Looks like The Hartford is out of California now, too:
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The data/communication/etc. requirements of this recent WF regulation are just absurdly onerous, on top of the snails pace rate filing reviews.
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Absolutely, my co-worker has had to deal with this. I don’t know the ins and outs of it but there are several different items that could each get a very small discount. In total it isn’t going to be very significant, it’s more red tape than anything.
Except from BULLETIN 2023-2
TO: All Admitted Insurers Writing Residential or Commercial
Property Insurance in California
FROM: Insurance Commissioner Ricardo Lara
DATE: February 3, 2023
RE: Prior Approval Rate Application Requirements to Comply with
Title 10 of the California Code of Regulations, Section 2644.9(d)
My regulation is part of a comprehensive response to protect consumers from climate
change-intensified wildfires…My new regulation also requires insurance companies to establish a process for
releasing wildfire risk determinations to residents and businesses within 180 days of the
effective date of the regulation…
Ricardo Lara is pretty possessive about these new regulations.
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I love the part where you have to communicate all of the specifics to customers (including the rating factors or coefficients in any modeling) in order for the customer to challenge any data you’re using.
I struggle to see how anyone would want to write wildfire risk in CA. They won’t let you charge an adequate rate and they pile on the regulations to really push up that opex. They probably feel the rest of the country should be subsidizing CA opex like that FL politician who felt the rest of the country should subsidize their HU risk.
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In 2020 I was able to get wildfire factors approved with relative ease after relying on experience that Nationwide responded with to support theirs. This is from publicly accessible page 1,120 of California filing 19-448 showing their 5-yr loss ratio history (2013-17) in California:
Thanks NW, I owe you one.
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Non-P&C here.
What amount is considered “credible”?
So, if someone lives next to (within 1/2 mile) a high-risk area (defined as…? near a dry and wooded area? near the ocean? Near the San Andreas or other Faults? Below steep areas subject to landslides?) that could conceivably be considered high-risk (high-loss)?
That output comes from a wildfire risk model.
This googled result seemed halfway useful:
That can be a very difficult question to answer and will depend on the context, etc. etc. I will say though in the context of CAT models expected losses they’re typically treated as fully (i.e. 100%) credible, although it can depend some. Not all CAT models are equally good, imo.
https://www.sfchronicle.com/california/article/condo-insurance-foremost-18630684.php
archive link
My favorite quote:
The California Department of Insurance has attempted to address the withdrawal of insurance companies with the “Sustainable Insurance Strategy,” which will require insurers to write at least 85% of their market share in high wildfire risk areas.
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lol
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Insurers stop writing new business. If only they had been coerced to write a disproportionate share of wildfire risks sooner this never would have happened, lol
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“Rate increases pending” seems like a pretty meaningless category. The rate increase is either approved or it’s not. They can’t sell at the pending rate. Maybe the pause is until the rate increase goes through???
The fact that 1 says “approved” and 10 do not highly suggests that the other 10 are pending.
Also, if the insurer asks for a 30% increase and the DOI approves a 10% increase that presumably counts as an approved increase, but the insurer might still be losing money at 110% of last year’s premium.
What a load of BS propaganda!
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This reminds me of the Fall meeting where they had a roundtable where someone from the DOI and FAIR was there and the FAIR person also complained that they were waiting for over a year for their rate increase. The DOI person was saying how insurers were posting their lowest LRs in years and making tons of cash and could not understand why everyone wanted increases. Definitely worth a watch if you did not yet see it.
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I didn’t want to start a new thread just for this article (gift link), so…
How Selling Insurance Became One of the Worst Jobs in California - WSJ
(not really news, just human interest on the difficulties of being a personal lines agent in California, along with reports of glitches from the rapid growth of California’s fair plan)
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managing the heck out of customer frustration and animosity. def the frontlines for that and I suspect most of the inquiries are tense.
but that’s 10-15% of a much larger premium base!
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txt
State Farm won’t renew 72,000 insurance policies in California, worsening the state’s insurance crisis
State Farm announced this week it will not renew 72,000 policies in California amid a tight insurance market.
The California homeowners’ insurance crisis reached another critical stage this week when State Farm General Insurance announced that it would not renew policies for 72,000 property owners across the state.
The insurance giant announced Wednesday that it would not renew homeowner insurance policies for 30,000 customers, including owners of condominiums. It also plans not to offer commercial apartment policies and won’t renew the 42,000 now in place.
