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San Francisco Chronicle
3 days ago
- Business
- San Francisco Chronicle
California's third-largest home insurer seeks to hike rates
Mercury Insurance, the third largest home insurer in California, submitted a request for a new rate hike on Friday — the first filing to utilize new state reforms that alter how insurance companies can price for wildfire risk. The filing asks regulators to approve a statewide increase of 6.9%, according to the company. The full details of the filing were not available online as of Friday afternoon. In a statement, Mercury said the increase was necessary to compensate for the insurer's exposure to wildfire risk and inflation that drives up the cost of paying claims. Each homeowners' exact rate change will depend on their wildfires risk — some may see increases that are lower than the average, or even decreases; others' rates will rise above the average. The company said it would also be offering new discounts for wildfire mitigation work, such as installing ember-resistant vents or clearing out brush, which could reduce customers' wildfire portion of their premiums by as much as a third. Mercury is the first company to submit for a rate increase under the Sustainable Insurance Strategy, a package of reforms spearheaded by Insurance Commissioner Ricardo Lara aimed at making insurance more available in California. The reforms allow insurance companies to begin using forward-looking models of wildfire risk to influence premiums and to pass along some of the cost of reinsurance — insurance for insurers — to customers. These reforms were widely expected to lead to rate increases, but also come with a requirement for companies to write more policies in high wildfire-risk areas if they don't do so already. Last year, Mercury confirmed to the Chronicle that it would be among the companies that would be required to write more policies under the new regulations. In anticipation of the reforms being finalized, it announced plans to insure more than 200 homes in Paradise (Butte County), the site of the 2018 Camp Fire. Over the past few years, Los Angeles-based Mercury has scaled up its presence in California's home insurance line, rising from the seventh largest home insurer in 2021 to the third largest in 2024 behind State Farm General and Farmers Insurance Group. Over that same period, Mercury has raised home insurance rates four times — a 6.9% increase in 2021 followed by a 12.6% increase in 2023, a 7% increase in 2024 and another 12% increase that went into effect this March. It's common to see insurance companies request rate hikes of 6.9%. That's because under Proposition 103, the 1988 voter initiative that established California's system for reviewing rate hike requests, consumer groups can request a mandatory hearing for requests of 7% and above. Mercury CEO Gabriel Tirador said in a statement that he believed Lara's reforms would successfully stabilize California's home insurance market. 'Our filing is the first step toward Mercury's goal of expanding insurance options for California homeowners and underscores our 60-year commitment to California customers and agents,' Tirador wrote. 'As other companies scaled back their California operations, Mercury stepped up to provide more options for our agents and customers, and we are committed to continuing our efforts to help protect our California neighbors well into the future.' Its filing makes use of a wildfire catastrophe model made by Verisk, one of three such models recently approved for use by the department. The department will now review whether Mercury's usage of the model reliably supports its request for a 6.9% increase. It's the first of many new filings expected now that wildfire models have been approved for use. Not all companies will be required to write new policies under the regulations — some that already insure a significant number of homes in high-risk areas will only be asked to maintain that presence. But Farmers Insurance Group, California's second largest home insurer, has joined Mercury in writing more new policies to prepare for the reforms. Last year, Allstate Insurance, the eighth largest home insurer as of 2024, signaled it planned to begin writing new policies for the first time since late 2022 once it could begin raising rates under the reforms. It has not set a date for this to happen, however. Officials hope private insurers writing more policies will reverse the rapid growth of the California FAIR Plan, the state's insurer of last resort. 'Our goal is for consumers to have more options to find coverage on their own terms instead of FAIR Plan policies that cover less and cost more,' Deputy Insurance Commissioner Michael Soller said in a statement Friday. 'That will continue to be our top priority.'
CBS News
02-06-2025
- Business
- CBS News
Mercury Insurance CEO plans to continue doing business in Southern California following devasting wildfires
One of the largest insurers in the state spoke to KCAL News about the future of the insurance market in California and whether it has enough funds to cover claims from the Palisades and Eaton fires. It's the first time since January's devastating fires that any head of an insurance company has gone on camera with KCAL News to answer some tough questions about rates and future policies. The CEO of Mercury Insurance, Gabriel Tirador, joined State Insurance Commissioner Ricardo Lara at the Global Sustainable Insurance Summit in Long Beach and told the crowd that Mercury is committed to doing business in Southern California. "We want to do it prudently, but yes, we want to grow both homeowners and auto in California," Tirador said. Mercury Insurance is the third-largest insurer writing homeowners' policies in the state. "Eighty percent of our business is in California. We were founded in California back in 1962. We are not going anywhere," he added. A main concern customers have following the fires is if their insurance policies will be affordable. Mercury recently had a 12% rate hike approved by the Department of Insurance and in July, Mercury's own "Reinsurance," which is an insurance company's way of transferring some of its risk to another insurer, is up for renewal. If those rates go up, Tirador said the costs will be passed along to consumers. "The higher costs we have have to be passed on at some point, what's really important is the risk mitigation," Tirador said. "The more that homeowners can do to mitigate their risk and harden their homes, the more discounts we can provide them." Mercury currently has a filing pending with the Department of Insurance that has discounts in place for home hardening. "That filing is what we call revenue neutral, which means some rates go up, some rates go down," he explained. Tirador claims he understands Californians' frustration with rising insurance rates, but he also says the homeowner has a responsibility to make their homes more fire-resistant. "There are folks who think they live two miles down from the wild land area and they're not exposed, but look at what happened in Altadena," he said. "It's really about trying to mitigate risk so that the prices can come down and insurance becomes more affordable." Consumer advocates have criticized the insurance company for fleecing consumers and mismanaging their finances, but Tirador said that's simply untrue. "The gross loss from these wildfires for Mercury are $2.15 billion. Our capital was about $2 billion. Luckily, we have a lot of reinsurance. We buy our own insurance. We try to price our product to only make 4%," Tirador said. "We have not made money in homeowners for quite some time. Earlier this year, Mercury became the first major insurer to start writing policies in Paradise, which was decimated by the Camp Fire in 2018.
