Insurance commissioner says reform will result in more policies – critic claims still unaffordable

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CALIFORNIA – California Department of Insurance (CDI) commissioner Ricardo Lara released further details, June 12, on his plan to increase the writing of homeowners and commercial insurance policies in areas of the state with high wildfire risk.

Lara said if a homeowner is stuck on the FAIR Plan because of a unique wildfire risk, there will be help for them.

His Sustainable Insurance Strategy is a response to insurance companies’ withdrawal from the California market due to the increasing risk and cost associated with wildfires.

350,000 Californians on the FAIR Plan

According to Lara, Proposition 103 enacted by voters in 1988, allows insurance companies to legally choose where they will write policies in California. He says as a result, companies are writing policies more in areas of the state deemed less risky of wildfires.

“This most affects residents and business owners in areas with wildfire risk where the California FAIR Plan has become the only option for insurance, not the last resort as it was intended,” said Lara in a press release.

As of February, there were 350,000 California homeowners on the FAIR Plan.

According to SnapNHD, the FAIR plan tends to be more expensive than conventional property or fire insurance, and they also offer less coverage. Premiums range around $3,200 as compared to $1,460 for conventional homeowner’s insurance.

Sustainable Insurance Strategy

Lara’s Sustainable Insurance Strategy includes the following regulations:

  • Companies must detail the location where they are writing policies in their rate filing documents.
  • Insurance companies using AI catastrophe models will be required to take into account the steps taken by policyholders to mitigate wildfire risk.
  • Larger insurance companies with a major presence in distressed areas will need to write no less than 85% of properties within two years of a rate filing being adopted. 

    Photo credit: California Department of Insurance

Home insurance will remain unaffordable

According to Consumer Watchdog, home insurance will remain unaffordable and unobtainable for many Californians under the new rules.

“The proposed regulations purport to require insurance companies to increase sales to homeowners in “distressed areas.” However, the proposal would not require insurance companies to charge a price that consumers are able to afford, and the requirement could be waived if insurers cannot meet it,” said Watchdog Consumer executive director Carmen Balber.

She goes on to say that the way to guarantee more Californians coverage is to require insurance companies to sell to every homeowner who protects their home from wildfire.

Upcoming workshop

The department is hosting a public workshop, June 26, to review public input before issuing the full catastrophe modeling regulation for adoption by year end.  To view the invitation to the workshop click here.

For more information about the Sustainable Insurance Strategy visit https://www.insurance.ca.gov/0400-news/0100-press-releases/2024/release023-2024.cfm

RELATED: Congressional Members urge Commissioner to stabilize insurance — 85% of market restricted in CA

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