California Homeowners Insurance Crisis — More to the Problem than State Farm

A week ago, Weekly Industry News reported that State Farm will no longer be writing homeowners insurance policies in California. At that time, and knowing more would follow, we asked — rhetorically — who would be next.

The next is Allstate.

The company “officially” announced it will no longer be writing homeowners policies in California. Allstate’s Brittany Nash blamed wildfires, the high cost of home rebuilding and repairs and the California Department of Insurance (CDI), and how it has made it so difficult for insurance companies to quickly raise rates.

Regulations are at the heart of that one.

“The cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires, higher costs for repairing homes, and higher reinsurance premiums,” Nash said.

She also noted that Allstate paused writing homeowners policies last year but didn’t publicly push the decision in mainstream media. AIG and Chubb have also quietly, and with little media notice, slowed the number policies it accepts for multimillion dollar homes. Farmers has also been canceling and declining to renew policies on condominium units.

All are doing so for the reasons stated by State Farm and Allstate.

Mark Sektnan of the American Property Casualty Insurance Association (APCIA) said there is a huge need for greater stability and regularity stability in California to ensure resiliency in the property market in California.

“The first step is making sure insurers can charge rates that reflect the increasing risk of loss,” he said. “The California Department of Insurance is working on this. Next, we need to allow admitted insurers to include the cost of reinsurance in their rates and use forward-looking probabilistic models to accurately assess future risk. Finally, we all have one common goal: mitigate properties and reduce the risk.”

Many experts looking at State Farm’s decision — and now Allstate’s and the others — say CDI policies and regulations stop insurance companies from set premiums based on climate change. Those same policies and regulations also will not let insurers raise rates based on wildfire risk.

Some insurance companies say CDI regulations have forced them to put policies in place that are priced far too low.

Michael Soller is speaking for the California Department of Insurance on this issue. He noted the announcement might be creating uncertainty and anxiety among people looking for homeowners insurance, and those that currently have such insurance from State Farm.

“Our immediate focus is on helping consumers navigate their options,” Soller said, and then noted that there are 115 companies writing homeowners insurance in California.

Many unable to afford — or find — homeowners insurance in California are turning to California’s FAIR Plan, the insurer of last resort. But the FAIR Plan is growing ever deeper in debt. It’s currently $332 million in the hole and the FAIR Plan is growing more in debt by the day.

In 2018 there were 140,000 policyholders in the FAIR Plan. By 2019 that number was 190,000. In 2021 the figure grew to 268,000.

Source link: Insurance Business America —

Source link: E&E News —

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