California Insurance Crisis: Homeowners Getting Insured Right Out of Their Homes
Blame decades of bad California politics
By Katy Grimes, September 17, 2024 7:11 am
In the late 1970’s Californians were being taxed out of their homes. Grandmas could not pay the escalating property tax bills on long-held family homes, and defaulted or were forced to sell. Thus, Proposition 13 was passed by voters and cut California’s horrifically high property taxes by 30 percent, and then caped the rate of annual increases.
Forty-six years later California is in the throes of a self-imposed insurance crisis, with homeowners facing selling because they can’t get insurance. And the state doesn’t seem to be addressing this crisis with any sense of urgency.
The Globe recently spoke with a couple who shared that the condominium complex in which they reside lost its insurance coverage. “They told our HOA that they just don’t want to insure us anymore,” the husband said.
This is a very nice condominium building.
Consequently, the HOA had to scramble to find new insurance. But the new insurance will cost each of the condo owners an additional $10,000 a year in HOA costs.
“Who can afford an additional $10,000 payment to already high HOA dues?” the husband asked.
Indeed, and what about people on a fixed income or retirement? We agreed that some will have to sell their condos and likely move out of state in order to be able to buy another home or condo.
In June, former State Senator Ted Gaines reported on the insurance crisis for the Globe, in “The Time for Action on Insurance Crisis is Now: Insurance lubricates the entire economy; the current system is broken.”
“Californians need bold and immediate action from the Governor Gavin Newsom and Insurance Commissioner Ricardo Lara to help attract insurers back to the state, create a robust market, and give consumers more options for fire insurance coverage,” Gaines said.
He explained that “rate increase applications are languishing in the Department of Insurance (DOI) for up to two years. Instead of losing money while waiting for rate increases, insurers are pulling out of the state with astonishing speed. It’s likely that everyone reading this knows someone who has been non-renewed by an insurer and unable to find the needed fire insurance required by lenders.”
With homeowners’ insurance going up so dramatically (my own homeowners insurance went up 20% this year, and I feel lucky to have it.
This is pushing Californians to the California FAIR Plan, which is writing the highest-risk policies in California, but it is woefully underfunded, with only a few billion in assets and several hundred billion in liabilities, Ted Gaines reported.
Insurers are now asking for a 34% increase in premiums in California now.
Sen. Gaines explained the history:
Proposition 103, passed by voters in 1988, governs our state’s property and casualty insurance industry. Under Prop. 103, the Insurance Commissioner must approve rate increase requests from insurers before they are implemented.
The DOI should immediately approve all currently filed rate filings from insurance companies. Rates will increase, for certain. But, right now, the choice is not between higher-priced and lower-priced policies, but between California FAIR Plan’s highest-priced policies or no policies at all. These approvals should extend to requests that include forward-risk modeling and reinsurance costs, which is standard in the other 49 states.
A single catastrophic loss event in an area dense with FAIR Plan policies would bankrupt the entity quickly. The insurance industry is the backstop for the FAIR Plan, meaning they would be liable for paying out excess FAIR Plan claims in proportion to the amount of business they write in our state, even though they are not receiving any premium for those policies and would also pay out for losses on their own policies.
This lose-lose scenario is another reason why insurers are shrinking their California footprint, to avoid FAIR Plan financial liability.
California is and has been a lower-cost state for insurance but that did not accurately reflect the risk insurers faced, as the devastating wildfires of 2017 and 2020 proved. Those fires wiped out decades of insurer California profits and shed critical light on what rate adequacy really looks like. The low prices were an artifact of Prop. 103, which is acting as a price control, which always leads to shortages. It is proving a barrier to its stated goal of ensuring insurance is available to all Californians.
The real responsibility for California’s high insurance premiums lies in state politicians’ and the governor’s policy decisions and bad laws. Most insurers say because of California’s high cost to rebuild, they can’t keep premiums artificially low any longer.
And why are California’s rebuilding and building costs so high?
