Experts anticipate double-digit rate increases to stabilize the market and provide relief to thousands of Californians who have lost their home insurance coverage in recent years, as discussed on Epoch TV’s “California Insider.” Host Siyamak Khorrami delved into the issue with an insurance broker, wildfire survivors, and lawmakers proposing solutions.
The problem began with Proposition 103 in 1988, capping rate increases for homeowners’ policies at 7 percent. This led to artificially low rates for homeowners while insurers faced rising costs. The COVID pandemic worsened the situation when the state froze rate increases, causing carriers to lose money and withdraw from the market.
As carriers issued nonrenewals or left the state, homeowners were left with expensive options or had to turn to California’s Fair Plan. The industry destabilized due to frozen rate increases, contributions to the Fair Plan, and increased claims for disasters, leading to a rare crisis.
However, recent changes by the state’s insurance commission are bringing hope for a sustainable insurance model with risk-based premiums. This new plan aims to address the crisis and encourage carriers to re-enter the market.
Despite these developments, some homeowners like Michael and Christy Daneau have had to forgo insurance due to unaffordable premiums, leading to devastating losses. This highlights the urgency of finding solutions to ensure homeowners have access to affordable coverage. Bill Dodd, who serves the Third Senate District covering Napa, Contra Costa, and Sacramento counties, advised Khorrami that opting out of insurance was not a wise decision. “All you can do is hope and pray, and hope and prayers are not a great strategy,” he emphasized. Dodd expressed confidence in the commissioner’s new insurance strategy, which allows insurers to adjust rates based on climate and catastrophic models, as well as factor in their reinsurance costs. He criticized the previous inability to do so as a disservice to California ratepayers.
Dodd highlighted the importance of increasing insurers’ rates, as they have been capped at 7 percent for too long. Allowing rate hikes of 25 to 40 percent would prevent carriers from leaving the state. He emphasized that moderate rate increases are more affordable than policy cancellations or exorbitant rate hikes. Dodd also noted the significant increase in policies under the Fair Plan, which poses a critical problem due to its inability to handle the associated risks.
Senator Dave Cortese, representing the 15th Senate District in Santa Clara County, discussed the concept of “partial” insurance, where carriers would cover only a portion of a property, calling for further evaluation. He hinted at potential bills in the upcoming legislative session to enhance the insurance process for homeowners, particularly regarding fire risk mitigation.
Cortese proposed the establishment of a state-funded financial safety net for the Fair Plan to prevent insolvency in the event of major losses. He stressed the need for a balanced approach to protect property owners while ensuring insurers remain profitable in the state.
Both chambers of the Legislature have formed insurance working groups to address these issues and guide the insurance market towards a more sustainable state. Cortese reassured that the Legislature is dedicated to addressing the concerns of homeowners who rely on insurance coverage for their valuable assets. Finding the equilibrium between safeguarding property owners and supporting insurers’ profitability is the ultimate goal in this endeavor. Please rewrite this sentence.
Source link
