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More Layoffs Coming in California’s Insurance Industry Without Reform

Everyone and everything are fleeing California as it becomes more unlivable, unaffordable, and now, uninsurable

By Ted Gaines, September 12, 2023 2:54 pm

San Francisco might not be the only California colossus in a so-called “doom loop.” The property and casualty insurance market is experiencing a crisis of its own, and the consequences are dire for the entire state economy.

Here’s one recent example. In August, California-based Farmers Insurance laid off 2,400 people, about 11-percent of its workforce. Not coincidentally, Farmers announced in July that it would limit its exposure to the California homeowner’s insurance market, shortly after State Farm and Allstate announced they would no longer be writing new homeowner’s policies in the state.

These companies don’t see California’s regulatory environment, forest management and wildfire risks, and sky-high building costs as a winning formula for their businesses right now. They are acting accordingly.

California government is certainly a hardy plant. It grows in all conditions and climates, through recessions, booms, busts, month after month, year after year, but the private sector isn’t immune to economic circumstances. If Farmers, Allstate, and State Farm are writing fewer policies, they will need fewer staff. A California slow to recover from its own Covid policies needs more jobs, not fewer.

These layoffs are only part of the story. Expect to see real estate deals fall apart over fire insurance costs. Expect to see businesses closing shop when they can’t get or can’t afford insurance in our state. Expect to see homeowners, especially seniors with paid-off homes but modest incomes, “going bare” on their homes and carrying no property insurance, exposing themselves and their heirs to massive financial risk. Insurance lubricates the economy and when it stops working the economy stops working.

There are some solutions, if the Legislature or even the current Department of Insurance will act on them. They will involve some short-term pain to consumers, but they offer a path back to a robust market where companies are entering the market, not leaving it, and hiring employees, not laying them off.

It starts with repealing Proposition 103, the 1988 initiative governing property insurance in California.

Its rules are strangling the market. We don’t need insurance companies begging for rate increases from the Insurance Commissioner, which can take years. We need agile companies that can price risk in the best and timeliest manner to meet consumer needs.

A repeal would also free up insurance companies to use whatever information they can to set their rates. They can’t be tethered exclusively to the past. Past data is important but future catastrophe modeling is critical for companies to comfortably price what they consider the real, current cost of doing business in California.

If insurers set their own rates, it would free the Department of Insurance to go after bad actors and enforce penalties for unlawful and unfair practices, and it could do an even better job in its important work examining insurers for financial health, but it shouldn’t act as a rate gatekeeper any longer. It’s contributing to the exodus of insurers in the state and hurting, not helping, consumers as Prop. 103 intended.

Just as the first pullbacks in insurance coverage were indicators of future, additional pullbacks, the Farmers job cuts will not be the last. They indicate an unhealthy insurance market in California, fewer premium dollars, less profit, and more layoffs in the entire industry.

Everyone and everything are fleeing California as it becomes more unlivable, unaffordable, and now, uninsurable.

But it’s within our power to reform our insurance markets. We can’t be afraid to pivot when laws prove failures, and we shouldn’t be defeated by rules of our own making. More insurers equal more competition and more choice for consumers. That is how to end the doom loop and is the ultimate solution to the California insurance crisis.

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7 thoughts on “More Layoffs Coming in California’s Insurance Industry Without Reform

  1. As long as Democrats keep their monopoly on power, things will continue to rapidly deteriorate in California. The Department of Insurance cannot be reformed it needs to be shut down. Corrupt, talentless, unelected bureaucrats in charge of industries they know nothing about are parasites sucking the life out of others who work hard to provide. Unfortunately for them, out of their own greed, they have almost killed the host. California is now unliveable for most people.

  2. Insurance actuaries identify trends that they deem potentially negative to their company’s bottom line.

    The state of California has descended into literal chaos beyond the point of no return: Therefore, indemnification of major assets in an environment devoid of order and stability is extremely risky. The homelessness that has manifest in every major city in California compounded by the analytics says this never abates; instead  becomes worse  thus the only conclusion; retreat.

    we’ve been transitioned to a nihilistic barbaric existence from which there is no return. soon only gold will be of value; prepare accordingly.

  3. Additional issue is Consumer Watchdog. Their advocacy lawyers have control of insurance rates via Prop 103. They sue insurers that request rate increases. It is a framework ripe for massive corruption and power monopoly. The gubmint tag line is “we’ve got your back ” They sure do, my back wallet. I’ve had cancellation after cancellation, fewer and fewer options, and my insurance costs have tripled since the great 103 and CW rode into town. The crisis has gone into overdrive. Advocates are funding a lot of propaganda about wealth and greedy corporations. If this is progress, gimme the antithesis please.

  4. California politics at it’s best.

    Why does California even have an Insurance Commissioner?. What does the Insurance Commissioner know about Insurance?…..nothing, he is an elected official. What qualifications does the Insurance Commissioner need to have to hold the job?, I know 2 of the former Insurance Commissioner’s and they never worked in the insurance industry…….they were politicians.
    It’s time for the State of California to wake up and realize what they are doing to it’s citizens.

    1. Slight modification : it’s beyond time for California VOTERS to wake the hell up and demand that electronic voting machines be banned, voting rolls cleaned up, and election integrity measures be implemented so that the TRUE WILL OF THE VOTERS be heard and tallied via free, fair and true elections…
      We were priced out of the commercial home insurance market and are now nervously covered under the stupid state FAIR plan, because we are within 200 feet of open space and in an area that was impacted by the utility company’s negligence…
      We are governed by COMPLETELY UNQUALIFIED INDIVIDUALS in this state….

  5. Most Californians that can leave the state have, or are doing so. They understand, unlike the past, there will be no Federal financial bailout for California. Time has run out. The state will financially collapse.

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