New law increases California’s auto insurance minimums

January 5, 2025 By Karen Garcia 2 Comments

For the first time in over five decades California is increasing its minimum auto insurance requirements this year, but the change isn’t expected to burn a hole in every driver’s wallet.

In 2022, Gov. Gavin Newsom signed Senate Bill 1107, also known as the Protect California Drivers Act, into law which increases the minimum auto liability limits. However, implementation of the law didn’t go into effect until the start of this month.

California law requires drivers to have minimum liability insurance that helps pay for injuries or damage that you cause to others.

Before Protect California Drivers Act went into effect, the following minimum liability requirements were:

  • $15,000 for injuries or death to one person.
  • $30,000 for injuries or death to multiple people in one accident.
  • $5,000 for property damage.

After the law went into effect Jan. 1, the minimum requirements increased too:

  • $30,000 for injuries or death to one person.
  • $60,000 for injuries or death to multiple people in one accident.
  • $15,000 for property damage.

Why is the change happening now?

Insurance Commissioner Ricardo Lara previously said people expect “to be made whole by their insurance after a traffic accident, but I believe the current minimum coverage levels [before the new law] often left California’s drivers at risk of being one accident away from financial ruin, especially those from our most vulnerable communities.”

Experts argued that the previous requirements for minimum liability limits were not enough to cover most claims.

That’s because the cost of repairs and medical expenses after an accident have increased over time and exponentially so after the pandemic, said Rex Frazier, president of the Personal Insurance Federation of California.

It’s also wasn’t keeping up with rising costs because the minimum limits were set in 1967, according to the American Agents Alliance.

If you bump into someone’s car in a grocery store parking lot with your vehicle today, for example, there’s a lot of technology in a car bumper now including sensors that would need to be fixed. Repairing that damage can easily cost anywhere from $15,000 to $20,000, Frazier said.

By increasing the minimum requirements, more accident-related expenses will be covered by this insurance policy.

Who will be impacted by the law?

Click here to read the full article in the LA Times

Filed Under: Top Stories Tagged With: , , ,

California has sweeping new rules for home insurance. What to know

December 18, 2024 By Laurence Darmiento Leave a Comment

A revolution is underway in California’s insurance market that could provide relief to homeowners in high-fire-risk neighborhoods who have found it difficult to find insurers to cover their homes, typically a household’s most valuable asset.

Under new rules, state insurers for the first time will be allowed to use so-called catastrophe models to help determine the cost of home insurance. The models, developed by firms such as Verisk Analytics and Moody’s, are complex computer programs that aim to better determine the risk a structure faces from wildfires amid a changing climate. Here are five things to know about the models:

Click here to SUBSCRIBE to CA Political Review 

How do these models work?

The programs, first developed in the 1980s because of hurricane losses and increasingly applied to wildfires, typically run thousands of possible scenarios that enable insurers to determine their potential financial exposure in a disaster. The models are proprietary but take into account many factors, including meteorological conditions, an area’s topography, the amount of brush and other nearby fuel, and a community’s building density.

When setting individual home premiums, California is requiring insurers to consider a building owner’s fire mitigation efforts, such as installing a Class A fire-rated roof, closing eaves or doing brush removal.

Will the models increase the availability of insurance?

The regulations are intended to sharply increase the availability of insurance in areas that have high fire risk as defined by Department of Insurance maps released this year, which are expected to be updated soon. Homeowners in those areas have been flocking to the FAIR Plan, the state’s insurer of last resort, which sells bare-bones policies. Southern California neighborhoods in those maps include ZIP Codes in Malibu, Beverly Hills and other communities in mountainous areas.

In exchange, large insurers are supposed to write policies in those neighborhoods equivalent to 85% of their statewide market share, meaning an insurer with a 10% statewide share should cover 8.5% of homes. However, critics such as Consumer Watchdog in Los Angeles say that those regulations have loopholes and that insurers have leeway to not meet that benchmark.

