By Levi Sumagaysay, CALMATTERS
California’s Insurance Department will soon implement new regulations to address the home insurance crisis that the state’s residents have been facing for the past couple of years. Insurance Commissioner Ricardo Lara has said his plan will address low availability of fire and home insurance by encouraging insurance companies to resume offering or writing more policies, especially in areas of high wildfire risk.
One part of Lara’s plan will allow insurance companies to incorporate reinsurance costs — what they pay to insure their risk — into their rates. But consumers and advocates are concerned about how much insurance premiums will rise as a result, and the department has no official estimates to offer.
One estimate by an actuary, offered before state lawmakers in 2020 and cited in public testimony to the department on Thursday, says premiums could go up as much as 40%.
Douglas Heller, director of insurance for the Consumer Federation of America, said during public comments Thursday that other states have long allowed insurers to factor in reinsurance costs, but that “we’re still seeing consumers who cannot find insurance or afford it in many states.”
Michael Soller, spokesperson for the department, said the regulations will cap how much in reinsurance costs insurers can pass along to consumers.
Soller: “We expect this regulation to provide greater stability in rates along with increased availability and affordability as more companies compete for business.”
The department expects to finalize and implement all parts of the plan by the end of the year or the beginning of 2025.
