California’s battle to keep insurers from leaving the state could become harder under a new bill that would add regulations to the already weakening property and casualty insurance market.
Authored by Sen. Josh Becker in February, Senate Bill 1060 looks to expand the list of acceptable fire mitigation protections that state insurers must offer discounts for when writing new policies.
In a joint letter submitted to the Senate Committee on Insurance, multiple insurance associations explained that the bill would put insurers in a tough spot.
“It is clear the goal of this bill is to force insurers to take on risks that are not supported by adequate rate levels and jeopardize their financial solvency,” reads a summary of the opposition in an April 22 analysis of the bill.
Properties made of non-combustible materials, free of flammable debris such as wood piles, and those with mitigations that prevent embers from entering during a fire are already eligible for discounts under current California law. Homes with a buffer around them known as a “defensible space” to slow down fires also qualify, according to lawmakers.
Under SB 1060, property owners and communities who take additional measures like thinning brush near their homes, known as “hazardous fuel reduction,” would also qualify, as would those who attend or host meetings or local events related to fire mitigation techniques, according to the bill’s text.
In the same analysis, Mr. Becker said the proposed legislation would ensure property owners’ efforts aren’t in vain, requiring insurers to recognize those who have done their part.
Despite California having spent $3.7 billion since 2017 on fire safety measures, insurance availability has continued on a downward trajectory, with rate increases, non-renewals of policies, and market instability impacting Californians.
According to a September 2023 report by the New York-based Insurance Information Institute, California insurers failed to collect more from their policyholders’ premiums than what they paid in claims between 2013 and 2022, with $1.08 spent for every $1 received.
According to the institute’s report, recent disaster-prone years have led to losses, with fires in 2017 and 2018 costing insurers more than $2 for every $1 they took in.
In 2018, the Camp fire, the deadliest and most destructive wildfire in state history, destroyed more than 18,000 buildings in Northern California’s Butte County.
The institute said insurers haven’t been able to charge adequate premiums since voters passed Proposition 103 in 1988, establishing what’s known as the intervenor process, in which state regulators review all proposed rate increases of 7 percent or greater, possibly taking years.
In a September 2023 statement, California Insurance Commissioner Ricardo Lara announced new rules for the industry, to be implemented by the end of 2024, that require insurers to write at least 85 percent of their policies in high-wildfire-risk and “underserved” communities, as part of what the state is calling its California Sustainable Insurance Strategy, which aims to expand insurance options in the state.
Those in favor of the bill include the County of Marin, home to Gov. Gavin Newsom and about 35 miles north of San Francisco, which said widespread hazardous fuel reduction and home hardening efforts can substantially reduce fire risk and need to be recognized.
“Meaningful investments in mitigations, like what we have committed to in Marin, should reduce the cost of insurance and/or increase availability to those properties and regions,” county representatives wrote in the analysis.
Since May 2023, State Farm has ceased accepting new business, personal property, and casualty insurance policies, according to a statement from the company issued at the time.
Others such as Allstate, Farmers Insurance, The Hartford, and more have announced similar moves beginning last year. In September 2023, Farmers Direct Property and Casualty Insurance withdrew its certificate of authority to offer insurance in California, impacting 58,000 auto and nearly 20,000 home policies, leaving residents with the state’s last resort insurance, which provides basic coverage when other insurers aren’t available but charges a high premium.