How will the new regulations affect my property insurance rates?

That’s a matter of debate. Catastrophe models are not specifically intended to lower rates, but insurers and the insurance department maintain that catastrophe models, by allowing insurers to more accurately calculate their risk, should allow for more gradual rate increases over time rather than requests for large one-time rate hikes, such as the 30% increase sought by State Farm in the summer.

Consumer Watchdog, however, says the models will lead to sharp rate hikes because the regulations allow insurers to keep essential details about the models under wraps despite a public review process established by the insurance department. The department disagrees and is supporting the establishment of a “public” model being developed by Cal Poly Humboldt and others that could be used in the future as a benchmark to evaluate the private models.

Will the new regulations affect me if I live in a city and not a wildfire zone?

Yes, sort of. Insurers in the state already include the risk of wildfire in their premiums, but it is based on historical claims data. Homes in neighborhoods that don’t face such a risk already pay lower rates, and that is not expected to change under the new rules. However, even homeowners in low-risk urban areas are facing rate hikes, and the department is hoping that the regulation, along with other regulatory changes — such as allowing insurers to include the cost of reinsurance in their premiums — will draw more insurers back into the market. Reinsurance is acquired by insurers from other insurers to help protect them from catastrophic losses.

Click here to read the full article in the LA Times

Filed Under: Top Stories Tagged With: , ,

California home insurance: Allstate requests largest rate hike seen in current crisis

July 12, 2024 By Megan Fan Munce Leave a Comment

Allstate, one of California’s largest home insurers, is asking to raise its homeowners insurance rates by an average of 34.1% later this year.

If regulators approve the filing without changes, which is uncertain, it would be the largest rate increase by a major insurer in the past three years. The request is larger than the 30% average increase that State Farm, California’s largest insurer, is seeking.

More than 350,000 policyholders would be affected by the rate change. Allstate is California’s sixth largest home insurer, representing about 5.5% of the overall market as of last year, according to the Department of Insurance. 

Click here to SUBSCRIBE to CA Political Review 

Allstate’s proposed figure is an average, meaning that premium changes would vary from house to house. Some customers could actually see their rates decrease by as much as 57%, but most would see higher rates, and at least one homeowner’s rates would increase by 647%, according to the request. Another homeowner, living in Mariposa County, would see a rate increase of 385%, according to the filing.

Allstate’s proposed home insurance rate changes

Allstate’s requested rate hike would increase average premiums by more than $4,000 in some places. It has yet to be approved.

The California Department of Insurance is reviewing the filing and will determine the exact increase amount and when it could go into effect. Department experts analyze companies’ data about their past costs and claims to determine how much they should be allowed to raise their rates; the increases cannot be excessive or discriminatory. Depending on its analysis, the department could approve a lower rate increase. In 2023, for example, Farmers Insurance Group applied to raise its homeowners, renters and condo rates by 25.5% on average, but was approved for only 12.5%.

If approved without alterations, Allstate’s homeowner rate increase would be the largest of any insurer this year and the largest increase by a major insurer since 2021, when Homesite Insurance Company was approved to raise homeowner rates by 38.2%.

Click here to read the full article in SF Chronicle

Filed Under: Trending News Tagged With: ,

State Farm seeks ‘massive’ insurance rate hike for California homeowners

July 3, 2024 By Ethan Varian 1 Comment

The request comes just months after it won approval to raise rates by 7% and 20% earlier this year.

State Farm is again seeking to raise California homeowners’ insurance premiums — this time by an average 30%.

The insurance giant, the largest provider in the state, is asking regulators to approve what would appear to be its steepest-ever rate hike in California, affecting more than 1.2 million homeowners. The request comes just months after the company won approval to raise rates by 7% and 20% earlier this year.

Also see: Home insurance at $10,000 a year shows California buyers’ pain

State Farm says the rate hike is necessary to shore up its financial situation following billions of dollars in losses caused by destructive wildfires and other catastrophic weather events. The company is asking permission to raise premiums as soon as the beginning of next year, though it could take longer to secure approval.

