The state of California on Tuesday will take steps to try to stabilize the market for homeowner's insurance after a major carrier announced it will stop insuring thousands.
Last week, State Farm announced it will cut around 30,000 property insurance policies and 42,000 commercial apartment policies this summer because of rising costs and the risks of catastrophes like wildfires.
On Tuesday, the state Department of Insurance will hold a public meeting to discuss new regulations designed to make it easier and more enticing for companies to insure homeowners in California.
One proposal is to streamline rate reviews for insurance companies that have complained it takes too long for the state to approve or deny a hike in insurance premiums.
"By updating submission procedures and clarifying requirements for insurance companies, we aim to eliminate confusion, reduce delays, and enhance public participation in the rate-making process," California Insurance Commissioner Ricardo Lara said. "This will help our department’s experts make sure that no policyholder is paying more than is required."
At least seven of California's largest property insurers have either limited or completely paused new home insurance applications. State Farm stopped writing new California homeowners policies last year and raised its rates.
In a statement to NBC Bay Area, State Farm says it’s dropping policies because the insurer continues to be impacted by inflation, catastrophe exposure, reinsurance costs and the limitations of working within decades-old insurance regulations.
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State Farm recently reported a net worth of $134 billion, up $3 billion from the year before. The state insurance commissioner says that raises serious questions about its financial situation — questions the company must answer to regulators.
Janet Ruiz of the Insurance Information Institute says the money Californians pay for property insurance doesn’t cover claims.
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"For the last 10 years, for every one dollar of premium that was taken in, $1.08 was paid in claims in expenses," Ruiz said. "We would like to be able to charge the correct premiums for the risk."
State law requires insurance companies provide 60 days notice for a nonrenewal. Some homeowners might need those two months to shop around and find a new policy.
