California Commissioner Lara & the Next Step of His Sustainable Insurance Strategy

California Insurance Commissioner Ricardo Lara has released more details of his Sustainable Insurance Strategy. It’s his plan to get insurers back into areas of high wildfire risk.

Lara wants to do important insurance reforms to update the state’s insurance regulations — regulations that haven’t been updated since Proposition 103 passed over 30 years ago.

“Californians in every corner of our state are frustrated with outdated regulations and desperate for change,” Lara said. “We are addressing this crisis of insurance availability head-on. For the many Californians who live anywhere where wildfires are a threat, my strategy will increase their options while requiring insurance companies to take their wildfire safety actions seriously. This builds on my first-in-the-nation Safer from Wildfires regulation by requiring insurance companies take into account wildfire mitigation efforts at the individual property, community, and regional level.”

Included in this phase of Lara’s plan is a map detailing which counties where wildfire risk is greatest, and where the state’s FAIR Plan has a high concentration of policies. It is Lara’s hope that insurers — under these reforms — will begin to move back into these areas.

Insurers and the commissioner reached a loose agreement last year that an insurer can get a rate increase if they agree to cover properties in those distressed areas within two years of that increase.

They can achieve that goal in three ways:

  • Write 85% of their market share in the state in high risk areas
  • Hit a one-time goal of 5% growth in the number of policies written in high risk areas
  • Expand the number of policies written by 5% and by taking people out of the FAIR Plan

“We have been surviving with 20th century regulations for 21st century problems. We are compressing decades of deferral and delay into a one-year timeline of action,” Lara explained to the Assembly Insurance Committee in a hearing in May. “We have to remain flexible. We have to be responsive. The lesson of the past is that we cannot be locked into another 30 years of stagnant regulations.”

These are California’s distressed counties — those the department of insurance considers distressed if more than 20% of homes, condos, mobile homes and dwellings with fewer than 5 units are classified as high or very high risk:

De lNorte

Siskiyou

Modoc

Humboldt

Trinity

Shasta

Lassen

Lake

Napa

Mendicino

Tehama

Butte

Plumas

Sierra

Nevada

Placer

El Dorado

Calavaras

Amador

Alpine

Tuolumne

Mono

Mariposa

Marin

Santa Cruz

Inyo

Monterey

Fresno

San Luis Obispo

Ventura

Governor Gavin Newsom — who is working on his own plan to get insurers back into the state — said Lara’s plan is “critical” in fixing the state’s homeowners insurance crisis.

“As the climate crisis has rapidly intensified, the insurance system hasn’t been seriously reformed in 30 years — this is part of our strategy to strengthen our marketplace and get folks the coverage they need,” the governor said.

California’s Consumer Watchdog Executive Director Carmen Balber does not like Lara’s plan, nor the work Newsom is doing to bring homeowners insurers back into the state, or to get those still writing policies in the state to write more in wildfire risk areas.

“Insurance Commissioner Lara’s plan gives insurance companies two years to comply but they can start to charge more immediately,” she said. “After two years, if insurance companies can say they can’t meet their goals the commissioner can just move the goal posts. This was the one consumer benefit in Lara’s proposal but the exceptions swallow the rule.”

Source link: California Department of Insurance — https://bit.ly/3xoyoOQ

Source link: CalMatters — https://bit.ly/4crjQN4

Source link: Digital Insurance — https://bit.ly/4bayQhm

Source link: Insurance Business America — https://bit.ly/4bWHUrv

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