Although the number of people affected is large, the company said the cuts represent less than 3% of its policies in the state.
“This decision was not made lightly,” State Farm wrote in a statement. The company “takes seriously our responsibility to maintain adequate claims-paying capacity for our customers and to comply with applicable financial solvency laws. It is necessary to take these actions now.”
News of the cancellations did not sit well with the California Department of Insurance.
“One of our roles as the insurance regulator is to hold insurance companies accountable for their words and deeds,” said Deputy Insurance Commissioner Michael Soller. “State Farm General’s decision today raises serious questions about its financial situation — questions the company must answer to regulators.”
California’s home insurer of last resort sees enrollment surge, raising concerns over its finances
State Farm’s decision not to renew policies comes as thousands of Californians are finding it extremely difficult to insure their homes and commercial properties as companies increase rates, limit coverage or stop offering policies in areas increasingly susceptible to natural disasters.
The companies have cited high inflation, catastrophe exposure, reinsurance costs and the limitation of decades-old insurance regulations as reasons for scaling back policies in the state.
State Farm reported a net loss of $6.3 billion in 2023 compared to a net loss of $6.7 billion in 2022.
The lack of options has prompted thousands of Californians to purchase insurance from the FAIR Plan as a last resort. Funded by the insurers doing business in California, the Fair Access to Insurance Requirement plan provides more limited coverage as a fallback for property owners unable to find conventional policies they can afford.
But the enrollment surge is putting a financial strain on the state insurer as it faces a potential loss of $311 billion, up from $50 billion in 2018.
At a legislative hearing last week, Victoria Roach, president of the FAIR Plan Assn., warned lawmakers that the insurer of last resort had a surplus of only $200 million and was at risk of financial instability should a catastrophic event occur.
A major auto insurer returns to California — with a 30% price hike
“We grew another $10 billion in exposure in January and another $15 billion in February,” Roach told lawmakers. “So the numbers just continue to climb, which is a concern — as those numbers climb, our financial stability comes more in question and we come closer to an assessment of the market should we, knock on wood, have a catastrophe.”
“We’re one bad fire season away from complete insolvency — it feels like a big gamble in many ways,” said Assemblymember Jim Wood, a Democrat from Sonoma County. “If this were on Wall Street, I’m not sure you’d be able to get away with this.”
In response to the crisis, Insurance Commissioner Ricardo Lara has proposed a set of new rules that would allow insurers to raise rates to cover reinsurance costs and projected losses from catastrophic fires, but also require that they provide coverage for more homes in the canyons and hills. The proposals, which aim to move people off the FAIR plan and slow the increase in premiums, have won support from insurance industry trade groups and some consumer groups, but criticism from other consumer advocates such as Consumer Watchdog.
State Farm said it would continue to work with Lara, the governor’s office and policymakers to pursue the reforms in order to establish “an environment in which insurance rates are better aligned with risk.”
Karl Susman, an insurance expert, said the Department of Insurance needs to push forward the new regulations at a much faster rate to prevent companies from leaving the state.
“Even if it works out perfectly, you’re looking at every carrier having to now submit their new plans based on new rates and get them approved, and then they have to program them in their systems, then they have to roll it out to their clients and then they have to wait a year to get premiums based on those rates,” he said. “We’re talking about a long runway before these regulations will start having an impact.”
California insurer of last resort says it’s not prepared for a big disaster
Susman hopes that the latest volley of State Farm cancellations will put more pressure on the Department of Insurance to speed up the process.
“It’s a tough, tough place for consumers right now, and my hope is that this will help expedite the department’s new regulations that it’s pushing out into being done maybe in weeks or the next month or two rather than slowly over the next eight months.”
State Farm said cancellation of policies will occur in the summer, starting with homeowner insurance on July 3, then commercial properties on Aug. 20.
Deputy Insurance Commissioner Michael Soller is shocked (SHOCKED!) that SF doesn’t want to keep losing money. Meanwhile, the state-run insurance company is almost out of money.
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Buncha liberal arts majors with no industry experience trying to help out their constituents
I swear to god these people don’t understand the concept of money. Always looking for ways to waste it and shocked when they don’t get support for additional funds
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The CA DOI should’ve been sued ages ago for not following the (actuarial) science.
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Did anyone else watch the CAS webinar about the state of insurance in CA?
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