BestWire – California Regulator Cannot Stop Homeowners Freeze, but Some Top Carriers Remain

By Timothy Darragh, BESTWIRE

California Insurance Commissioner Ricardo Lara says he cannot stop homeowners insurers such as State Farm from putting a freeze on new homeowners business in the state, but he remains confident it will return.

Lara said the California Department of Insurance legal team advised him he cannot order State Farm, the largest writer of homeowners policies in California in 2022, to pursue new homeowners coverage, pushing back against Consumer Watchdog, which last month said Lara indeed has that authority.

“Under Proposition 103, insurance companies can’t just stop selling insurance to consumers in order to make more money for themselves they have to open their books and get the insurance commissioner’s approval,” said Harvey Rosenfield, the author of Proposition 103 and founder of Consumer Watchdog. “Commissioner Lara has the power to order State Farm to obey the law and reverse its decision.”

Rosenfield said State Farm’s action is an attempt to force Lara to “rubber stamp” more than $700 million in “new and potentially unjustified” rate increases.

But Lara denied he has that authority.

“The most important thing for us is to make sure that we tell Californians that they’re covered,” he said. “No insurance company is leaving, and that these are business decisions the companies have made.”

The company said it made its decision due to “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure and a challenging reinsurance market.”

That follows Allstate, the state’s fifth-largest writer of homeowners coverage, which last year said it would be suspending new homeowners and condo business in the state because of the inability to raise rates to reflect loss and reinsurance costs, although it will renew existing policies (BestWire, Nov. 3, 2022).

Lara said the CDI is working with the carriers to support the insurance marketplace, because the last thing he wants is fewer options for consumers.

“We’re going to focus on the things we can do, which is bringing companies together and having the conversation, making sure that consumers are protected and don’t lose their coverage,” Lara said. “I’m very confident we’re going to bring these companies back.”

The No. 2 homeowners insurer in California, Farmers Insurance Group, has not said publicly whether it would follow State Farm’s and Allstate’s lead.

It did offer a statement saying its primary focus is to continue serving the needs of its customers.

“While we continue to monitor the changing developments in the California insurance marketplace, we remain actively engaged with the California Department of Insurance and others interested in improving the availability of property insurance in the state,” it said.

The third-largest homeowners carrier, CSAA Insurance Group, is staying put.

“As a leading insurance company, we periodically evaluate our exposure to risk,” a company spokesman said. “After careful review of our exposure, we continue to offer insurance in Northern California as long as our underwriting criteria are met.”

The company offers wildfire discounts to homeowners who take mitigation actions, it said, and CSAA applauds efforts by the CDI and fire service organizations working to reduce fire risk.

Fourth-ranked carrier Liberty Mutual Insurance Cos. did not reply to an inquiry about the state homeowners market.

The top five writers of homeowners multiperil insurance in California in 2022, based on direct premiums written, were: State Farm Group, with 20.58% market share; Farmers Insurance Group, 14.46%; CSAA Insurance Group, 6.66%; Liberty Mutual Insurance Cos., 6.43%; and Allstate Insurance Group, 6.36%, according to BestLink.

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