CalMatters
By Sameea Kamal, CalMatters
You’re a California homeowner who just spent thousands of dollars to protect your property from wildfires — and saved maybe $100 on your insurance bill.
Could grants to low- and middle-income residents help? That’s an idea California Insurance Commissioner Ricardo Lara wants to bring to the Legislature next year, he said in conversation today with CalMatters’ economy reporter Levi Sumagaysay.
Lara discussed his multi-pronged approach to the insurance crisis — with companies decreasing coverage, raising premiums for residential and commercial customers, or leaving the state altogether. Part of the plan includes speeding up the state’s reviews of insurance companies’ proposed rate hikes — which are supposed to take 60 days, but often take as long as 18 months, by which time rates might not reflect the risk anymore.
“This was completely ignorant on my part as a new insurance commissioner. I’m like, ‘Okay, we’re reviewing these rates. We’re done, right?’ They’re like, ‘Oh no, there is a whole backlog,’” he said during the hour-long CalMatters event in Sacramento, adding that companies often submit another rate review immediately after one is done because of the long wait times.
Another significant change Lara is pushing to make insurance more available: For California to come out of the “dark ages” to join other states in allowing insurance companies to do “catastrophe modeling.” That would allow them to take projected losses into account – not just historical information — using data such as frequency, severity, damage and loss from wildfires and other natural disasters. Insurers can start using the modeling to set rates next year.
While companies are allowed to keep the modeling private, Lara promised there will be safeguards in place to ensure data and transparency.
“We’re doing this from scratch,” he said.
Lara also wants to tackle problems with the FAIR Plan — a “last resort” insurance plan required by state law that offers minimum coverage for wildfires. His plan is to raise the amount of coverage. Run by a pool of insurers, the FAIR Plan has grown to 400,000 policies.
While he worries about “Armageddon” scale disasters, Lara said the recent flurry of wildfires in Southern California don’t undermine his proposals, noting that he issued emergency declarations to protect 750,000 policyholders from losing coverage.
“I’m so confident in my plan,” he said. “I know it’s going to work.”
What’s not in Lara’s proposals? Requiring insurers to address climate change in the regulations.
“My immediate goal is to stabilize this market now, to get insurers to come back, to grow, and then we’re going to be having conversations on separate issues, separate requirements that we can look at,” he said.
This article was originally published by CalMatters.
I’ve seen quotes for $6K to $20K premiums from friends. Their brokers went to the “non-standard” market and got quotes from Knight Specialty Insurance. If that name sounds familiar, that’s because Knight Specialty is owned by Don Hankey (aka “King of the subprime auto loans”).
Hankey is the guy who backed Donald Trump’s $175M bail bond in this year’s E Jean Carrol case. IMO, $6K seems par for the course but $20K seems like predatory pricing.
https://www.nbcnews.com/business/business-news/billionaire-don-hankey-trump-175-million-bond-subprime-car-loans-rcna146232
Holy cow, EASTBEACH! I guess I should really count myself lucky that my policy only went up about 40% this year and is still manageable.
How are middle class homeowners supposed to afford a policy at that amount? This is definitely a crisis. How do we solve it?
sacjon, compared to others I know, I think you can count yourself lucky. I think the most fortunate are those who have USAA (I know they’re still insuring veterans in Painted Cave) or are in Goleta. 93117 was among the lowest of State Farm’s local non-renewals (3.8% cancels) so I think most insurers consider that a lower-risk area. The hardest hit was 93108/Montecito (28.7% cancels)
Based on that BankRate primer I posted elsewhere, my guess is one knob we can turn is to fix the weaknesses in Prop 103. When it was passed in 1988, I don’t think the perfect storm we have now was anticipated. That said, I’m not a free-market capitalist by any means.
Our fire insurance went from $2,800 with Chubb in 2017 (for 30+ years) through a succession of unknown companies to the Calif. “FAIR” plan (unfortunate choice of name) in 2021. This year, we were invoiced for $21,000. Our *insurance agent* was horrified and told us he could not find another co. We are currently uninsured . . . for the first time in our lives.
BLUEDOG – wow, that’s crazy! $21,000 annual premium?
