Starting in the new year, insurance companies in California will now be required to cover homeowners in areas with high-fire danger. The announcement came on New Year's Eve from the state insurance commissioner.
The California insurance commissioner has released his long-awaited emergency regulations. Commissioner Ricardo Lara says the rules are designed to bring home insurers back into the state to end the drought of insurance available.
A move to resolve the home insurance crisis in California, much done in secret, may actually cause more delay.
This is what the deputy insurance commissioner told KTVU on December 12 about the new emergency insurance regulations, essentially effective immediately.
"Under the reforms we're putting in place, insurance companies, in order to utilize these tools, like modeling, they have to write more policies. That's the change and we'll enforce that through our rate authority," said Michael Soller, California deputy insurance commissioner.
The promise was that the regulations would force insurers to sell policies equivalent to 85% of their statewide market share, including wildfire areas. "We think that long term, this is gonna help stabilize rates, because right now, people are experiencing ballooning premiums and rate spikes, but they're not getting the benefit of increased competition," said Soller.
Consumer Watchdog, the major consumer advocacy group overseeing the Department of Insurance, counters with this. "If we look at what happened in other states, in North Carolina and Florida, we're gonna see rates go up 40%," said Consumer Watchdog President Jamie Court.
The group says the regulations are seriously flawed. "There is no legally binding commitment in this document that they have to cover more people, but we're all going to be paying more. There is nothing in these like, you know, 72 pages of regulation and explanations about the cost impact on consumers," Court said.
Added to rates going forward will be the cost of so-called reinsurance, policies insurance companies buy to protect themselves for massive losses such as California's worst wildfires. Another danger, pegging California home insurance rates increases, in part, to the worldwide catastrophe bond market. "We will be paying for the risk of hurricanes in Malaysia," said Court.
But, Independent insurance agent Karl Susman, who stands between to equally important parties. They are the insurers that provide him with the policies and his customers, who must be able to afford them.
Susman says whatever happens, will not likely cause massive additional spikes. "It is gonna make it infinitely easier, not only to obtain coverage, but to get competitive bids from more than one company. When there are more options, there's more competitiveness in the marketplace and prices will tend to go down. I think we've seen the worst of it as prices go," said Susman.
Consumer Watchdog says it will sue in court, to either block implementation of or have the new regulations set aside.
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