Click here to SUBSCRIBE to CA Political Review 

Under the current proposal, nearly all impacted policyholders would see their premiums go up between 25% and 35%. State Farm’s proposed rate increase would boost premiums by hundreds, if not thousands, of dollars, depending on the price of a homeowner’s current coverage.

State Farm insures roughly one in five homes statewide.

Consumer advocates called on the California Department of Insurance to closely scrutinize the evidence State Farm is providing to support the request before deciding whether to approve it.

“A 30% increase is going to be a massive blow to homeowners’ pocketbooks,” said Consumer Watchdog Executive Director Carmen Balber.

In addition to raising homeowner premiums, the company last week asked the California Department of Insurance for permission to raise rates by 52% for renters and 36% for condo owners.

“State Farm General is working toward its long-term sustainability in California,” the company said in a statement to news organizations. “Rate changes are driven by increased costs and risk.”

Also see: Allstate says it will insure California homes again, under one condition

California’s insurance rates are tightly regulated and, as a result, far lower than in many other states. The insurance industry, citing a series of destructive wildfire seasons and rising building costs, argues the rules have become untenable.

In recent years, providers, including State Farm, have ended coverage for hundreds of thousands of policyholders in fire-prone areas, even as regulators approved new rate hikes. Homeowners unable to find traditional policies have been left to buy into the exorbitantly expensive FAIR Plan, the state’s insurer of last resort.

State Farm, along with other large insurers, including Allstate, have even stopped writing new home insurance policies anywhere in California. It was unclear whether State Farm would restart writing policies if it wins approval on the rate hikes.

Click here to read the full article in OC Register

Filed Under: Trending News Tagged With: , ,

Another California crisis that can be solved with state officials getting out of the way

June 26, 2024 By Kerry Jackson Leave a Comment

California’s home insurance market is deeply troubled. A former insurance commissioner said it’s “in chaos.” Insurance Commissioner Ricardo Lara calls it “a real crisis.” Using more colorful language, the president of a Los Angeles agency told The San Francisco Standard that “if there’s a major event” before the market is fixed, “we are in deep doo-doo.”

The muddle became even messier when State Farm announced in March that beginning on July 3, the company would, on a “rolling basis,” decline to renew “approximately 30,000 homeowners, rental dwelling, and other property insurance policies.” It will also “withdraw from offering commercial apartment policies with the non-renewal of all of those approximately 42,000 policies.”

Click here to SUBSCRIBE to CA Political Review 

Those able to keep their State Farm policies were hit with 20 percent rate increases.

The company has policyholders in all 50 states, but it’s California that seems to be dominating its business decisions. Almost a year earlier, citing “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market,” State Farm said that it was done with offering new policies to “all business and personal lines property and casualty insurance” in the state.

Allstate has also said it was quitting. “New homeowners, condo and commercial insurance policies” are on pause as “the cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires, higher costs for repairing homes, and higher reinsurance premiums.”

Farmers Insurance has soured on California, as well, with affiliates dropping 100,000 customers across the state, including those who insured their autos through the company.

Over the longer term, seven of the top 12 insurance companies that had been doing business in California “have either stopped writing new policies or restricted them,” E&E News reports.

And it’s not just California’s problem anymore. The “deep doo-doo” has seeped into the Nevada side of Lake Tahoe, where, reports the San Francisco Chronicle, “increasing numbers of homeowners are facing insurance nonrenewals and soaring premiums — and few if any insurers willing to write new policies.”

Click here to read the full article in the OC Register

Filed Under: Top Stories Tagged With: , , ,

Gov. Newsom details plan to fix home insurance market woes, consumer advocate says it will cost consumers ‘billions’

May 31, 2024 By Ethan Baron Leave a Comment

Car, home, small business insurance would be affected

Gov. Gavin Newsom’s new proposal to speed approval of rate hikes for most types of property insurance and help stabilize a collapsing market will cost Californians billions of dollars, consumer advocates said Wednesday.

