CALIFORNIA, USA — Insurance officials say a first-of-its kind regulation is another step toward ending California's insurance crisis.
"What we're doing is a comprehensive reform to 30-year-old insurance rules that really haven't stood the test of time, that aren't helping Californians get the coverage they need, and at the end of this process, when we complete our work this year, Californians are going to have more options for insurance," said Michael Soller, spokesperson for the California Department of Insurance.
Insurance Commissioner Ricardo Lara announced the Department of Insurance sent in its last wildfire catastrophe modeling regulation for approval. If approved, insurers would be required to make coverage commitments for underserved areas in order to use catastrophe modeling for ratemaking. It would also factor in the efforts people make to protect their homes as well.
"This regulation allows insurance companies to use forward-looking data that also looks at the benefits of wildfire mitigation, so where people have made their homes safer, where communities and fire departments have put in fire breaks, insurance companies now, for the first time, have to look at all of that when pricing those future rates so that we are, in the future, we're driving the cost down, not just seeing increasing," Soller said.
That aspect is something Soller calls a "gamechanger."
"People are doing and spending money to make their homes safer, in some case, 1000s of dollars, and insurance companies are still not writing them policies. That's unacceptable. That's what needs to change, and that's the heart of the Sustainable Insurance Strategy," he said.
Overall, it marks a change from what Soller said were 30-year-old rules where insurance companies had to use historical data, which led to premium spikes after major wildfires.
"We've seen price increases almost jumping overnight, prices, in some cases, doubling. We need to change that and the regulation that that Commissioner Lara has put forward now, it's going through the final review process," Soller said.
As mentioned, the insurance companies will have to show the Department of Insurance they're writing policies in underserved areas if they use the forward looking models. He said the regulation will ultimately help rates become more stable. And, if the companies don't hold up their end with the policies, Soller says the department will hold them accountable.
It's big change expected much sooner rather than later.
"Today, there is no requirement that insurance companies write policies in areas of higher risk, starting January 2025 that changes," Soller said.
Once those policies are in place, all eyes go toward the insurance companies.
"Starting in January, insurance companies, it's your turn. We need you to come to the table. We need to see your data. We need to see your rate bonds. We need to see where are you going to be writing these policies that Californians need," Soller said.
Soller is expecting major changes in the market by the middle of next year.
"We expect to have a lot more companies coming in, answering your calls for folks who are in parts of the state where that just hasn't been the reality. We think that's we're going to start seeing that change, starting in mid next year," Soller said.
If anyone has questions about their insurance, they can go to insurance.ca.gov or call 800-927-4357. Questions can range from finding insurance to even addressing problems with claims.
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