Gov. Gavin Newsom and Insurance Commissioner Ricardo Lara just announced separate plans to give insurance companies bigger, faster rate hikes in response to the home insurance crisis. Their actions would fulfill an insurance industry wish list that threatens Californians’ access to affordable home, condo and apartment insurance.
Speedier unjustified rate hikes, and the other deregulation the insurance industry is demanding, isn’t going to get Californians covered again.
The largest insurance companies in the state have already won big double-digit rate hikes this year. They’re still limiting sales and non-renewing policies with no regard for the investments homeowners and communities are making to protect their homes from wildfire.
Giving the insurance industry everything it wants doesn’t work. Just ask Florida, where insurance companies won all the changes they’re seeking here. Premiums in Florida are twice as high as in Californian. Almost 20% of homeowners have been forced into Florida’s insurer of last resort, compared to 4% in California’s FAIR Plan. And insurance companies still abandoned the state.
If we want to restore Californians’ access to home insurance, we must require insurance companies to cover people who do the right thing and protect their homes from wildfire. Every homeowner who meets state guidelines for home hardening and brush clearance should be guaranteed access to coverage.
Incentivizing wildfire safety measures with guaranteed insurance will have the added bonus of saving insurance companies money by making our homes and communities less likely to burn.
The governor’s plan, a budget trailer bill that could pass with little scrutiny, doesn’t do this. Instead, it would raise rates by billions of dollars by undermining the process consumer groups use to challenge rate hikes.
In 1988, voters revolted against insurance industry price-gouging and passed Proposition 103 to make insurance companies open their books and justify their prices. The Insurance Commissioner must approve all rate increases. Prop 103 also gave consumers the right to object to excessive rates.
Consumer Watchdog’s rate challenges have saved drivers, homeowners and small-business owners over $6 billion in the last two decades.
The governor’s plan would cut consumers out of the process, eliminating consideration of issues raised by the public from any proposed rate hike below 7%.
Public input is a check on insurance companies and on insurance commissioners who get too friendly with the industry they’re supposed to be regulating.
That independent voice is more important now than ever before given the pro-industry record of the current insurance commissioner. As this paper editorialized last April: “Ricardo Lara purports to be the champion of the people. But the past four years of scandal and cozy ties to the insurance industry have shown otherwise.”
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Lara’s latest regulation will trade higher rates based on secret algorithms for a commitment from insurers to start selling in parts of California they’ve abandoned.
While rate hikes would take effect on Day 1, insurance companies would get two years to expand sales in wildfire-distressed areas. But nothing requires the policies insurance companies offer to be affordable. If after two years they fail to meet their commitment — because their policies cost too much — the insurance commissioner can let them off the hook. That will mean higher rates and less oversight while leaving some Californians uninsured.
Writing a blank check for faster, larger rate hikes is not the way to keep Californians in their homes. Instead, lawmakers should take the reins and require insurance companies to cover wildfire-protected homes or forfeit the right to sell auto or home insurance in California.
Carmen Balber is the executive director of Los Angeles-based nonprofit Consumer Watchdog.