The problem is people buy/build this homes in fire prone areas and expect insurance companies to take the risks.
RUBY – it’s the insurance companies JOB to take the risk. What should we do, ban building outside of cities?
Of course ban building in the woods and fire prone areas. Take away profit from insurance companies and they’ll be gone.
RUBY – there are many cities in this country that are completely within “fire prone areas,” many in our state. That’s just not a viable solution. What about the tens of thousands of homes in SB County that are in areas that are “fire prone?” Do we require owners to demolish their homes and move into the city areas?
Sorry, but that’s absurd.
If you want to live in a fire zone, don’t expect me to pay for your insurance. Yes, in the woods prohibit building, or at least make those owners cover their own insurance without our subsidy. There are homes in areas of lesser risk which should be built with all fire preventative measures in mind. Aren’t we tired of daily reports of tragedy due to wrong location and/or wrong construction?
RUBY – ah there it is. Your precious tax pennies. You seem to think you’re paying for others’ insurance. Yeah, nope.
The FAIR plan is not funded by tax payers, not at all.
https://www.cfpnet.com/about-fair-plan/
Always with the tax pennies. Is there anything you DO approve of your taxes going to? Not the homeless, not the highways….. How about public education? Defense? Health insurance? Lol… never mind. Infrastructure? Oh wait, no you think highways are a “waste.” Umm….
RUBY – take a look at what is likely considered “fire zones” for insurance purposes:
https://experience.arcgis.com/experience/03beab8511814e79a0e4eabf0d3e7247/
That’s most of the state of California. Just ban building there, eh?
That fire map is great – plenty of unthreatened places to build. Of course you should overlay a flood map to increase safety. I’m tired of horror stories of people by their own poor judgement get burned or flooded out. They took their chances and lost – no whining. Houses can be built mostly fire and flood proof, especially in the right location. Someday we will learn, climate change may accelerate it.
RUBY – build where? I mean seriously. Force people to jam into urban areas just to avoid high premiums? Just not viable as a solution.
Sorry, you’re “tired” of people losing their homes and lives, but not everyone has a choice to live outside a fire or flood zone. Do you have any idea the absolute chaos if all flood and fire zones were off limits?
This is not the solution.
Yes they have a choice and there are thousands of acres. But it’s their choice provided no whining when burned out and I don’t have to subsidize their insurance.
Yup, red rubber ball nose firmly attached today.
YOU. DO. NOT. PAY. THEIR. INSURANCE.
FFS read something sometime.
Sac, I don’t think you understand the concept of money doesn’t grow on trees. Have you ever heard of that? Have you ever thought of what it means? Did you take economics in college?
BASIC – explain to us, EXCACTLY, how you or your pal RUBY are paying for anyone else’s homeowners policies.
Come on, smart guy. We’re all waiting.
This is truly a CRISIS for CA homeowners. The insanity of paying $2k a MONTH for homeowners insurance is beyond ridiculous, yet our State Representatives do nothing. Realtors are warning potential home buyers to shop for homeowners insurance PRIOR to even opening escrow on your desired property as you may lose your earnest down payment if you can not find insurance.
Actually many insurance companies are already gone – keep controlling and see what happens
Earlier this year, State Farm started “non-renewing” 72,000 policies in CA. 30,000 were homeowners’ policies. But most people don’t know 42,000 policies were for commercial insurance (e.g., stores, 2/4-plexes, multifamily/apartments, etc.) – State Farm has completely pulled out of the commercial market in CA. Given State Farm’s top market position in CA, plus other insurers cutting their risk portfolios, I expect this will rents/leases across the board.
Personally, I don’t have a lot of faith in what Lara or the state legislature will be able to do in the next year. By then, lots of people will already have been hurt. To see how complex the insurance issue is in CA, this is a nice overview. The *reinsurance* component was a surprise and reminds me of dominoes:
https://www.bankrate.com/insurance/homeowners-insurance/carriers-exit-california-home-insurance/
Sorry Ricardo, your release doesn’t sound good at all to those of us getting hit with big insurance. Vote of ‘no confidence’ for me like in the Star Wars movie – I just simply don’t believe in you. Bit hey prove us all wrong. You have a job to do.