CA Senate Republicans Send Letter To Insurance Commissioner Lara Over Faltering Homeowners Insurance Market

California State Senators delivered a letter to California Insurance Commissioner Ricardo Lara on Thursday, urging him to take more direct action in fixing the state’s faltering homeowners insurance market.

In the past three months, 5 insurance companies operating in California have either stopped accepting all new homeowner insurance applications or put severe limits on how many new applications can be accepted in a year. State Farm because the first company to no longer accept new applications for any kind of insurance other than personal vehicle insurance in May. In June, Allstate had a similar announcement, saying that they had already not been accepting new applications all year. Farmers was the next to announce last month, reducing the overall number of new monthly policies that they would accept. Earlier this month the most recent insurance companies to announce that they would be ending homeowners policies, AmGuard and Falls Lake, only further limited the insurance options for homeowners. This is all on top of several insurance companies, such as AIG, leaving the California homeowners insurance market in the past few years.

While each company had a different number of reasons for their decision, all generally had the same theme: Construction cost increases, inflation, wildfires, and a challenging reinsurance market were all listed. However, the largest reason for the companies overall has been the rapidly growing number of catastrophe exposure risks in the state. Insurers included wildfires, floods, and other “extreme weather events.” Insurance companies have increasingly been feeling the burden, leading to them changing their position in the state.

The growing number of insurance companies leaving the market has concerned many in the state, with some saying that it is now a crisis. Others worry that more could leave later this year and in 2024, potentially leading to a collapse of the home insurance market in the state, and leaving many homeowners uninsured or faced with a very limited number of options as a result.

A letter to Commissioner Lara

This led to Senate Republicans calling for Commissioner Lara to take action immediately, both to stop more insurance companies from leaving the state and to keep homeowners insurance available to all residents.

“The insurance industry is broken and only you have the power to fix it – and the responsibility,” Senate Republicans said in the letter. “Proposition 103 gave California the unique situation of having an elected Insurance Commissioner responsible for regulating the insurance industry. Our caucus has pushed for legislative fixes for years now – even decades – to try to prevent the homeowners’ insurance market from collapsing. Unfortunately, our efforts fell on deaf ears and major insurers have now left the market, and we fear more will be following suit.”

“While the Legislature has failed to act, YOU have the power to begin solving the problem under your current authority. Everyone knows the hard truths of what has to happen: there need to be rate adjustments; reinsurance and prospective catastrophic modeling need to be authorized; the rate review process needs to be accelerated; insurance discounts for home-hardening must be authorized; we need to modernize the insurance market. You can begin this process yourself, now. This is a critical Time for decisive leadership from California’s elected Insurance Commissioner and the department you head.”

“We urge you to begin the common sense solutions to the insurance market that California homeowners desperately need and we stand ready to help you from the legislative side if statutory changes are necessary. But we need you to be the catalyst for modernizing the market. Our constituents are losing options quickly and we need to stop the bleeding now.”

Senate Minority Leader Brian Jones (R-San Diego) expanded on the letter in a statement, saying, “California needs a healthy and stable homeowners’ insurance market that is accessible to all. Our current market is on the brink of collapse and Californians are struggling to find and purchase affordable homeowners’ insurance. While the Legislature has failed to act, Insurance Commissioner Lara has the power to begin solving these problems under his current authority and we stand ready to work with him to fix this broken market.”

Senator Brian Dahle (R-Bieber) added, “My constituents are already suffering. In order to avoid exponential and unaffordable rate hikes on Californians in the near future, we must act now. Californians can’t afford for a catastrophic wildfire to collapse the market and leave those insured without the coverage they may need to rebuild.”

Insurance experts agreed with with the lawmakers on Thursday, albeit noting that what Lara could do would likely be limited.

“Lara could definitely do some things to limit the damage that has been done and perhaps entice some of these companies to comeback in a smaller capacity,” said Trevor Connery, a lobbyist who has worked for insurance companies in the past. “There is plenty he can do. But even all that is stymied by big decisions that need to go through the legislature first, through the Governor, or passed by voters. But the hard truth is that a lot of this is really tied with the growing number of wildfires, floods, landslides, and other weather risk events that are becoming more commonplace in the state. Losses are everywhere for companies. At the very least, Lara needs a sit down and to go over all causes of the companies leaving and figure out a plan on how to deal with it. It needs to be transparent.”

“This letter is a good gesture and perhaps could get the ball rolling. But there is a lot that needs to be done, and until insurance companies stop seeing losses, this trend will continue.”

Lara has yet to respond to the letter as of Thursday evening.