California’s Insurance Regulation Fixes Came Too Little, Too Late
At the end of last year, California issued emergency new insurance regulations giving insurers more freedom to raise premiums while also requiring them to extend coverage to wildfire-prone areas of the state.
The hope was that this compromise of higher premiums and more coverage would set right the crisis of insurers fleeing the state and leaving homeowners with no private options for financially protecting their homes from the next disaster.
The reality is that these reforms might be too little and come too late. Now, the still-burning Palisades and Eaton fires (estimated to have caused $150 billion in damages) seem to be pushing politicians back into their old, bad habits of bullying insurers into doing business in California.
This past Friday, California’s elected insurance commissioner, Ricardo Lara, issued a moratorium on insurance companies canceling or not renewing policies in areas affected by the Palisades and Eaton fires.
“I am using my moratorium powers to prevent insurance companies from canceling or non-renewing policies in wildfire-impacted areas, so people don’t face the added stress of finding new insurance during this horrific event,” said Lara.
California Gov. Gavin Newsom touted the non-renewal ban on social media.
California is preventing insurance companies from canceling or not renewing home coverage for LA wildfire victims in affected zip codes over the next year.
Whether homeowners have suffered a loss or not, we’re alleviating the stress of finding new insurance during these times. pic.twitter.com/ABr9oQlct3
— Governor Newsom (@CAgovernor) January 10, 2025
Forcing insurers to renew policies has been California officials’ go-to policy for the past several years.
In 2018, the California Legislature passed S.B. 824. Written by Lara (then a state senator), the bill forbade insurance companies from canceling or not renewing policies for one year in ZIP codes that had been affected by wildfires.
As of November 2022, nearly 2.4 million policies were in ZIP codes covered by non-renewal moratoriums, according to a September 2023 report by the International Center for Law and Economics (ICLE).
That law was passed in the wake of the 2017 and 2018 wildfires that had caused some $20 billion in damages—a figure high enough to wipe out a quarter century of insurance industry profits in the state.
Insurers’ non-renewal rates increased 36 percent in the years following the 2017 and 2018 fires, according to ICLE. Over the same period, the number of policies written by FAIR, the state’s insurer of last resort, increased by 225 percent.
Between 2019 and 2021, non-renewal rates more than doubled in the ten counties most affected by wildfire risk, according to California’s Department of Insurance.
But forcing insurers to renew policies did little to address the companies’ primary reason for wanting to limit their Califor
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