California aims to expand insurance coverage in fire-prone areas with new laws
FOX Business’ Max Gorden reports on the latest news that Allstate will raise California home insurance rates by 34% from ‘Varney & Co.’
California Insurance Commissioner Ricardo Lara announced enforcement of a regulation aimed at increasing insurance coverage in the state’s wildfire-prone areas, where insurers have fled and homeowners have struggled to get coverage in recent years.
The head of the California Department of Insurance (DOI) said Friday that the state will allow insurance companies to use catastrophe models to determine rate increases in hopes of stabilizing the market. Subsequently, insurers will be required to increase comprehensive coverage in fire-prone areas to at least 85% of their market share.
Sen. Ricardo Lara joined union groups that gathered together at a meeting in Wilmington Oct. 3, 2018. Lara is now the commissioner of the state Department of Insurance and has proposed reforms to address California’s insurance crisis. (Brittany Murray/Digital First Media/Long Beach Press-Telegram via Getty Images/Getty Images)
“Giving people more choices to protect themselves is how we’re going to solve California’s insurance crisis,” Lara said in a statement. “For the first time in history, we need insurance companies to expand where people need help the most.
The DOI said that in the 30 years before the law change, the state required insurance companies to use historical wildfire losses to determine the catastrophic factor in rates, which resulted in higher premiums following disasters.
HOME INSURANCE OPTIONS DEPEND ON NATURAL DISASTERS
Through the use of disaster models, which predict future losses, insurers will be able to take into account the risks of climate change and consider measures to reduce the risk of fire.
A firefighter carries a chainsaw as the Windy Fire burns in the Sequoia National Forest near Johnsondale, Calif., Sept. 22, 2021. (Getty Images / Getty Images)
The goal is to attract insurers to these high-risk areas and offer more market options than California’s FAIR Plan, which many homeowners and businesses are left with as a last resort if there are no other options.
HOME INSURANCE RATES ARE UP ALMOST 40% SINCE 2019 – BUT THEY ARE RISING FAST IN THIS COUNTRY.
Regulators hope that the ability to raise rates quickly will spark the return of insurance companies that have left the state. Under previous California laws, it could take years for insurance companies to get permission to raise premiums.
Downed power lines and the remains of burned homes and cars remain after the Glass fire passed through Napa Valley, Calif., Sept. 28, 2020. (Samuel Corum/AFP via Getty Images/Getty Images)
Many insurance companies have stopped selling new home insurance policies in California in recent years due to wildfires and the high cost of doing business in the state. Now, of the top 12 insurance companies in California, only five are still writing new policies.
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After State Farm, California’s largest insurer, announced earlier this year that it would cut 72,000 home insurance policies in California due to inflation, regulatory costs and increased risks from disasters, Lara called the situation “a real disaster.”
FOX Business’ Sunny Tsai contributed to this report.
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