California is home to the largest insurance market in the country — one that’s become increasingly strained amid an affordability crisis, increasing wildfire risks, and insurance companies pulling back from writing policies in the state.
The job of regulating this complicated market falls to California’s Insurance Commissioner.
This November, for the first time, voters will choose between two Democrats, State Senator Ben Allen, and Jane Kim, a former San Francisco supervisor and director of the California Working Families Party.
Kim placed first in the June primary and is pitching a progressive vision for taking on the insurance industry and expanding coverage.
Vicki Gonzalez spoke with Kim about her plans to overhaul California’s insurance landscape if elected.
This interview has been edited for length and clarity.
Interview highlights
Your campaign website leads with Jane Kim endorsed by Bernie Sanders. Why is that important for voters to see right off the top?
I think that it's an indicator of the type of politics that I engage in. I'm really proud to have the endorsement of Senator Bernie Sanders and also our Lieutenant Governor, Controller and California Labor Federation and our teachers and our nurses.
I've dedicated my career to fighting for everyday Californians and working families. And I want to transform this under the radar, under leveraged office to be a powerful champion and platform for working families.
Speaking of endorsements, your opponent in this race, Ben Allen has been endorsed by the California Democratic Party as well as both senators Adam Schiff and Alex Padilla. Do you see that as a disadvantage heading into a general election between two Democratic candidates?
Well, I came in first place out of 11 candidates winning over 2.3 million votes. So, we're really proud to be leading across the state of California by eight points from our second place opponent and we're leading in 52 out of 58 counties including Sacramento.
And I believe that our message of taking on the insurance industry and fighting for everyday Californians resonated because everyone is tired of being fleeced by the insurance industry. It is a $3.3 trillion industry that this office regulates and it has zero federal oversight. And this industry is doing quite well.
Its top 10 CEOs made $391 million. And we want to see a lot more accountability on the product that we were required to have to drive to work or to school, to qualify for a mortgage to buy a first home, to open a business or even a nonprofit of any kind. We have to make insurance affordable and available. Otherwise, we're shutting everyday Californians out of our economy and that's what's already happening. The premiums are too high. They're canceling our coverage and even if we have insurance, they fight our claims every step of the way.
One of your big proposals is creating a Natural Disaster Insurance for All program, how would it be funded? Especially given California's shaky overall budget situation?
It would be funded the same way the private insurance market is, which is our premium dollars. We are already paying more and more every year to the insurance industry. I believe we should claw back those funds and we should use it to actually drive down risk.
So the insurance industry prices your risk. They don't actually use any of the revenue to prevent it from happening. In countries like New Zealand, France, Spain, even Canada where they have single-payer auto insurance, they use a portion of the premiums and the returns from those premiums to invest in prevention: safer roads, floodproofing and fireproofing communities so that claims aren't filed in the future.
The only way to make insurance more affordable and more available is to invest in prevention. And what I'm proposing is that we use some of that revenue we're already spending and using it to drive down prevention. But this program would be staged, it wouldn't happen all in one fell swoop.
A lot of people have been dropped from coverage. How could you help protect those consumers?
The insurance industry's response to the climate crisis where we now have a billion dollar storm every three weeks is to raise premiums on the homeowners that they consider actually to be less risky. Then they cancel coverage on all the homes that they view as high risk. So, the homes with pre-existing conditions, they dump them into the FAIR Plan. And then they fight our claims every step of the way. This framework is not working for consumers, but it is generating more profits for the insurance industry.
So (there’s) a lot of things that we can do to better regulate this market. One, I want them to pay you interest every day they deny, delay, or underpay a valid claim. And I want to set a minimum of our premium dollars that they actually have to spend back in paying claims. Currently the (government) requires through Obamacare that $0.85 for every dollar we spend on premiums comes back in the form of health care. We don't have that floor for home and auto. In fact, we get roughly $0.48 on every dollar we spend on premiums back in the form of claims. So, I would like to set a floor ratio here of maybe $0.65 or $0.75 per your dollar, to ensure that insurers are in the business that they say that they're in.
And finally, California is the largest insurance market in the country. It is the fourth largest insurance market in the world. No insurance company can truly exist without California. They need our market for the revenue. And as long as they want to be licensed to do business here, we have to set fair rules that level the playing field for consumers.
The state’s insurer of last resort, the FAIR Plan, has become increasingly strained over the past several years. As of March, it had grown to over 600,000 policies, an increase of 152% since September of 2022. It has warned about its ability to keep paying claims and is set to raise rates nearly 30% on average starting in October.
What changes could you make as commissioner to fix or alleviate the pressure of the FAIR Plan?
So the FAIR Plan was introduced in 1968 as a civil rights initiative. It was meant to address redlining because insurers refused to insure Black communities, Latino communities and Asian-American communities.
So, the state made a public mandate that private insurance create a FAIR Plan. So, it is not a public state program. It's run by the 15 insurance companies. And they have a nine-person governing board, all made up of insurance companies. We don't know who sits on it. We don't know when they meet. We have zero insight into their financial models and how they make the decisions around risk and pricing. So, I want to reform that.
We will audit the FAIR Plan’s governing committee because right now nobody knows who is making those decisions or why. And we have to make these governing boards transparent and I think that we should have consumer advocates, (a) representative from the Governor's Office and Department of Insurance on this plan as well. Florida's FAIR Plan very interestingly is public and nonprofit. So, we have a lot of work to do to make the FAIR Plan actually more fair.
These overhauls that you're proposing are ambitious and they have sparked some criticism.
The San Francisco Chronicle's editorial board endorsed your opponent and said that “Kim is rash and could reverse progress being made and cause the market to implode.”
Given that the insurance landscape in California is fragile, what do you say to the argument that it's maybe not ready for big attempted reforms?
They're distracting from the current set of conditions that every voter's aware of. The current system is a failure. It is a disaster, currently.
The premiums are too high, they're canceling our coverage, and even if you have insurance, they fight our claims every step of the way. Magical thinking is believing that we can keep doing what we're doing as we have for the last 10 years and somehow get a different set of results. And I'm running to fight for ideas that will actually solve the problem. And if the biggest critique of this campaign is that I want too much for California, that is a critique that I will take.
But we have to put every idea on the table and explore and investigate those options and try to make it work. Because again, the current status quo is not an option. And I think that our message for that very reason resonated across the state of California because people are tired of the current framework.
We have reached out to State Senator Ben Allen, Kim’s opponent and we’re working to schedule an interview in the near future.
