California lawmakers propose insurance regulations after wildfire claims crisis

California lawmakers are proposing multiple bills to tighten insurance regulations following year-long complaints from wildfire survivors about delayed claims, inadequate coverage, and poor insurer communication. The legislation, introduced by Democratic state senators and the state’s Insurance Commissioner Ricardo Lara, would require insurers to provide faster notifications, increased coverage limits, and greater transparency in handling disaster claims.

Survivors of the 2025 Los Angeles wildfires have struggled to rebuild homes and lives even as insurers have paid billions in claims, exposing gaps in consumer protections that state lawmakers say require immediate regulatory attention.

Jen Egan is still dealing with the aftermath of the Palisades Fire that damaged the home of her 83-year-old father, Paul, last January. That has meant more than a year of going back and forth with State Farm, which has assigned three different claims adjusters to their case. Egan also hired a public adjuster to help her navigate the process, who she says has been a “saving grace.”

Egan and her father have received some payouts and are preparing to make repairs to the home. But this week, they received an estimate for compensation that falls tens of thousands of dollars short of what Egan said they have already paid out of pocket to address a brush violation issued by the fire department, and to conduct soil testing.

She is growing more frustrated. “No one’s asking for a new jacuzzi,” Egan said. “We want my father to be able to return to a safe and habitable home.”

Survivors navigate policy gaps as claims mount

Stories like the Egans’ are common after last year’s deadly Los Angeles County fires. State Farm says it has paid $5 billion so far on more than 13,500 claims. But survivors express frustration over insurers’ poor and delayed communication.

State Farm customer Rebecca McGrew has no outstanding complaints about her claims after her Altadena home burned down — except that she was “drastically under-insured by hundreds of thousands of dollars.” Many others like her have realized — too late — that their insurance payouts won’t cover all of their rebuilding costs.

Lawmakers respond with new regulations

Survivors and community organizations that have formed after the fires have asked their local and state elected officials for help. In response, California lawmakers have introduced bills seeking to tighten regulations on how insurers handle fire claims.

Senate Bill 876 would make wide-ranging amendments to the state’s insurance code. Introduced by Senate Insurance Committee Chair Steve Padilla, a Democrat from Chula Vista, and sponsored by Insurance Commissioner Ricardo Lara, the bill would require insurers to share their disaster-recovery plans with the insurance department and notify policyholders within five days when they’re assigned a new adjuster.

The legislation would also double penalties for fair-claims-practice violations during declared emergencies from $5,000 to $10,000 per violation. It would expand required additional-living-expense payments by 100% in cases of total loss, require cash-value payments within 30 days for home purchase or rebuild contracts, and mandate that insurers offer extended and guaranteed replacement-cost coverage when writing new policies. The bill would also apply building-code upgrade coverage at the time of a rebuild.

“People need a sense, particularly when they face tragedy, that the underwriters they’ve relied on and paid into for decades, will want to help and not get in the way of recovery,” Padilla said in an interview.

He acknowledged that the insurance industry will have objections to his bill, but said the companies know that they need to provide adequate coverage for the health of the insurance market.

The industry has already expressed opposition. “It appears these measures would worsen the current affordability and availability crisis for Californians just as we are starting to implement the Commissioner’s Sustainable Insurance Strategy to restore a healthy and competitive market,” said Seren Taylor, vice president at Personal Insurance Federation of California, in an email.

Lara’s strategy, which went into effect in January just days before the Los Angeles-area fires, aims to get insurance companies to start writing policies in the state again, especially in areas at high risk of fires. Many insurers had pulled back from the state in the past few years, complaining of increasing fire risks and state regulations that they said slowed down their ability to match prices to those risks.

Additional bills target transparency and penalties

Democratic state senators Sasha Renée Pérez of Pasadena and Ben Allen of El Segundo have co-authored two additional bills. Senate Bill 877 would require insurance companies to provide claims-related documents to policyholders within 15 days. The legislation would also require insurers to disclose changes to repair estimates, who approved them and why.

Senate Bill 878, also written by Pérez and Allen, would require insurers to pay interest of 20% annually if they fail to meet deadlines for claims payments. The bill would also compel companies to submit to the state’s insurance department a report, signed by a corporate officer under penalty of perjury, that shows the company’s compliance with prompt payments requirements.

Assembly addresses drone surveillance concerns

In the Assembly, lawmakers plan to introduce bills that will “continue to make sure we have oversight of insurers,” said Assemblymember Lisa Calderon, the Los Angeles-area Democrat who also chairs the Assembly Insurance Committee. She said she expects bills to address strengthening and modernizing the FAIR Plan, which serves as the insurer of last resort, as well as mitigation efforts for natural disasters.

Calderon is reintroducing Assembly Bill 1559 to regulate insurers’ use of drone images. A similar effort last year passed the Assembly and made it through some Senate committees but ultimately didn’t advance. This year’s bill would require companies to notify consumers about when they plan to take aerial images of their properties, ban insurers from ending coverage based on drone images taken more than 180 days before sending notice of that decision to policyholders, and require companies to provide the images to policyholders, allowing them to dispute accuracy and to take action if needed before having their policies terminated.

“We’ve been hearing from consumers that they’ve been blindsided by these images that were inaccurate,” Calderon said. “I believe homeowners should have the right to request an in-person inspection.”

Calderon also intends to introduce legislation to implement recommendations from a forthcoming report about the California Wildfire Fund that she expects to include provisions related to the availability and affordability of property insurance in the state.