The California legislature has passed three bills reshaping how property insurers handle claims and nonrenewals, sending them to Governor Newsom for signature.
The bills, authored by state senators Sasha Renée Pérez and Ben Allen, follow sustained scrutiny of insurer conduct after the January 2025 Eaton and Palisades fires destroyed roughly 12,000 homes and wiped out an estimated $8.3 billion in property value.
SB 877 requires insurers to provide policyholders with claims-related documents within 15 days of a request, including disclosure of every version of a loss or repair estimate, who approved any changes, and why. The bill is designed to let homeowners see how an insurer arrived at a payout figure and challenge it if the calculation looks wrong.
SB 878 sets firm claims-handling deadlines, requiring insurers to accept or deny a residential property claim, in whole or in part, within 40 calendar days of receiving proof of loss, codifying timelines that previously existed only in regulation rather than statute. Insurers that miss payment deadlines on undisputed claims would owe 20% annual interest, and the bill requires companies to submit compliance reports to the California Department of Insurance, signed by a corporate officer under penalty of perjury, confirming their adherence to the state's prompt-payment rules.
SB 1301 requires insurers to give policyholders six months' notice before nonrenewing a residential property policy, along with specific, documented reasons for the decision and, where applicable, an explanation of what repairs or changes would let the policyholder keep their coverage. The bill also bars insurers from nonrenewing a policy solely because a homeowner inquired about a potential claim or filed one that was ultimately paid.
The bills arrive as California's FAIR Plan, the state's insurer of last resort, has absorbed a surge in policies insurers have declined to renew directly in the private market. The plan's total exposure reached roughly $768 billion by mid-2026, up around 250% since September 2022, with policies in force climbing to nearly 697,000 over the same period, an increase driven largely by private carriers pulling back from wildfire-exposed areas.
The California Department of Insurance approved a 29.1% average rate increase for FAIR Plan policyholders effective October 2026, weighted toward the wildfire portion of premiums, meaning homeowners in the highest-risk areas face considerably steeper increases than the statewide average suggests.
Senator Pérez said the bills send a clear message that fire survivors and policyholders across the state won't accept the status quo, urging the Governor to sign legislation she said would make a real difference for homeowners who faced hardship after the Eaton and Palisades fires.
Meanwhile, Senator Allen said too many Californians have wrongfully lost coverage or lack a viable path to maintain it in the private market, and that SB 1301's protections would help working families manage their risk of loss while relieving pressure on the FAIR Plan's growing exposure.
The legislation has not moved forward without pushback from within the industry. California Insurance Commissioner Ricardo Lara, discussing an earlier iteration of this bill package, said he had received pushback characterising the reforms as a potential "market-killer," a concern that echoes the broader dynamic already playing out in the state.
Several major carriers have already paused writing new policies or capped new business volume in wildfire-exposed areas over the past several years, moves regulators and insurers alike have linked to rate inadequacy and rising catastrophe exposure. Insurance Business's own reporting on an earlier stage of this legislative package noted that lawmakers had already stepped back from a companion measure that would have mandated insurers offer coverage outright, suggesting the legislature has been calibrating how far to push new obligations against the risk of accelerating further market withdrawal.
The three bills that passed take a narrower, more procedural approach than an outright coverage mandate. Rather than compelling insurers to write new business in high-risk areas, they focus on transparency, payment timing and nonrenewal notice for policies insurers already hold.
That distinction matters for how the industry is likely to respond. Compliance costs tied to documentation, faster claims deadlines and longer nonrenewal notice periods are real and will require operational changes, but they stop short of the kind of coverage mandate that insurers have argued could make wildfire-exposed markets uninsurable to write at all.
Whether Governor Newsom signs the bills as passed, and how the Department of Insurance implements the reporting and disclosure requirements in practice, will determine whether this round of reform meaningfully changes claims outcomes or simply adds new compliance obligations on top of an already strained market.
