A new plan from California’s insurance commissioner aims to stop the nation’s top insurers from leaving the wildfire-prone state by letting them consider climate risks when setting their prices.
Unlike most states, California tightly restricts how insurance companies can price policies. Companies aren’t allowed to factor in current or future risks when deciding how much to charge for an insurance policy. Instead, they can only consider what’s happened in the past on a property to set the price.is making wildfires, floods and windstorms more common, insurers say that restriction is making it increasingly difficult for them to truly price the risk on properties.
On Thursday, California Insurance Commissioner Ricardo Lara’s office said the state will write new rules to let insurers look to the future when setting their rates. But companies will only get to do this if they agree to write more policies for homeowners who live in areas with the most risk — including communities threatened by wildfires.
The rule change could mean higher rates for homeowners who are already seeing dramatic increases. But looking to the future to set rates doesn’t have to always be pessimistic. Insurers can also consider the billions of dollars the state has spent to
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