- The California Environmental Quality Act (CEQA): As Ed Ring reported for the Globe, over 50+ years, “CEQA has acquired layers of legislative updates and precedent setting court rulings, warping it into a beast that denies clarity to developers and derails projects. When projects do make it through the CEQA gauntlet, the price of passage adds punitive costs in time and money.”
- Project labor agreements are one of the biggest obstacles to political collaboration between construction unions and groups representing business interests, Ed Ring explained. A PLA is “a pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project.”
- federal, state, regional, and local agencies permitting, overlapping and conflicting regulations, and the agencies all have the power to halt building projects, allow a lawsuit, or rule change, require an entire new set of designs, and force and individual or builder to resubmit plans to every agency and start all over again (Ed Ring, summarized).
These reasons as well as incoherent water restrictions, preposterous “clean air” requirements, mandatory electricity requirements, mandatory solar requirements, mandatory interior sprinkler systems and the like. These state mandated regulations in home and commercial building have driven the cost of construction to unimaginable levels.
In “LA Homeless Tower Cost as Much as 5-Star Hotel to Build,” Globe contributor Thomas Buckley showed how the new Weingart Center 19-story “Permanent Supportive Housing” for the homeless tower cost $594,000 a unit to build – over $1,000 per-square-foot.
The cost of the “housing first” $1 Million dollar per-unit recently approved Santa Monica project is an other example of why insurance costs are so high.
Or when in January Sacramento Mayor Darrell Steinberg proudly announced “Sacramento’s historic Capitol Park Hotel, a permanent supportive housing complex for “people experiencing homelessness,” at a cost of $478,000 – per 280 square foot room.
Using Darrell Steinberg’s homeless housing math, his home of approximately 2,000+ square feet would cost $3.8 million, in a residential bedroom community.
For the record, “people experiencing homelessness” are drug-addicted vagrants living on streets, in city parks, or on the banks of California rivers.
In 2020, we reported, “Redevelopment of the hotel is now budgeted at $59.6 million, (up from $23 million in 2019) and is expected to be completed in the summer of 2022 (not August 2019).”
It was finalized in 2024.
The City of Sacramento says it contributed $20.3 million. The rest was other taxpayer funds via Gov. Newsom’s state-funded Project Homekey.
It is 2024, and “guests” are just now moving in, the Globe reported. “We are taking bets on how quickly the apartments will be trashed by the ‘unhoused;’ the opening bet is 2 months.”
This is why California’s insurance has escalated to untold amounts in a relatively short amount of time. It’s not just the wildfires.
We always knew California’s leftist political policies would catch up to the people paying the bills. But no one expected just how high the bills would be. Or how devastating the costs and cancellations would be. Or how the repercussions would hit every industry in the state. Or how so many business owners would pick up and leave California. Or how many employees would leave the state.
Oh wait – yes we did. We’ve been warning about this since Jerry Brown was reelected as governor in 2011, and finished the state off that he started to destroy in his first term, 1975-1983. We’ve been warning that if Gavin Newsom was elected he would be worse than Jerry Brown. We warned that electing Ricardo Lara to Insurance Commissioner – who has never run a business or even signed the front of a paycheck – would be a disaster…
And here we are – your homeowners insurance has just been cancelled. Will you be forced to dump your single family home?
Now you know how it happened, and even who is to blame, but there will be no indictments.
The real blame falls on California voters; when will the California voter stop supporting dreadful policy makers? When will voters acknowledge that voting for today’s radical Democrats only leads to crisis after crisis?
Nothing will change for Californians until voters rid the state of the Democrat supermajority who wield the power that only harms the people.
–“Never in the history of the world has there been a situation so bad that the government can’t make it worse.” Henry Morgenthau, Jr. (Franklin Roosevelt’s Secretary of the Treasury)
@Gregory
Truer words have never been spoken.
This is all part of the plan. Remember “You will own nothing and be happy”? This dystopian nightmare is being rolled out right in front of us. I would bet the insurance industry is not a victim of circumstances but a willing participant.
When Wal-Mart became an operative for the federal government by mass administration of the covid toxins where were the screams about fascism; there weren’t any.
I’ve no doubt you just hit the nail on the head.
