OAKLAND — California state regulators have released a new plan to make it less difficult for homeowners to get home insurance, but some consumer advocates worry it would mean steep premium increases for everyone.
The proposed plan comes after many homeowners in older homes and those living in fire-prone areas have lost coverage or seen rates rise in recent years.
Many major insurers have left the state or stopped writing new policies.
“Seven redwoods and we also have oaks and cedars. We’re surrounded by trees,” said Buck Reesor, who lives in the Oakland Hills.
Like many of his neighbors, Reesor received the dreaded notice of termination.
“We had Mercury and last year they dropped us,” Reesor said.
Many companies insist that government regulations make it difficult to increase premiums and make it too risky to insure homes in fire-prone areas.
“We called around and it was hard to find someone (to insure our house),” Reesor recalls.
California Insurance Commissioner Ricardo Lara has announced a new plan that will allow companies to use “catastrophe modeling” and climate change to set higher rates. In return, companies would sell policies in areas with the greatest fire risks, areas like Wine Country, the Santa Cruz Mountains and the Oakland Hills.
The new plan would require insurers to increase coverage in state-identified zip codes that are prone to fire.
“All they really want is to have a regulatory system and for prices to reflect real risks,” said Seren Taylor, vice president of the Personal Insurance Federation of California (PIFC), an insurance industry group.
Taylor supports the plan and believes it would stabilize the market.
“Once all these pieces are in place, we are confident that insurers will come back to California. They will continue to serve,” Taylor said.
Opponents say home insurance under the proposed plan will remain unaffordable and out of reach for many people.
“There are too many loopholes to be workable. There are too many off-ramps for insurance companies to default on these obligations,” said Carmen Balber, executive director of Consumer Watchdog. “The basic problem with these regulations is that insurance companies can immediately raise rates on day one, but don’t have to prove that they have retreated into distressed parts of the market for two full years.”
While Reesor doesn’t know if the state’s latest plan would help homeowners like him, he’s glad he didn’t have to buy the state’s FAIR plan, an expensive policy of last resort. He says he pays 30 percent more with his new policy.
“It was such a relief when AAA just signed us up,” Reesor said.
Commissioner Lara said he wants to finalize the proposal and new regulations by the end of the year.
Da Lin
