Why are more insurance companies giving up on California?
MORE DEFECTIONS
For the past several months Insurance news for policyholders in California has not been good. Recently that news became even worse with the announcement that Tokio Marine and Trans Pacific Holdings will be withdrawing from the personal Insurance market in California, both of these companies are subsidiaries of Tokio Marine holdings.
A company representative from Tokio Marine said in a statement recently,
“Given the small segment of personal lines business we write and escalating costs, we cannot support personal lines coverage's and do not plan to return.”
So we are now dealing with a very long list of Homeowner insurance carriers that have left California or have withdrawn from the personal lines market altogether.
THE HIGH COST FOR REPAIR
The major complaint given about insuring homes in California seems to be the high cost for the structural repair from covered losses.
The following is a quote from Policygenius Home Insurance Pricing Report,
“Homeowners in California saw nearly a 10% increase in home insurance rates from May 2021 to May 2022, according to the Policygenius Home Insurance Pricing Report. Experts point the blame at an increase in costly wildfires, a rise in building costs, and a shortage in construction labor.”
However, even after examining all of these somewhat similar reasons for insurance carriers to escape homeowner coverage responsibilities in California, I believe what is really behind the increased cost for labor, materials and repair work rest with the company that sets the pricing structure and that is The Xactimate Corporation.
TAKE A LOOK AT THE CAUSE
The Merlin Law Group, which is a member of the American Bar Association, has researched the Xactimate issue and discovered the following,
“22 of the top 25 property insurance companies utilizes the Xactimate system.’’
Also, it is good to point out again that Xactimate is a business subsidiary of a company called Verisk Analytics. Verisk was created to serve as the parent company for the Insurance Services Office, which researches and creates the Policy Forms that provide and deny coverage for your property.
STATE FARM’S COSTLY ERROR
A case in point: A class-action lawsuit against State Farm can move forward according to a federal court ruling.
Some of the background for this case is that from 2004 to 2017 State Farm Adjusters did not properly figure the cost for depreciation. This led to 65,575 policyholders being paid less that they should have received. The incorrect payment amounts was the direct result of the Xactimate System being used incorrectly.
SUGGESTIONS FOR REDUCING COST
1. Each property insurance carrier should be required to provide an estimate written by that carrier and not by some Artificial Intelligence that is not willing to negotiate because it just isn’t capable. What I mean is that each property carrier should provide its own price sheet for use in constructing an estimate. I have stated previously that during my tenure as a property claims specialist, I called the Xactimate Office to discuss just how the Xactimate creators arrive at a cost for repair work. The answer I received was the one I expected and that was the cost for the repair is obtained by speaking with General Contractors in each specific geographical area concerned. I should say something here about the fox being in charge of the hen house, but I won’t.
2. Here is a suggestion for consideration, each carrier should keep a staff of its own construction crews for use on everything from a busted water pipe to a major fire loss. The company crews would be reimbursed per the company payroll and would not receive their salary based upon the size of the loss. The repair cost would be determined based upon the insurance company’s own price guide.
Respectfully Submitted,
Norman Lambe