Homeowner Insurance Rate Hike Bill Passes Assembly

On Monday, the state Assembly passed Assembly Bill 2167 , which would allow for a faster rate of increased insurance premiums, by a largely bipartisan margin 61 to 3.

A bill born out of wildfires

AB 2167, written by Assemblymen Tom Daly (D-Anaheim) and Ken Cooley (D-Rancho Cordova), would create the Insurance Market Action Plan (IMAP) program, which would ‘specify the combination of rate relief and underwriting criteria required to support a mandate for the insurer to issue or renew more policies in high-risk counties’ and if approved the insurer ‘would be obligated to issue or renew more policies in high-risk counties’.

This would also give insurance companies leeway to get more higher premium rates approved quicker by giving them a way to exempt policies from rate protection under Proposition 103. Prop 103, approved by California voters in 1988, required approval from the Department of Insurance before any rate increase. AB 2167 would thus amend Prop 103.

AB 2167 was written in response to the changes in fire risk in California due to an increase of deadly and destructive wildfires, with the bill itself listing 7 wildfires from 2017 and 2018 alone as evidence, including the infamous 2018 Camp Fire. Many homeowners who had property damaged or destroyed in the wildfires came back to higher rates, with many being unable to get insurance again because of the new cost. Assemblyman Daly noted that this would create competition and allow other companies to compete for lower rates for those in areas that can be in danger of wildfires.

“Too many homeowners in California are suffering the consequences of insufficient competition in the insurance market,” said Assemblyman Daly in February. “This bill will bring more insurers back to the market and give consumers more options to choose from.  And it will help stop the cycle of non-renewals and ease the minds of homeowners who are afraid to open the mail.”

Assemblyman Cooley agreed, noting that AB 2167 would also give increased access for insurers and consumers alike.

“Market action plans help increase homeowner’s insurance access in states where catastrophes like fire, flood or hurricane have made insurance hard to find,” noted Assemblyman Cooley earlier this year. “They give regulators a useful tool that can help ease access issues without causing problems for other insurance customers.”

Opposition to AB 2167

However, despite a largely bipartisan vote on Monday, in which 15 Democratic Assembly members also abstained from voting, considerable opposition has formed from both the state Insurance Commissioner, consumer groups, and even some wildfire victims themselves.

“They call it ‘rate regulation’ but really it’s just going to give many insurance companies an excuse to knock up rates by claiming homes are within a certain danger area,” noted former insurance executive and insurance watchdog Terrance Connolly. “They’ll be exempt from Prop 103, which was passed over 30 years to stop this exact thing from happening.”

“Wildfires are bad, of course, and homeowners getting higher rates without much of a choice is bad too, but there are also ways around that. Homeowners themselves can easily find other more affordable rates through other means. And it’s coming during a new recession too. This can hurt so many more people than it helps.”

“They’re simply using wildfires as an excuse for rate increases, and then they’ll claim other homes and policies are in areas warranting higher rates.”

California Insurance Commissioner Ricardo Lara also agreed, noting that insurance premiums would only go up under AB 2167.

“It’s is an insurance industry wish list with nothing to help consumers.” said Commissioner Lara last week.

Passed in the Assembly, AB 2167 will next head to the Senate, with a hearing in the Senate Insurance Committee expected very soon.