By Natalia Gurevich, SAN FRANCISCO EXAMINER
A consumer advocacy group alleges that a trio of home insurance providers pulled out of California earlier this summer in a combined effort in order to spike insurance premiums.
Consumer Watchdog called upon California Attorney General Rob Bonta on Tuesday to investigate whether or not major home insurance providers are using companies’ departures as leverage for a state bailout.
Allstate and State Farm announced earlier this summer they would no longer sell new insurance policies to California homeowners, citing issues like wildfires as too big of a risk. Farmers Insurance and USAA, also citing wildfires, announced they would limit new policies in the state.
Other major insurance providers, including CSAA and Liberty Mutual, have not indicated any intention of leaving California.
Consumer Watchdog alleged on Tuesday that the companies leaving and limiting policies are doing so in an organized attempt to force state lawmakers into bailing out the insurance providers.
Jamie Court, the group’s president, told Politico last week that he overheard and recorded a lobbyist saying that “we are trying to jam a bill in the last three weeks of the year.” Court and the organizer have characterized the bill as a “bailout” of the industry.
“Industry insiders have confirmed the companies’ deliberate, ongoing destabilization of the marketplace and have described to Consumer Watchdog how insurance companies and their lobbyists coordinate their actions to create shortages,” the organization wrote to Bonta on Tuesday.
Consumer Watchdog alleged that the insurance providers meet weekly in the offices of “lobbyists and lawyers” with the Personal Insurance Federation of California and the American Property Casualty Insurance Association to discuss these plans, which are in direct violation of Proposition 103.
Passed in 1988, Prop. 103 requires insurance providers to get state approval when setting property and casualty insurance rates.
The consumer group said they have a “confidential witness,” an industry insider who attended these meetings and has confirmed that these discussions have happened.
“Insurers collected more than $150 billion in premiums from California homeowners over the last 25 years and enjoyed profits at four times the average rate nationwide,” said Harvey Rosenfield, the author of Prop. 103 and founder of Consumer Watchdog, in Tuesday’s release. “Now they’re demanding an unprecedented bailout from the California Legislature in the last few days of session as the price of continuing to do business here in the wake of wildfire losses.”
The insurance providers are allegedly threatening to pull even further out of the state unless California policyholders shoulder the costs of unexpected wildfires, essentially reimbursing the companies through the FAIR Plan, which is a state-run insurance plan that typically only goes to Californians who cannot get traditional coverage.