{"id":10217,"date":"2023-10-23T10:03:48","date_gmt":"2023-10-23T17:03:48","guid":{"rendered":"https:\/\/sandiegonewsdesk.com\/?p=10217"},"modified":"2023-10-23T10:03:48","modified_gmt":"2023-10-23T17:03:48","slug":"californias-disastrous-insurance-landscape","status":"publish","type":"post","link":"https:\/\/sandiegonewsdesk.com\/?p=10217","title":{"rendered":"California’s disastrous insurance landscape"},"content":{"rendered":"

Original Article Link: The Disastrous Insurance Landscape in California (californiapolicycenter.org)<\/a><\/p>\n

by SHERIDAN SWANSON<\/a><\/h4>\n

Late last month, Gov. Gavin Newsom signed an executive order<\/a>\u00a0in an attempt to address the insurance crisis in California that\u2019s leaving scores of homeowners without coverage. The executive order comes after State Farm and Allstate, the first and fourth largest home insurers in California, announced this year they would no longer sell new home insurance policies in the state. Additionally, Farmers Insurance (California\u2019s second largest home insurer) is capping the number of new policies it will sell in California. These announcements follow a years-long trend of increased nonrenewals of existing policies in the wake of massive wildfires in California.<\/p>\n

\u201cThis is the very first time in the [75-year] history of our agency that we can\u2019t always find insurance for people,\u201d Chris Hebard, President of Hebard Insurance Solutions, told California Insider. Michael D\u2019Arelli, Executive Director of the American Agents Alliance,\u00a0says<\/a>\u00a0he\u2019s flooded with calls and emails from insurance agents telling him, \u201cI\u2019m so angry, because I have consumers in my office literally in tears because they need insurance\u2026 and I can\u2019t fulfill their needs.\u201d<\/p>\n

Why the startling shortage of insurance coverage? In California, it\u2019s become increasingly expensive for insurance companies to operate.<\/p>\n

This is largely because of Proposition 103, which was passed in 1988 and made the Insurance Commissioner an elected office. This means the Insurance Commissioner is inclined to make decisions based on public opinion (often with political aspirations), rather than what\u2019s best for a healthy insurance market and stable economy. The Insurance Commissioner is very hesitant to allow premium increases, and when this goes on for too long, the insurance companies are squeezed by high costs. \u201cYou can\u2019t afford to pay 130% of what you take in for very long,\u201d Hebard explains.<\/p>\n

California has among the lowest homeowners insurance rates in the nation, which at first glance is good for homeowners. But these low rates are artificial, a result of policy decisions rather than the function of the insurance market. The unintended consequence is that insurance companies are trying to mitigate their risks, so they avoid new policies and\/or decline to renew existing policies. And still, premiums are increasing dramatically in California; Proposition 103 isn\u2019t keeping rates from climbing, just from climbing as fast as the market would allow.<\/p>\n

Newsom\u2019s executive order blamed climate change and \u201cextreme weather events\u201d for the crisis. And indeed, severe fires in California over the past several years are a primary factor. But this itself stems from California\u2019s\u00a0mismanagement of forests<\/a>.<\/p>\n

California has, for the most part, rejected strategic, controlled burning to remove underbrush prone to wildfires. As a result, underbrush grows out of control \u2014 and California\u2019s forests become tinderboxes. California has heavily regulated the lumber industry, making \u201cmodern land management endlessly time-consuming and ultimately cost-prohibitive,\u201d writes Edward Ring, senior fellow at California Policy Center. As a result, California\u2019s forests are full of dead and dying trees.<\/p>\n

Contrary to common misperception, a thriving timber industry is completely compatible with healthy forests; it doesn\u2019t require the clear-cutting of vast swaths of trees. As Ring explains, California\u2019s timber industry would need to triple in size in order to balance out a forest\u2019s natural growth to keep the ecosystem healthy and avoid excessive fire risk. But California\u2019s leaders ignore this reality, allowing the forests to grow out of control for the sake of \u201cenvironmentalism.\u201d<\/p>\n

California\u2019s devastating wildfire seasons over the past several years caused massive losses for insurance companies. In 2018, Northern California insurer Merced Property & Casualty went bankrupt due to fires. In 2022, insurers AIG and Chubb decided to nonrenew thousands of policies in California due to the state\u2019s fire risk. Enrollment in California\u2019s FAIR plan \u2014 a high-cost last resort that offers minimal coverage \u2014 \u00a0spiked<\/a>\u00a0by 70 percent from 2019 to 2022.<\/p>\n

Reinsurance \u2014 or insurance for insurance companies \u2014 is a second factor in California\u2019s dilemma. Reinsurance is a safeguard so insurance companies avoid owing policyholders more money than they can afford to pay. California\u2019s recent wildfires have pushed the prices of reinsurance upward, but insurance companies are not allowed to pass the cost of reinsurance to their customers in California. These skyrocketing costs are another impetus for companies to reduce and cap the coverage in California, and Newsom\u2019s executive order recognized it as a \u201cprimary driver\u201d in the lack of available insurance coverage in the state.<\/p>\n

A third leg of the policy-failure-trifecta responsible for the crisis: the California Environmental Quality Act, or CEQA, and its slew of laws and regulations, which have pumped the brakes on the development of new housing in California. The dearth of supply of new homes has made housing even more expensive, and insurers raise their rates accordingly. While the California legislature has attempted to make incremental changes to CEQA\u2019s vise-grip on new housing, these efforts take a \u201cone step forward, two steps backward\u201d approach: many of the bills are\u00a0rife with regulations and mandates<\/a>\u00a0\u2014 such as organized labor and low-income housing requirements \u2014 that ultimately increase the cost for developers.<\/p>\n

Try as he might, Newsom can\u2019t blame California\u2019s insurance crisis on the climate. His executive order calls on the Insurance Commissioner to \u201ctake prompt regulatory action\u201d to stabilize California\u2019s insurance market. But California\u2019s plethora of policy failures indicate the opposite is needed: ease regulations on the insurance market, the timber industry and the building process, and the state will see fewer wildfires, more affordable housing and the insurance market return to the Golden State.<\/p>\n

Original Article Link: The Disastrous Insurance Landscape in California (californiapolicycenter.org)<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Original Article Link: The Disastrous Insurance Landscape in California (californiapolicycenter.org) by SHERIDAN SWANSON Late last month, Gov. Gavin Newsom signed an executive order\u00a0in an attempt to address the insurance crisis in California that\u2019s leaving scores of homeowners without coverage. The executive order comes after State Farm and Allstate, the first and fourth largest home insurers…<\/p>\n","protected":false},"author":3,"featured_media":8794,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17],"tags":[],"class_list":["post-10217","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-housing"],"yoast_head":"\nCalifornia's disastrous insurance landscape - San Diego News Desk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/sandiegonewsdesk.com\/?p=10217\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"California's disastrous insurance landscape - San Diego News Desk\" \/>\n<meta property=\"og:description\" content=\"Original Article Link: The Disastrous Insurance Landscape in California (californiapolicycenter.org) by SHERIDAN SWANSON Late last month, Gov. 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