a rubber stamp for serial rate increases the insurance companies have wanted for a long time and cut interveners out of the process,” Carmen Balber, the executive director of Consumer Watchdog, said in an interview. “It’s a big problem for the governor.” Consumer Watchdog sponsored Proposition 103, a ballot measure voters passed in 1988 to rein in insurance rates. The group says its interventions since have saved insurance customers $5.5 billion by arguing against excessive rate hikes during the Insurance Department’s reviews. Californians have some of the lowest property insurance rates in the country. The insurance industry has long asked for faster rate reviews and has been dialing up its attacks on Consumer Watchdog specifically. The American Property Casualty Insurance Association launched a website and ads last fall that paint Consumer Watchdog as a “publicity-seeking, dark money front that only looks out for its own interests and that of its secret funders.” Public records obtained last week by Steve Maviglio, a consultant working for insurance companies, show that Consumer Watchdog got 96 percent of the fees the Insurance Department paid to intervenors last year, adding up to over $21 million for the group since 1988. California’s property insurance crisis has grown so dire that other consumer advocates are starting to suggest that changes to the intervenor system might be necessary. “It’s great Consumer Watchdog can take claim for saving consumers millions, but look where we are right now: Insurers are saying it's not viable,” said Amy Bach, the executive director of United Policyholders, whose nonprofit advocates for consumers but has only rarely intervened in rate reviews. “The pain has to be distributed equally in a situation like this, and I think Consumer Watchdog is going to probably have to intervene in fewer proceedings.” “I wouldn't demonize the governor for this initiative,” Bach added. “There's a lot of pressure on him to try to get things moving faster.” Insurance companies are pleased they’re being heard. Denni Ritter, APCIA's department vice president for state government relations, called Newsom’s proposal an “important reform” in an email on Tuesday. “Expedited rate reviews will help insurers adapt to ongoing changing conditions such as inflation, population shifts, and more costly disasters caused by climate change," she said. But a similar version of the proposal failed to gain traction among lawmakers last fall because of concerns about costs to consumers. Now lawmakers must consider it again. IT’S WEDNESDAY AFTERNOON. This is California Playbook PM, a POLITICO newsletter that serves as an afternoon temperature check on California politics and a look at what our policy reporters are watching. Got tips or suggestions? Shoot an email to cvonkaenel@politico.com. WHAT YOU NEED TO KNOW TODAY BUDGET PUSHBACK: California’s legislative leaders reached a budget deal this afternoon that rejects many of Newsom’s proposed cuts — to social services, housing, climate and health care, among others — while still aiming to close the state’s gaping budget deficit. The details of the agreement, announced by Assembly Speaker Robert Rivas and Senate President pro Tem Mike McGuire, come ahead of a June 15 deadline to send the governor a balanced budget. It's typical for the chambers to establish a united front before final negotiations with the administration. “Speaker Rivas and I are ready and raring to go with this Legislative budget plan and eager to continue to work with our colleagues and Governor Newsom on getting a final budget agreement across the finish line,” McGuire said in a statement today. — Lara Korte ON THE BEATS GENDER POLITICS: A bill to prohibit local policies that require schools to notify parents when a student asks to change their pronouns, preferred bathroom or sports team cleared its first hurdle today in the Senate Education Committee. The discussion ran for over an hour and a half and frequently veered into related issues such as gender-affirming care for children, where the right to privacy begins and ends in families and the prevalence and causes of suicidality in transgender kids. Republican state Sen. Rosalie Ochoa Bogh said parents needed to be notified immediately if their child is experiencing gender dysphoria because the parents may need to secure the home from weapons if their child is suicidal. She said most parents unconditionally love their children and defended parents who are angry when they first learn their child is transgender. “They may not accept, but they will respect their child,” she said. Assemblymember Chris Ward, a San Diego Democrat who introduced the bill, clarified its scope. “This is not about gender dysphoria or medical decisions,” he said. “This is about harmful policies and when we are going to have a local district policy which forcibly is outing students.” The committee’s chair, Democratic state Sen. Josh Newman, said the bill was fundamentally about providing a safe and supportive space for kids at school. “You can make a distinction between respect for self expression and identity versus active participation in gender transition,” Newman said. — Rachel Bluth AI ACCESS — The Newsom administration wants the benefits of artificial intelligence to be evenly distributed — and it’s appealing to tech titans for help. “We cannot close those digital divides on our own. We’re not resourced enough to do that,” deputy chief of staff Jason Elliott said during an AI event in San Francisco today. “We need the private sector to drive it.” Elliott compared distributing AI computing power to spreading access to broadband internet and literacy before that, but he warned of the technology becoming “reserved to a few who can afford it.” Correcting that, he said, would mean collaborating with industry heavyweights. “We have the opportunity to get to know Nvidia and to get to know Google and Open (AI)” and “make this argument to them directly,” he said, framing that work as part of California’s broader efforts to lead the field: “We will not be in first place forever unless we defend that position, and part of that means working with companies that are headquartered here.” — Jeremy B. White Republican Assemblymember Jim Patterson poses with Beelz the Raven. | POLITICO/Lara Korte CRITTERFEST — Staffers and lawmakers crowded into the auditorium in the Secretary of State’s building this afternoon for a chance to rub shoulders with some important constituents. As part of its annual advocacy day, SeaWorld representatives stopped by to showcase their conservation efforts. In addition to Beelz the raven (named for Beelzebub), visitors also got to pet, hold and play with a California desert tortoise, a baby porcupine, a baby kangaroo, a sloth, an alligator and a python. — Lara Korte WHAT WE'RE READING TODAY — Tesla shareholders are getting another chance to decide the fate of Elon Musk’s record-breaking compensation package. The $56 billion deal represents more than a quarter of Musk’s current net worth. (The Sacramento Bee) — Black student enrollment in California dropped nearly 50 percent between 2003 and 2023, and the state is the third most segregated for Black students in the country, according to a new report from a coalition led by the American Civil Liberties Union. (KCRA) — Almost one third of new EVs are going to California, Texas and Florida. (Orange County Register) AROUND THE STATE — The Biden administration is pumping nearly $100 million of federal funds into Southern California’s plan to build the nation’s largest wastewater recycling plant. (Los Angeles Times) — San Francisco removed the “Appeal to Heaven” flag that has been displayed in front of City Hall for decades. The flag sparked national controversy this month following reports that it flew outside of Supreme Court Justice Samuel Alito’s vacation home last year. (San Francisco Chronicle) — A Riverside County coroner determined that former Assemblymember Brian Nestande, who died in March, overdosed on multiple drugs, including fentanyl and cocaine. (Desert Sun) — compiled by Ariel Gans   Subscribe to the POLITICO Playbook family Playbook  |  Playbook PM  |  California Playbook  |  Florida Playbook  |  Illinois Playbook  |  Massachusetts Playbook  |  New Jersey Playbook  |  New York Playbook  |  Ottawa Playbook  |  Brussels Playbook  |  London Playbook View all our political and policy newsletters Follow us

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