Insurers contend the plan language released announced Tuesday evening — which affects home, rental, vehicle, boat and small business policies — would help fix the state’s wildfire-linked insurance crisis that has seen rates climb, coverage dramatically shrink and insurers flee the state.

Newsom’s plan would impose a hard 120-day deadline for the state Department of Insurance to approve or deny insurance companies’ applications to raise premiums. Although the process is by law supposed to take only 60 days, the department routinely receives insurers’ consent to waive that deadline to allow its staff to conduct a review, so it can take more than two years, said Carmen Balber, executive director of Consumer Watchdog, a consumer advocacy group.

Click here to SUBSCRIBE to CA Political Review 

“The governor’s plan invites insurance companies to set their own prices” and would “cost insurance consumers billions in savings from future public rate challenges,” Balber said. “The idea that this is a quick fix that’s going to right California’s insurance market is a pipe dream.”

Forcing decisions within 120 days would hamper consumer groups’ ability to provide effective input into the process and challenge attempts to raise rates — oversight that has saved California consumers $6 billion since 2002, Balber said. Consumer Watchdog’s founder authored the state’s voter-approved insurance regulations.

The new time limit would also cut the state’s ability to properly examine rate-increase applications, and insurers would have little incentive to answer questions and provide data when the insurance department must issue a decision within 120 days, Balber said.

Alex Stack, a spokesman for Newsom’s office, said Wednesday that the proposal requires the Department of Insurance to “modernize and streamline its rate application process” to comply with the expedited timelines imposed by 1988’s Proposition 103.

“It makes no changes to the rules in Prop 103 for how much an insurance company can charge, which continues to be that rates cannot be ‘excessive, inadequate, or unfairly discriminatory,’” Stack said. “This is part of our larger package of solutions to ensure Californians have adequate access to insurance and combat market exodus that hurts consumers.”

California’s insurance industry has melted down in the wake of massive wildfires in recent years that have led to billions of dollars in claims. A year ago, the state’s largest insurer, State Farm, said it would stop offering new property insurance in California, and in March, the company said it would not renew 72,000 policies statewide, including thousands in the Bay Area.

Many other major insurers have limited coverage, particularly in areas of high fire risk. The crisis has pushed thousands of homeowners into the state-mandated FAIR Plan, the costly insurer of last resort backed by a pool of property insurance companies which face skyrocketing liability exposure.

Last fall, California’s elected insurance commissioner, Ricardo Lara, spurred by Newsom, announced a plan that met several insurance industry demands, including quicker approval for rate increases in exchange for a commitment to offer coverage in fire-risk areas.

Lara promised changes by the end of the year, but Newsom at his May budget presentation said, “I don’t think we have that much time.” His proposal released Tuesday would add the proposed changes to the budget as a “trailer bill” to be voted on next month, possibly bypassing committee hearings in the Assembly and Senate.

“The timeline on this and whether or not it’ll go through committee will be worked out with the Legislature,” Stack said.

Officials at the Department of Insurance had no immediate comment.

Click here to read the full article in the Mercury News

Filed Under: Trending News Tagged With: , , ,

California home insurance crisis: These are the major insurers still offering policies

May 7, 2024 By Megan Fan Munca 1 Comment

Numerous Californians have lost their home insurance over the past few years as some of the state’s largest insurers have cut back.

Photo by Ross Stone on Unsplash

Some insurers have limited where they will write new policies, and others have stopped writing new policies altogether. While most of the state’s 10 largest insurers say they are still offering new policies and renewing existing ones, there are key exceptions.

Together, the top 10 insurers represented just over half of the total California property and casualty insurance market in 2022, according to the latest available data from the California Department of Insurance. 

