SACRAMENTO – The insurance battle for California homeowners continues. This week, some Bay Area homeowners learned that Liberty Mutual will drop a certain type of fire insurance in the state.
The announcement comes as the California Department of Insurance looks for ways to encourage insurance companies to expand coverage in the state.
Next month, California Insurance Commissioner Ricardo Lara will ask the public for input on a plan to change some regulations insurers must follow to do business in the state, including the way they calculate the risk of wildfires and other disasters to set their premiums.
Under the California Department of Insurance’s proposal, insurers that “commit to writing additional policies or maintaining policies for disaster areas could be allowed to use forward-looking catastrophe models,” according to a draft of the proposal on the California Department of Insurance’s website.
Industry observers believe the government is essentially saying: “We will change the rules if you provide more insurance coverage.”
“Consumers should be very concerned,” said Carmen Balber, executive director of the consumer protection organization Consumer Watchdog. “What the commissioner is doing will drive up their tariffs without getting much in return.”
Balber said the proposal would give insurance companies three years to fulfill their promises of increased coverage without facing penalties if they fail to do so.
There would be no transparency about how the disaster models work because the algorithms underlying them would be developed by third-party companies and would be considered proprietary information.
Unlike the requirements of the current regulations: “Insurance companies do not have to provide us with figures to ensure that their forecasts are correct,” said Balber.
Others are more optimistic.
Karl Sussman is an insurance broker and industry analyst and believes something needs to change.
“The market is currently worse than ever,” he said.
Sussman believes that more insurance providers in the market will ultimately lead to more competitive prices for consumers.
“By and large, we’re going to see all the insurers come back into the market. That’s going to lower their rates again,” Sussman said. “Right now, we’re in the complete opposite of a competitive market because nobody is issuing (new policies).”
Since 2022, seven of the state’s largest property insurers, including State Farm, Allstate and Nationwide, have either dropped or limited coverage for homeowners in California.
This week, some Bay Area homeowners learned they are among 17,000 Liberty Mutual customers in the state who have lost a certain type of fire insurance.
Residential fire insurance covers the cost of a home’s structure, but not its contents. This is the type of insurance that many rental or vacation home owners rely on.
The California Department of Insurance’s public hearing on this issue is scheduled for September 17.
The meeting will be held virtually and participants can call in to voice their concerns and opinions. No decisions are expected to be made at the hearing, but Lara has said he wants to approve these rule changes by the end of the year.
