Unlocking America’s Future Demands California Regulators Close Loopholes and Protect Families From Predatory Insurance Practices
WASHINGTON, D.C. — New reporting by the New York Times reveals that California’s 2023 insurance deal, advertised as historic relief for homeowners in fire-prone areas, was riddled with loopholes that let insurance companies avoid covering the most vulnerable properties. The investigation found that insurers can meet their coverage requirements by writing policies in lower-risk areas while abandoning high-risk communities, all while charging higher rates. Since the deal was announced, the number of Californians forced onto the state’s last-resort FAIR plan has nearly doubled, and major insurers dropped nearly 50,000 policies in just six months, including more than 11,000 in areas that would later burn in January’s devastating fires.
Unlocking America’s Future demands real protection for American homeowners. As the Trump administration slashes wildfire mitigation funding by 34% in California and the state’s last-resort insurer seeks a 36% rate increase, California state regulators must champion policies that shield workers, families, businesses, and communities from industry loopholes and predatory practices. Unlocking America’s Future urges immediate action to ensure fair, affordable, and accessible insurance for all Americans.
“This so-called compromise was a giveaway to insurance companies that left California families holding the bag. Insurers got permission to raise rates and dump customers in fire zones, while homeowners got stuck with skyrocketing premiums and worthless promises. California regulators need to close these loopholes immediately and stop letting the insurance industry write its own rules,” said Kyle Herrig, spokesperson for Unlocking America’s Future.
See coverage below:
New York Times: California Promised Insurance Relief, But Delivered Loopholes
- Even before the devastating wildfires that ravaged Los Angeles this year, companies that insure the ever-growing number of homes perched in California’s fire-prone foothills were threatening to abandon the state, declaring that the risks were becoming unsupportable.
- The prospect of uninsurable homes was an existential threat for the state. A collapse in its $446 billion real estate economy would bring California to its knees. Gov. Gavin Newsom’s administration went into crisis negotiations with the insurance industry, and emerged in September 2023, with what was billed as an “historic” compromise, one that would reward insurers with higher rates in exchange for protecting homeowners in neighborhoods that climate change was turning into tinder boxes.
- The central promise was that insurers would have to write policies in fire-prone areas at a rate equal to at least 85 percent of their market share across the state. But a New York Times investigation has found that a series of loopholes quietly negotiated by the insurance industry all but eliminated that guarantee.
- Vast swaths of the designated areas where insurers must write new policies do not in fact overlap with areas that California’s state fire marshal deems to be the most fire-prone, the investigation found, meaning that insurers can load up on coverage in areas the state considers to be safer and still qualify to charge higher rates.
- As a result, insurance companies will be able to raise rates and offload billions of dollars in costs and liabilities to ratepayers while taking on few, if any, new customers in high fire-risk areas.
- And while the regulations were billed as an attempt to get homeowners off the state’s overburdened last-resort insurance program, FAIR, the number of residential FAIR policies has nearly doubled since the new insurance deal was announced, rising to 625,033 from 320,581, the Times review found.
- Some insurers began minimizing their potential losses even before the new regulations were finalized. In the six months after the deal was announced, California’s three largest insurance groups informed the state of their plans to dump nearly 50,000 existing policies, five times the number filed by those companies in the 20 months preceding the deal. And the new regulations will effectively reward them for doing it.
- More than a fifth of the nonrenewals — about 11,000 policies in total — were in ZIP codes within or adjacent to areas that would burn in the January fires, the Times analysis found. The vast majority of those were in and around Pacific Palisades, where fire later destroyed more than 6,800 structures.
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