Insurance Commissioners 'deal' with home insurers raises lots of questions

The California's Insurance Commissioner's announcement Thursday seemingly struck a deal to make home and renters' insurance more available in the state and create a better environment for insurers to return to the market.    

When a very high state official says he has a deal on a critical cornerstone of the entire state economy, it’s worth exploring how true that is.

The insurance commissioner says he made an agreement with insurers to increase options for homeowners and renters, and create more price competition, especially those forced into California Fair Plan, the insurer of last resort. 

"This is a great day for consumers as we are able to give them more availability," said California Insurance Commissioner Ricardo Lara.

"We had gotten to the point in this standoff between insurance companies and our regulatory system where something had to be done. I have to commend [Lara] and [Gov. Gavin Newsom] for being brave," said United Policyholders' consumer advocate Amy Bach.

However, not everyone is so sure.

Consumer advocate Harvey Rosenfield, author of voter-passed Prop 103 that's saved customers many billions of dollars and with Consumer Watchdog, asked "Where's the plan? I've negotiated it. But it's behind closed doors, nobody's seen it."

Lara says the deal will allow his department to explore, not guarantee, fair rates. Insurers will likely be allowed to pass on re-insurance costs they buy to offset major California disaster claims.  

New climate change risk evaluation rate calculations are likely to be approved. Customers, even in high fire risk areas, will be able to get traditional insurance, but affordability is not guaranteed.  


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Whatever the deal may be, it will likely come at a cost, according to Insurance agent Jeff Quan.

"The big carriers like State Farm, Farmer or Allstate are looking at rate increases of 20 to 30 percent over the current market; 20 to 30% is on average…there may be homes that see a 200% increase," said Quan.

That would render those homes with mega-increases essentially uninsurable and unsellable. 

"We're taking hundreds, but more likely, thousands of dollars more every year for home insurance," said Rosenfield.

All of this raises an alternative, a voter-approved non-profit state insurance agency. 

"Our elected officials don't understand what's at stake. Maybe we do need a public insurance company," said Rosenfield.

Lara says even at an accelerated pace, it will still take at least 15 months to get new rules in place.