California has been facing an insurance crisis that has impacted homeowners and the state’s economy at large. Large carriers have been fleeing the state at a worrisome pace and Governor Gavin Newsom has finally spoke out on a plan of action to course correct the market.
Many insurance companies have been leaving California for reasons such as wildfire risks and growing costs. Despite California having made efforts to mitigate fire risks, insurance companies have paused or halted writing policies in the state all together.
Homeowners have been asked to help in this effort by making improvements to their home so as to lower the risk of wildfires and other disasters destroying their properties. However, these improvements are costly, and many California residents are already struggling to afford the alarming cost of living in the state.
In the past month, two more large carriers— Tokio Marine and Trans Pacific— joined the likes of State Farm and Allstate in discontinuing their coverage in the state. In response to the mounting insurance crisis Governor Newsom wrote an executive order instructing Insurance Commissioner Lara to “take swift action to address issues with the insurance market and expand coverage options for consumers”.
The order was issued in September 2023 and action has still not been taken 8 months later, concerning residents and sparking frustration aimed at Newsom.
To add insult to injury, without other insurance options residents will be left with the FAIR (Fair Access to Insurance Requirements) Plan which is something of a last resort for homeowners. Not to mention, rumors of bankruptcy have been swirling around the Fair Plan, which would leave desperate homeowners in an even worse position.
This month, Newsom has finally spoken out on his plan to address the mounting crisis. He is drafting a budget bill which would aim to speed up the rate-hike approval process. Currently, it can take more than a year for insurance companies to even get approval from the department due to bureaucratic red tape.
If rate hikes are challenged the process can become even more drawn out. Newsom’s bill will limit this time frame to only 60 days, speeding up the process immensely. At the same time, Lara is working on methods to protect insurers’ assets and allow them to write more policies.
While residents are encouraged that some action is finally being taken on the crisis, many worry that change will not be quick considering how many months it has taken for Newsom to bring forth a plan.
Lara announced that his own plans wouldn’t be ready until December 2024. He stated in a recent press conference: “We need to stabilize this market. We need to send the right signals”. But many Californians may not wait around until legislators can come up with the right solutions seeing as some residents have already packed up and left the state for these reasons.
