Another Home Insurer Leaving California; Regulators Looking for Answers

Another Home Insurer Leaving California; Regulators Looking for Answers

Firefighters mop up hot spots at a home that was destroyed by a wildfire in Santa Rosa, Calif., on Sept. 28, 2020. (Justin Sullivan/Getty Images)

Travis Gillmore

Travis Gillmore

1/26/2024

Updated: 1/29/2024

SACRAMENTO, Calif.—The Hartford has announced that it will no longer be writing new home insurance policies in California, further contributing to the state’s home insurance availability crisis.
“The homeowners’ insurance environment in California has unique challenges that have required us to reconsider the viability of writing new homeowners’ business in the state,” a spokesperson for The Hartford told The Epoch Times in an email on Jan. 25. “Based on these challenges and our analysis of the trends, we have decided to stop offering new homeowners policies starting Feb. 1.”
Existing homeowners can renew their policies, and other insurance products covering businesses and autos will still be offered, she said.
The company’s home insurance market share in the state is less than 1 percent, according to the state’s Department of Insurance.
A difficult regulatory environment that restricts insurers’ ability to recoup costs has been cited by the eight major insurers that paused writing policies or withdrew from the state over the past year.
“We do not enter into this decision lightly, and we appreciate and support efforts like Commissioner Lara’s Sustainability Insurance Strategy to help bring stability to the market,” the spokesperson for The Hartford said. “We will be watching those efforts closely.”
Seeking to find a solution to the insurance dilemma, state lawmakers met with Ricardo Lara, commissioner of the California Department of Insurance, during a Senate Insurance Committee hearing on Jan. 24.
Then-state Sen. Ricardo Lara in a file photo. (Robin Kemker/The Epoch Times)

Then-state Sen. Ricardo Lara in a file photo. (Robin Kemker/The Epoch Times)

State Sen. Susan Rubio, chair of the insurance committee, said during the hearing that consumers across the state are negatively impacted because of a lack of insurance and are in fear of losing their homes.
Mr. Lara blamed “historic inflation” and an outdated regulatory system for the “unprecedented stress” in the insurance market.
With more than half of the largest insurers—representing about 85 percent of the insurance coverage written in the state—choosing to stop offering home insurance, many homeowners are left with what’s known as the FAIR plan, a fire insurance pool of the state’s licensed insurers, as a last resort.
“The FAIR plan has become the only option,” versus no plan, Mr. Lara said during the hearing.
One senator on the committee, who said her home is insured by the FAIR plan, said the limited coverage and high prices are detrimental to many Californians.
“It sure does not feel fair to only have one option. ... and it’s unaffordable,” state Sen. Marie Alvarado-Gil said during the meeting. “This is not a sustainable business model.”
Prices for insurance coverage increased from a few thousand dollars annually with traditional insurers to more than $14,000 per year on the FAIR plan for some, she said.
As insurers retreated from the state, the use of the plan ballooned to about 350,000 policies in 2023 from about 125,000 policies in 2018, according to testimony to the committee by Michael Martinez, chief deputy commissioner for the Department of Insurance.
About 900 applications per day were considered in 2023, and 50,000 calls related to the FAIR plan were fielded last month by the department, he said.
Looking to find a long-term, sustainable solution, Ms. Rubio said urgent action is needed to resolve the situation because Californians are suffering.
“The more we stall, the more it falls on consumers to pay for it,” she said during the hearing. “We’re at the brink of really falling apart.”
The California State Capitol building in Sacramento, Calif., on March 11, 2023. (John Fredricks/The Epoch Times)

The California State Capitol building in Sacramento, Calif., on March 11, 2023. (John Fredricks/The Epoch Times)

Plans to address the problem include allowing insurers to recoup certain reinsurance costs—how insurers mitigate risk—if the companies write 85 percent of their new business in wildfire risk areas and help to get consumers off the FAIR plan.
With a goal of implementing such new regulations by the end of 2024, the insurance commissioner said incremental steps taken throughout the year will yield benefits.
However, some have questioned how the new regulations will be imposed and what waivers will be granted to some insurers. Of particular concern is the potential for private insurance companies to offer plans that are similar in price and coverage to the FAIR plan—although it remains unclear if the insurance department will grant such requests.
One committee member, state Sen. Bill Dodd—whose district includes northern areas of the state most affected by wildfires—requested regular updates throughout the year on the issue.
“I think it’s a trust, but verify situation.”
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Travis Gillmore

Travis Gillmore

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Travis Gillmore is an avid reader and journalism connoisseur based in California covering finance, politics, the State Capitol, and breaking news for The Epoch Times.

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