With multiple factors impacting the insurance industry, big insurance companies have been making it harder for homeowners to find any type of coverage for their homes. In recent years, increased wildfires, higher inflation, and higher reconstruction costs have all heavily impacted insurance companies’ ability to provide homeowners insurance.
With all these challenging factors, insurance companies are deciding that it’s better to just not provide any coverage to new clients. Recently, State Farm announced that they would not be renewing around 30,000 home insurance policies. This is just for one of the big insurance companies here in California, with many others halting with writing new insurance policies.
Why Are Insurance Companies Not Accepting New Clients?
Due to increased wildfires in California, more parts of California are being considered a high-risk zone. With more homes being high-risk, it makes it harder for insurance companies to price their coverage at a rate in which both the insurance company and homeowner can be satisfied with.
Having inflation go up in recent years has also played a role in this issue right now. Inflation has caused the price of everything to go up, which includes the materials for rebuilding properties. This makes it harder for insurance companies to cover claims, as each claim can cost the insurance company significantly more money than before.
With insurance companies having to pay more from their end without being able to raise their rates to match it, it leads to them choosing to not do new business at all.
Proposition 103
Why don’t insurance companies just raise their rates instead of not doing any new business at all? Proposition 103 would be the reason why they can’t just raise their rates. With Prop 103, it prevents insurance companies from raising their rates over 7% without being approved by the California Department of Insurance. As it can take a few months for the rate to be approved, this makes it difficult for insurance companies to continue new business without risking their financial stability.
How Can California Homeowners Still Find Insurance?
Despite the tough insurance market right now, there are still many insurers out there that can provide you with coverage, us included. Other options for home insurance in California include non-admitted insurers, otherwise known as excess & surplus lines insurers. This means that the insurance company is allowed to do business in California, but are not bound to the same rules and regulations as "admitted", or traditional, insurers are. Due to the different regulations, it allows E&S providers to have more flexibility in what types of risks they take. The price of E&S policies are sometimes higher than admitted insurers, but sometimes that is better than no insurance at all. Kwan Insurance Services has a wide variety of different admitted and non-admitted carriers that can insure your assets for you. Read more about what a non-admitted (E&S) insurer is on our blog here.
If you are really struggling with finding coverage for your home, consider looking into the CA FAIR Plan. The FAIR Plan was created for those who are unable to find coverage for their homes as a last resort. For more information about the CA FAIR Plan, please check out our CA FAIR Plan blog. Kwan Insurance Services is a licensed CA FAIR Plan broker and can help you submit an application.
Comentários