Click here to SUBSCRIBE to CA Political Review 

Here’s what to know about the top 10 home insurers in California:

No. 1 State Farm

State Farm, California’s largest property and casualty insurer with an 8.7% market share, hasn’t offered new home policies since May 2023. The company said wildfire risk, construction costs and pricey premiums for reinsurance (insurance for insurers, which cannot be factored into rates in California) motivated the decision. 

The company has continued to renew most, but not all, of its existing policies, though prices are rising. In March, State Farm rates rose an average of 20% across the state. Shortly after the rate increase took effect, State Farm announced it would not renew 72,000 policies — 30,000 homeowner and other personal property policies and 42,000 commercial property policies, a small fraction of its policies in the state.

Click here to read the full article in the SF Chronicle

Filed Under: Top Stories Tagged With: , ,

California’s firefighters can’t get fire insurance

April 13, 2024 By Camille Von Kaenel 5 Comments

“We can’t get fire insurance at a fire station that’s going to be manned by firefighters,” one state lawmaker said in incredulity.

SACRAMENTO, California — How bad is California’s wildfire insurance crisis? So bad that the state can’t get coverage for its own firehouses.

CalFire

The irony emerged at a state Senate budget subcommittee hearing Thursday in Sacramento, where Gov. Gavin Newsom’s administration defended the California Department of Forestry and Fire Protection’s request for $11 million to replace a kitchen at Ishi Conservation Camp, which houses and trains inmate firefighters in the remote Sierra Nevada foothills of Tehama County.

Click here to SUBSCRIBE to CA Political Review 

Cal Fire usually pays for building maintenance with bonds based on the value of its property, but it couldn’t for the Ishi project because it couldn’t insure the facility to underwriters’ satisfaction, Finance Department analyst Victor Lopez told lawmakers.

“The insurance industry, they weren’t interested in selling insurance policies in the region due to the perceived fire risk in the area,” Lopez said. And the insurer of last resort, FAIR Plan, doesn’t meet the bond underwriters’ requirements, either, he added.

State senators from both parties were incredulous.

“We can’t get fire insurance at a fire station that’s going to be manned by firefighters,” said state Sen. Brian Dahle, a Republican from Lassen County, in the northeast corner of the state. “That’s where we are in California. That to me is crazy.”

Add Cal Fire to the growing list of constituents putting pressure on lawmakers to do something to stop property insurers’ exodus, which makes headlines daily as companies announce policy non-renewals or moratoriums on new coverage.

California Insurance Commissioner Ricardo Lara agreed last year to let insurers raise rates and base them on future projections of fire damages, after lawmakers punted the decision to his office. Lara has been duly handing out rate increases, but insurers are still leaving: In the past two months alone, American National announced it would leave the state and State Farm said it would drop tens of thousands of homeowners.

State Sen. Josh Becker, a Democrat from Silicon Valley, highlighted his bill to require insurance companies to give property owners more credit for things like installing fire-resistant roofs and building fire breaks. (Insurance companies oppose it, saying it could force them to take on too much risk.)

“It’s ironic and highlights the problem we’re trying to solve,” he said about Cal Fire’s insurance woes. “We’re just trying to get recognition for the direct fire mitigation on the ground.”

Ishi might be the tip of an iceberg.

Mike McGinness, Department of Finance’s deputy director responsible for Cal Fire, said he only knew of one other Cal Fire facility that has had a similar problem so far. But the Department of General Services, which oversees all state facilities, has identified 16 projects statewide — 11 of which are Cal Fire’s — that may have trouble getting fire insurance, spokesperson Monica Hassan said in an email.

Cal Fire and the Department of Finance are now reviewing all the maintenance and upgrade projects seeking funds this year to figure out if others might struggle to get fire insurance, too, McGinness said.

“Typically, this hasn’t been an issue and so we have waited until closer to the point of selling the bonds,” he said. “But given recent trends in the insurance industry, it’s been important to start looking.”

So far, lawmakers have defended Cal Fire’s increasing drain on state coffers, even in a down budget year, as Newsom adds firefighters to cut back flammable vegetation and protect communities from increasingly intense wildfires.

