SACRAMENTO, Calif.,
March 28, 2024 /PRNewswire/ --
California must require insurance
companies to sell home insurance to homeowners who protect their
homes from wildfire in order to restore consumers' access to
affordable coverage, Consumer Watchdog executive director
Carmen Balber will testify in comments before the Little
Hoover Commission today.
Mandatory coverage for homeowners who do the right thing is the
only option to quickly get Californians insured again, Balber
will testify.
View the livestream of the hearing here and
see Consumer Watchdog's presentation.
"Appeasing the insurance industry has failed to protect
consumers' access to home insurance in California," said Consumer Watchdog executive
director Carmen Balber. "Any company that wants the privilege
of selling home and auto insurance in the largest market in the
nation should be required to cover every Californian who does the
right thing and protects their home from wildfires. The added bonus
will be depopulating the FAIR Plan to help stabilize the finances
of the state's insurer of last resort."
A mandate would require insurance companies to sell coverage to
any home or condo owner who meets state "Safer From Wildfire"
mitigation guidelines - including home-hardening and defensible
space measures that reduce the risk a home will burn in a wildfire.
To incentivize homeowners to complete these mitigation steps
they must be confident they will be able to buy insurance at the
end of the process.
A recent study by the National Association of Insurance
Commissioners found that "structural modifications can reduce
wildfire risk up to 40%, and structural and vegetation
modifications combined can reduce wildfire risk up to
75%."
Balber's presentation also makes the following
points:
The home insurance industry was more profitable in California over the last two decades than it
was nationwide, with 8.8% average return on net worth from
2002-2021 compared to 6.2% nationwide. California did even better in recent years,
with return on net worth reaching 19.4% in 2021, compared to 1.3%
on average nationally.
Rate regulation under California's strongest-in-the-nation insurance
oversight law, Proposition 103, has allowed home insurance
companies to get the rate hikes they need to cover legitimate cost
increases. Home insurers in California received an average 92% of the
premium increases they requested between 2021 and 2023 and all but
one of the top ten insurance companies in the state received rate
hikes in the last year, some with multiple increases.
Insurance Commissioner Lara announced a deal with insurers
last September that he said would expand home insurance coverage
for Californians. The only consumer benefit of the plan was a
supposed "commitment" by insurers to increase insurance sales in
wildfire areas. However, documents Consumer Watchdog obtained under
the Public Records Act reveal that the legislation his plan is
based on would not require insurers to offer comprehensive home
insurance to a single new homeowner. Insurers could instead meet
their commitment by offering bare-bones FAIR Plan-equivalent
policies, leaving consumers no better off than they are
today.
State Farm recently announced it will dump 72,000 policyholders
despite a 20% rate hike of approximately $500 million that took effect this month. The
move makes clear that California
must do more to prevent insurance companies from abandoning
consumers who have paid their premiums responsibly for decades.
The insurance industry proposals embraced by
Commissioner Lara have already been tried in Florida where they failed to stabilize that
state's insurance market. Insurance rates in Florida are 2-4 times as high, five times as
many homeowners are insured by the state's insurer of last resort,
and insurance companies continue to leave the market.
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SOURCE Consumer Watchdog