Under a new insurance regulation just approved this week, California Insurance Commissioner Ricardo Lara said homeowners should have an easier time purchasing fire insurance.
The insurance crisis has unfolded in the state in recent years companies leave or dropping customersespecially those living in wildfire-prone areas.
“How much is my premium going to be and am I going to get dumped? I worry about it all the time, especially since everyone around me is getting canceled,” said Oakland Hills homeowner Catherine Johnson.
Johnson lives in a house that was rebuilt after the 1991 Oakland Hills firestorm destroyed the original structure.
“[My premium] went from $5,000 per year to $7,000 per year for my last payment term. And I’m just keeping my fingers crossed that I don’t get terminated when the term expires. That is my biggest fear,” said Jonhson.
Many of her neighbors are too on the FAIR Plan, California’s insurer of last resort.
Commissioner Lara announced Friday his plan to allow companies to use catastrophe modeling and climate change to set higher rates received approval from the Office of Administrative Law. He said companies in return promised to sell policies in areas with the highest fire risks, such as Wine Country, the Santa Cruz Mountains and the Oakland Hills.
“This is the first time in California that insurance companies have been required to write policies and we are going to enforce that,” said Michael Soller, deputy insurance commissioner at the state’s insurance department. He said the new regulations will require companies to cover 85 percent of homes in designated fire-prone zip codes.
But critics said the new rule has too many loopholes.
“The regulations allow insurance companies to use secret algorithms to inexplicably raise rates. Californians will pay more, but will not have better access to coverage,” said Carmen Balber, executive director of Consumer Watchdog.
Balber predicted that insurance companies will make more money with the new higher rates, but the insurance crisis will persist.
“What the insurance commissioner has done is an attempt to blackmail the insurance industry,” Balber said.
“We are focused on providing solutions to Californians and bringing more policies to market so that the Fair Plan is not the only option for people. Consumer Watchdog brings cynicism,” Soller said.
Homeowners said they were desperate for change. One man even thought about moving to an area with a low fire risk.
‘We expect that [our insurance] will be cancelled. But we’re hoping that maybe this new development will [change that]” says Oakland Hills resident Stephen Shefler.
Johnson said she is willing to try the new model if it can increase affordability and accessibility.
“Hopefully it would attract some of the airlines that have made an exodus. Maybe they’ll come back and we’ll have a more competitive market,” Johnson said.
State officials were confident that companies will use the catastrophe models to set prices starting in mid-2025. They believed it would stabilize the market.
Commissioner Lara’s office said the new regulation is part of the larger strategic plan to reform the insurance industry. They are still working on other parts of its ‘Sustainable Insurance Strategy’.
