, major insurers will be required to cover a certain share of homeowners in the state’s most wildfire-prone areas. In exchange, the Department of Insurance will allow companies to charge more to cover the rising costs of doing business in a fire-ravaged state.Lara called the package of new proposed regulations “the largest insurance reform” since 1988, the year California voters passed a proposition requiring insurance companies to get prior approval before raising premiums.
In principle, that’s a trade-off insurers are willing to make, he added, though it will ultimately depend on how the specific regulations are crafted in the coming months.Lara “did not sell out to the industry here, in my opinion, he struck a deal,” she said. “Whether it’s going to manifest positively overall…the proof will be in the premiums.”
In the final weeks of the legislative session that ended a week ago, lawmakers scrambled to bridge the demands of insurers — who called for higher premiums to cover more of their costs and for a more flexible rate-setting process — and those of consumer groups, who resisted calls to add to the financial burdens of homeowners. After negotiations floundered,In a statement, Sen., a Napa Democrat involved in the unsuccessful negotiations, cheered Lara’s announcement.
Currently, insurance companies are not allowed to factor in the cost of reinsurance into those applications. They are also prohibited from using forward-looking models to predict future costs — something insurers say they desperately need as a warming climate and residential development encroaching into fire-prone areas results in fire seasons that are longer and more catastrophic than they have been in the past.
In exchange for these new tools, companies will be required to cover homeowners in wildfire-prone parts of the state at 85% of their statewide coverage. For example, if a company provides 10% of the homeowner policies across California, they would be required to provide 8.5% of the coverage in areas deemed “at-risk.”Then, there’s FAIR plan
Consumer Watchdog regularly challenges the applications for higher premiums that insurance companies submit to the state, an intervention allowed for under the 1988 ballot measure. Today, Lara also said he wants to make it easier for the public to see who intervenes and how much they are compensated for doing so.