Oh, also, California has repeatedly harassed insurance companies: To understand this, we have to back up a bit.Back in 2017 and 2018, when wildfires raged throughout the state, a lot of insurers drastically scaled back their coverage. Those wildfires had cost them $23 billion in total, about twice as much as the companies had collected in premiums over that same time period, and many of the companies decided some of these places were simply too costly to insure.
Premiums, after all, are not arbitrary; they reflect risk. Teams of actuaries spend a lot of time trying to understand what prices to offer homeowners in any given area. Unfortunately, in California, the insurance commissioner—an elected official,
Ricardo Lara—must approve premium increases. Lara generally won't
approve high premium increases, which leads to the predictable outcome of insurers pulling out. Something Lara is also seeking to, uh, "fix" via government coercion.
"For the first time in history we are requiring insurance companies to expand where people need help the most," he announced last month. "Major insurance companies must increase the writing of comprehensive policies in wildfire distressed areas equivalent to no less than 85% of their statewide market share," he continued.
Yes, you understand this correctly: He thinks bullying private insurers into covering costly wildfire-prone areas (as opposed to allowing them to accurately price risk) will result in more coverage for homeowners.
Look forward to, when it gets costly enough, State Farm and the like totally pulling out of the whole state. Lara, contra his own hubris, can't force the financials to work. (Somehow, many progressives cannot comprehend this cycle of cause and effect.)
But don't worry, there's another option. "Homeowners have largely replaced their fire coverage with a state plan of last resort called the California FAIR plan, an insurance pool, which covers up to $3 million in damages for residential properties and $20 million for commercial ones," reports The New York Times. "Between September 2020 and September 2024,
the number of FAIR policies for dwellings grew by 123 percent, to 452,000 policies." The FAIR fund, though, was widely expected to become insolvent in the event of catastrophe—which any California-watcher knows is not an if but rather a when, given the wildfire track record over the last few years....
