There are two types of people who love living in California. Masochists and fools. California’s Deocrats strive to drive a stake in the heart of the citizens. The recent wildfires is a perfectexample. They will try to make the insrance companies the bad guys for caceling the homeiowner insurance in California. But, ask yourself, why did they abandon a state with so many potential customers? If you guessed liberal regulations, you win the prize.
Let’s face. Many people who lost their insurance will never be able to rebuild their homes. State Farm announced it would drop homeownership insurance coverage for tens of thousands of Californians in 2023, with the Pacific Palisades — one of the areas hardest hit by the wildfires.
E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center explains:
“Overregulation was a major contributor that forced many homeowners to ‘go naked’ according to industry lingo, meaning roll the dice with no insurance.It’s going to be very scary when we find out how many folks lost their homes with no insurance and won’t be able to afford to rebuild.”
California’s Proposition 103 requires insurers get approval from the state before setting property insurance rates. Those rates were capped at 7%. But, insurance rates are set by the amount of risk involved. With the total mismanagement of wildfires, the risks were rising much faster than the rates were. Already the estimated damage in California i estimated to be $50 billion dollars with much more to come. Insurance companies were mart to pull out of California.
According to Andrew Siffert, senior vice president at global insurance broker BMS Group:
VISIT OUR YOUTUBE CHANNEL“Proposition 103 requires insurers to get approval from CDI [the California Department of Insurance] for any rate increases, which can be a lengthy process. Over time, this regulation has not kept up with the cost of doing business in California, and has made it difficult for insurers to adjust premiums to reflect the increasing risks and costs associated with natural catastrophes like wildfires. As a result, insurers have taken their products and capital to other states where they can maintain their profit margins.”
Proposition 103 also bars insurers from using a client’s credit score to determine their rate.
“Another form of overregulation involves restrictions on underwriting practices,” Peter Earle, senior economist at the American Institute for Economic Research, told the DCNF. “California prohibits insurers from using certain risk-based factors, such as credit scores or other predictive analytics, which are commonly used in other states to assess risk more accurately. This limits insurers’ ability to differentiate between low- and high-risk policyholders, forcing them to spread costs unevenly.”
Moreover, Proposition 103 forces computer models used to calculate rates be made public. Companies often want to keep their modeling technology private, which results in insurers using outdated models to make calculations, Mark Sektnan, vice president for state government regulations at the American Property Casualty Insurance Association, told E&E News in May 2023.
“It’s a little bit like driving your car using the rearview mirror when your windshield is right there in front of you,” Sektnan said.