Click here to read the full article in Politico

Filed Under: Trending News Tagged With: , , ,

State Farm discontinuing 72,000 home policies in California in latest blow to state insurance market

March 23, 2024 By Staff 7 Comments

SACRAMENTO, Calif. (AP) — State Farm will discontinue coverage for 72,000 houses and apartments in California starting this summer, the insurance giant said this week, nine months after announcing it would not issue new home policies in the state

The Illinois-based company, California’s largest insurer, cited soaring costs, the increasing risk of catastrophes like wildfires and outdated regulations as reasons it won’t renew the policies on 30,000 houses and 42,000 apartments, the Bay Area News Group reported Thursday.

Click here to SUBSCRIBE to CA Political Review 

“This decision was not made lightly and only after careful analysis of State Farm General’s financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs, and the limitations of working within decades-old insurance regulations,” the company said in a statement Wednesday.

“State Farm General takes seriously our responsibility to maintain adequate claims-paying capacity for our customers and to comply with applicable financial solvency laws,” it continued. “It is necessary to take these actions now.”

The move comes as California’s elected insurance commissioner undertakes a yearlong overhaul of home insurance regulations aimed at calming the state’s imploding market by giving insurers more latitude to raise premiums while extracting commitments from them to extend coverage in fire-risk areas, the news group said.

Click to read the full article in AP News

Filed Under: Top Stories Tagged With: , , ,

Californians finding it hard to keep their homes insured amid skyrocketing rates, canceled policies

March 15, 2024 By Carlos Granda 5 Comments

LOS ANGELES — More and more Californians are finding it difficult, or even impossible, to keep their homes insured amid skyrocketing rates and policies being canceled by insurance companies.

Eyewitness News looked into the cause of this insurance crisis and what can be done about it.

Homeowners like Susan Bookheimer of Calabasas have seen firsthand the difficulty of keeping your home insured.

Click here to SUBSCRIBE to CA Political Review 

“The insurance didn’t care,” she said. “They increased the rates just an incredible amount of money.”

She says that after one insurance company raised her premium to $19,000 a year, she naturally tried to find something less expensive.

“It was terribly hard. I called all of the major insurance companies. None of them would even talk to me. They’re not writing policies,” said Bookheimer.

She was able to find a different company but just recently that company also raised the premium.

She feels lucky to even have insurance. Thousands of people are getting notices that their polices are either going up or not being renewed at all.

Major insurers such as State Farm stopped accepting new applications in May of last year. Allstate also stopped new policies.

Bookheimer says she cut back vegetation and she keeps the area around her house clear.

Los Angeles County Supervisor Kathryn Barger says her office is getting numerous calls from homeowners who say they are protecting their homes but are still losing their insurance.

“They are doing clearance and I feel that they feel that this is just an excuse for them to cancel their insurance or charge more,” said Barger.

Record-breaking wildfire seasons in 2017 and 2018 caused huge losses for the insurance industry in California. In November 2018 alone, insurer losses were more than $12 billion. That’s when the number of cancellations started to go up.

In 2019 there were 234,000 cancellations statewide. The number of cancellations dropped during the pandemic to 186,000 and then jumped in 2021 to 241,000.

Insurance companies say because of climate change we are seeing more fires, more floods, more hurricanes.

“It’s not great news for consumers but insurers have said they need more price in order to take on the additional risk and loss associated with these climate change-driven, more frequent and severe wildfires,” said Dave Jones, the former insurance commissioner for California.

Bookheimer says she sent complaints to the current state insurance commissioner but never heard back.

We tried to interview current insurance commissioner Ricardo Lara. We asked his office several times over the last few weeks but they never made him available.

Barger is asking Lara to find a solution with insurance companies.

“Much of this is being done by an industry that is regulated by the Department of Insurance but is also using their leverage to say we are going to pull out of the state entirely,” said Barger.

Click here to read the full article on ABCNews

Filed Under: Trending News Tagged With: , ,