California Progressives Want ‘Big Oil’ To Fix an Insurance Crisis Created by the State’s Price Controls

The Orange County Register Editorial Board once interviewed state Sen. Scott Wiener (D–San Francisco) about his bill to decriminalize the use of some psychedelics. We questioned the obvious inconsistency between his anti-prohibition stance on mushrooms and his prohibitionist stance on vaping and flavored-tobacco products. He reminded us that he’s a San Francisco progressive and not a libertarian. Fair point.

I recall that encounter as I mulled Wiener’s Senate Bill 982, which mainly encourages the state attorney general to sue oil companies “for climate-attributable damage to recover costs and losses suffered by the California FAIR Plan.” The Fair Access to Insurance Requirement Plan is the state-created, insurance-industry-funded, barebones insurer of last resort. It has been teetering on the fiscal brink since property insurers began exiting the state or reducing their underwriting, thus overloading the plan with customers.

This legislation wants Big Oil to pay for an insurance crisis caused by the state’s price controls. This is non-serious lawmaking—a transparent virtue-signal rather than an effort at problem-solving. Wiener is a thoughtful lawmaker who championed groundbreaking housing-deregulation laws, but in this case the San Francisco progressive won out.

What’s wrong with drilling oil companies? For starters, it’s wrong to pin the state’s wildfire-related troubles on companies that sell a legal, highly taxed and regulated product to consumers. Climate change likely has contributed to severe wildfire seasons, but that’s a multifaceted public-policy failure. Senate Bill 982 is just a blame game and an effort to get “free” money from a deep-pocketed third party. It’s a fancy way to engage in a financial taking.

The bill’s supporters rely on conspiratorial hyperbole that would make a MAGA podcaster proud. This is from an op-ed from Wiener and the bill’s co-author Sen. Akilah Weber Pierson (D–San Diego): “Large multinational oil and gas corporations spent decades lying to the public about their products’ contribution to climate change and working to undermine the transition to cleaner energy sources. They’re uniquely responsible for the mess we’re in; it’s only fair they share the financial consequences.”

Oil companies, and opponents of a government-forced transition to windmills and solar panels, have every right to express views that are contrary to the green-energy mantra. There’s substantial academic disagreement and new thinking on many aspects of climate change—and numerous places to assess blame for what’s ultimately a global challenge.

For instance, California’s government has only conducted a tiny portion of the land-clearance work its own CalFIRE says is necessary to reduce wildfire risk. A University of Chicago report found that a single year of California’s “wildfire emissions is close to double emissions reductions achieved over 16 years.” In other words, the state’s own wildfire failures are obliterating its climate goals. Maybe the AG should start by suing the state government.

State officials are now concerned about the exodus of refiners, which is driving up gas prices. If you don’t like the oil industry, fine—but good luck powering the world’s fourth-largest economy without it. We already have the nation’s steepest prices because of our highest-in-the-nation gas taxes, stringent environmental regulations, and special-fuels mandate that limits our ability to buy gasoline from other states. This could be the last straw for refiners foolish enough to remain here.

Fundamentally, this legislation gives short shrift to the real cause of California’s insurance crisis: voters and regulators. Californians in 1988 approved Proposition 103, which created a system of price controls. The insurance commissioner gained the power to approve and roll back rates. And the state has failed to implement those regulations in a way that allows insurers to deftly adjust their underwriting and pricing to reflect risk from a changing climate.

After some ferocious wildfire years, insurers faced massive losses. Their risk soared, but the Department of Insurance capped their rates. Inflation also played a role, as it became more costly to rebuild damaged properties. So insurers started exiting the market or stopped writing new policies, thus reducing competition. This is how price controls always backfire. Meanwhile, the best way to keep rates low is to have a vibrant market filled with competitors.

Until recently, California wouldn’t even let insurers use catastrophe models to help determine rates. If the climate is warming, then why would insurers have to base rates on past losses rather than forward-looking models?

Insurance Commissioner Ricardo Lara created the Sustainable Insurance Strategy, which addressed some of the major issues. It sped up the rate-review process, allowed insurers to factor the rising cost of reinsurance policies in their rates, and bolstered the FAIR Plan. Lara also granted painful but necessary rate hikes. There’s much more to be done, but several companies have announced their plans to jumpstart California underwriting.

“No one should be priced out of their homes because they can’t afford insurance,” the senators wrote. Agreed, but this bill substitutes the long, painstaking, and complex work of fixing California’s troubled insurance market with finger-pointing and posturing. One needn’t be a libertarian to recognize that reality.

This column was first published in The Orange County Register.