It’s the cost of doing business and it’s infiltrating every marketplace. Today I received a price quote from a Toyota dealer to replace the timing belt on my ancient Toyota 4Runner: The estimate was $3,100 plus change; water pump belts etc, incredible, I wouldn’t want to be insuring homes.
I bet an independent shop would be half that or less.
Agreed however I was rocked back on my heels
Evil Newsom and the criminal Democrat mafia have destroyed the once golden state of California and turned it into a dystopian nightmare. Katy is right that nothing will change for Californians until voters rid the state of the Democrat supermajority who wield the power that only harms the people. The challenge is how to wrest power from them when they’re evil demonic lawless thugs who will do anything to keep their power and control?
Katy Grimes DID predict all of this hell and has been doing it for YEARS and YEARS.
Many of us joined her and screamed that Gavin would be WORSE than Jerry Brown, even though it was hard to imagine how that could possibly be.
LEARN the lesson from what we are seeing now, a destroyed, dysfunctional, and unaffordable California, all brought to you by the Dem-Marxist politicians, and STOP voting for Democrats. (You can even do it in secret if you’re afraid of being socially shunned.) Then, assuming enough people learn the lesson, we can watch EVERY aspect of our lives get better and better and better.
Ughhh. The well written article was depressingly true. The problem is that fewer and fewer Californians pay taxes, or own property, and thus don’t directly feel the bite. Politicians dishing up word salads and chattering about a $25,000 down payment giveaway, or reparations is just a way to distract low information voters. None of the problems mentioned in the article have any chance of being resolved short term, and only a series of catastrophic disasters will make the whole system collapse and thus engender change. Not looking forward to any of it.
Yes, indeed Rod. The “great replacement” is underway. It is starting with the food and retail industries where “low-skilled” workers in places like Springfield, Ohio are being replaced by migrants using “open border political asylum” as a cover. Charleroi, Pennsylvania is the template for this plan and you can count on this happening all over the country (especially in California) if Harris/Walz win in November. Watch: The ride-along in Charleroi occurred on Sunday while factories were shuttered and the town was quiet. https://www.zerohedge.com/political/watch-haitian-invasion-charleroi-exposed-resident-shows-great-replacement-us-factory
The “great replacement” of U.S. citizens has been going on for years in California by Democrats and the globalist cabal?
Small towns across the U.S. are now being inundated with third-world migrants. Native-born residents feel powerless as their communities are trampled by decisions made at the federal level. ZeroHedge has an article today about Sylacauga in Alabama which is a small town with a tiny population of 12,236 people southeast of Birmingham. Reports indicate at least 2,000 Haitian migrants have been dumped into the area with little or no communication with the locals.
https://www.zerohedge.com/political/small-town-alabama-residents-silenced-questioning-sudden-flood-haitian-migrants
Wall Street Journal reporter Asra Nomani has published a shocking report that Springfield, Ohio appears to be a hub of a complex hidden human trafficking network where every week since 2019, a company called First Diversity Staffing Group Inc., has shuttled Haitian migrants in unmarked white vans from Florida to Ohio, where they are allegedly exploited for cheap labor by companies like Dole Food Company Inc.
George Ten, whom Haitians and local residents call “King George,” is the chief executive at First Diversity Staffing Group Inc., which has been the tip of the spear in the alleged trafficking operation of Haitians to the town. He lives in a $1.35 million mansion and parks his luxury cars off a golf course.
No doubt this type of human trafficking is going on in every state nationwide under the corrupt Democrat Biden/Harris regime?
(https://x.com/AsraNomani)
You’re absolutely correct. There’s a well orchestrated and conceived plan in play for California to lead the destruction of America for all the reasons you cite.
Wow, such good info and links here. Thank you TJ and Raymond.
You stated, “We are taking bets on how quickly the apartments will be trashed by the ‘unhoused;’ the opening bet is 2 months.”
I’ve seen these people at work. They can be very industrious at times. I’ll bet they will have the entire building gutted of anything of value, inside and out, in 12 days. And the entire complex will be condemned for any human occupancy within your 2 months.
Please update as it happens.