After State Farm made the announcement that caused so much heartache to tens of thousands of California homeowners, California insurance commissioner Ricardo Lara decided to break his silence on the matter.
The insurance commissioner is extremely concerned about how this will affect the lives of homeowners and has decided to take necessary steps to investigate State Farm and its reasons for making such decisions while being careful not to push other companies out of California.
The Latest Blow To California Property Owners
California’s largest home insurance company made a huge announcement that turned the whole state upside down. The State Farm announced that this summer they would be stopping coverage for at least 72 homes and apartments policies.
This decision is a tough one and a blow to the people of California who are already suffering from extremely high insurance rates and scarce policy coverage.
Inflation And Regulatory Cost Influence Led The Decision
When State Farm announced its decision to discontinue, it also added the reasons for its decision. The insurance company mentioned that they made their decision considering inflation, regulatory costs, and also other increasing risks from several catastrophes.
They had other reasons, but the limitations of working within decades-old insurance regulations topped it all. The decision wasn’t made lightly, and these conditions were put into deep consideration, but it had to come to this.
This Is A Real Crisis
The news about the discontinuation has finally landed on the table of California’s insurance commissioner and during his interview on Friday, Ricardo Lara confirmed that this is a real crisis.
Ricardo Lara also mentioned his intentions to investigate the finances of the State Farm, however, these investigations can’t go too far so as not to chase other companies out of California completely.
The Difference Between Insurance Companies And Utility Companies
While having a conversation with KABC, insurance commissioner Ricardo Lara explained how different insurance companies are from Utility companies. He added that “by law” insurance companies don’t need to be here.
He also talked about how hard it is to regulate insurance companies. Citing what happened after the Northridge earthquake and how insurance companies stopped taking earthquake insurance in California after the legislature came in to over-regulate their affairs.
Ricardo Lara Will Enact The Largest Insurance Reform In California
While speaking with the press, the commissioner made an exciting announcement, he informed the public about his attempts to spearhead an effort to pass the largest insurance reform.
Ricardo added that he has already proposed new regulations that will help change how insurance companies operate and assess their risk from catastrophic situations like earthquakes and wildfires.
This Approach Will Stabilize Premium Cost And Expand Coverage
Going by Ricardo’s approach, this is one of the best ways to tackle California’s insurance crisis. He believes that if this proposal passes, issues concerning premium cost and coverage expansions will be stabilized.
Despite Ricardo’s intentions, critics have other concerns. They believe Ricardo has not gone far enough and might need the California legislature to step in and take over.
Ricardo’s Approach Is Not Working
One of Ricardo’s critics had something to say concerning the recent happenings in California’s insurance market. Carmen Balber who is the executive director of Consumer Watchdog, a group known for criticizing Ricardo might have made some sense.
Carmen said that the fact that the State Farm announced its discontinuation could only mean that something was not right. Carmen added that the announcement shows that Ricardo’s current approach is not working.
Several Years Of Pleading
Carmen Balder in his interview with KABC touched on some areas which need urgent attention. He stated that for several years now, the Californian government has been asking insurance companies to only sell to people who are doing the right thing.
He wants insurance companies who want to sell homes or auto insurance in California to only sell to those who are worth it while diligently protecting their homes. Carmen is urging the insurance company to support the state’s policy change.
California’s Historic Increases In Construction Costs
When State Farm announced its plans to stop accepting new applications for home insurance in California it added that one of its reasons was because of how expensive California was in terms of construction costs, talk about extreme inflation too.
After this announcement, the company then went ahead to increase its insurance rate by a whopping 20% for all of its existing customers. This news was reported by the San Francisco Chronicle.
This Also Happened In 2022
Surprisingly, this is not the first time an insurance company will be discontinuing business in California. This also happened in 2022 when the insurance giant made their announcement.
California’s insurance giant Allstate announced to the public that it had decided to pause the sale of new home insurance policies due to wildfire and the higher cost of doing business in the state.
Seven Of The Largest Insurance Companies Have Also Paused Business In California
According to a post made by KCRA, quite a large number of insurance companies have either paused or completely stopped doing business in California.
They added that at least seven out of California’s 12 largest insurance groups halted business. While some have paused business others have restricted new homeowners’s policies in the past few years.
Ricardo’s Reforms Will Increase Insurance Transparency
During his interview with KABC, Ricardo once again mentioned how his proposed reforms are all that the Californian insurance industry needs. He mentioned that his reforms would enhance transparency and also allow insurance companies to do a better job at assessing their risks.
He also added that this reform will usher in lower rates and expand insurance coverage for all Californians.
Bringing The Risks Down!
Ricardo intends to bring insurance risk down in California communities while keeping insurers’ writing. The ultimate goal is to get more insurance writing while also bringing down insurance costs.
In addition to this, Ricardo will also seek the help of insurance experts who will be actively involved in your dealings with insurance companies. These insurance experts will help you transition and connect you with those insurance companies who write policies in California.
