By Tran Nguyen | The Associated Press
Hundreds of thousands of California homeowners who have failed to find or lost access to home insurance as wildfires in the state become more destructive will once again be able to purchase policies under a state regulation announced Monday.
The rule will require home insurers that write policies in the state to offer coverage in high-risk areas, something the state has never done, Insurance Commissioner Ricardo Lara’s office said in a statement. Insurers will have to start increasing their coverage by 5% every two years until they hit the equivalent of 85% of their market share. That means if an insurer writes 20 out of every 100 state policies, they’d need to write 17 in a high-risk area, Lara’s office said.
The requirement will take effect within 30 days.
Major insurers like State Farm and Allstate have said they would stop writing new policies in California due to fears of massive losses from wildfires and other natural disasters.
“Californians deserve a reliable insurance market that doesn’t retreat from communities most vulnerable to wildfires and climate change,” Lara said in a statement. “This is a historic moment for California.”
In exchange for increasing coverage, insurers will be able to consider climate change when setting their prices under a different rule taking effect this week. They’re all parts of an effort to persuade insurers to continue doing business in the nation’s most populous state.
A consumer advocacy group said the new regulations would allow insurance companies to drive up home insurance rates by 40% to 50% without offering a substantial expansion in wildfire coverage. “There is no opportunity for public comment, as it was issued on an emergency basis,” Consumer Watchdog said Monday.
“This plan could drive the price of home insurance up by 40%,” said Jamie Court, president of the watchdog group. “Tellingly, the commissioner did not do a cost impact analysis of his plan on consumers. That’s because this plan is of the insurance industry, by the insurance industry, and for the industry. The commissioner has left no opportunity for public comment on the regulation before it is final by issuing it on an emergency basis. “It’s the worst type of power grab.”
Wildfires have always been part of life in California, where it only rains for a few months out of the year. But as the climate has gotten hotter and dryer, it has made those fires much larger and more intense. Of the top 20 most destructive wildfires in state history, 14 have occurred since 2015, according to the California Department of Forestry and Fire Protection.
In some counties in California, nonrenewal rates have increased more than 500% since 2018, according to a New York Times report on a newly released congressional investigation . The probe found that since 2018, more than 1.9 million home insurance contracts nationwide have been dropped.