The news coming in from Sacramento will be making Insurance Company CEO’s dance on their desks. Commissioner Lara has indicated that the State Insurance Commission will now let Insurance Companies consider Climate Change when they are setting their prices.
This capitulation was considered necessary in order to stop Insurance Carriers like State Farm, Farmers, Allstate and many other large carriers from leaving the state or to cease from insuring Homeowners policies.
Unlike other states, California at present, does not let insurance companies consider current or future risks when deciding how much to charge for an insurance policy. Instead, they can only consider what’s happened on a property in the past to set the price.
Lara said his plan is to “require insurance companies to write policies for no less than 85% of their statewide market share in areas at risk for wildfires. That means if a company writes policies for 20 homes, it must write 17 new policies for homeowners in wildfire-distressed areas — moving those people off of the FAIR Plan.”
If I read Mr. Lara’s quote correctly, it means that 85% of the new policies needs to be in wildfire-distressed areas. You can only imagine what the new rates for those people will be.
For a good long time, it was the accepted practice to let the buyers set the price for a certain product, meaning the company with the best and the least expensive product will be the one purchased.
In 1988, the California Insurance Commissioner gained the power to deny requested premium increases with the passage of Proposition 103. This voter approved legislation requires an insurance company to obtain approval from the California Department of Insurance prior to approval of any rate hikes. The regulation was provided in order to protect the Insurance consuming public from excessive insurance premiums.
Proposition 103, where are you now.
The coming months and years will reveal to us who will prevail in this semi-price war among the Insurance carriers that have been threatening to leave.
There are several issues that I see and they are the following:
1. ) We have an Insurance Commissioner accused of taking money from an Insurance Company to help finance his previous campaign. This issue has not been talked about enough.
2. ) We need to spend more on the care of our State and Federal Forrest instead of thinking they will take care of themselves. We can see on the news the net result of that program.
3. ) I wonder, will the premium for a Homeowners Policy be flexible depending upon the time of the season and location of the Homeowners property.
4. ) We are in need of more Insurance companies in this State and Country. The greater the number of companies offering a product, the lower the price will be. This is known as competition.
5. ) Do away with this policy of thinking we can learn from the unknown future. We cannot in all good conscience believe we can learn anything from an unknown future.
Remember, Philosopher George Santayana wrote “Those who forget history, are condemned to relive it”.
Respectfully Submitted,
Norman Lambe
nwlambe@gmail.com