Latest news with #Proposition103
Yahoo
29-05-2025
- Business
- Yahoo
California's Insurance Gap: Mercury Insurance Details What Homeowners Need to Know
Thousands of California Homeowners Are Underinsured LOS ANGELES, May 29, 2025 /PRNewswire-PRWeb/ -- The devastation caused by January's Pacific Palisades and Altadena wildfires served as powerful reminders of how crucial it is for homeowners to have adequate insurance coverage. In addition to the emotional toll of losing a home, the financial burden can be overwhelming — particularly for those who discover their coverage falls short. According to a recent report in the San Francisco Chronicle, a significant number of California policyholders are underinsured, meaning that they may not receive sufficient funds to rebuild a home comparable to the one they lost. Equally concerning is data from LendingTree, which reveals that of the nearly eight million residences in California, 806,600 are completely uninsured — that's 10.5% of all homeowners in the Golden State. And in some counties, such as Lake, Kings and Humboldt, for instance, the rate is even higher. "Being underinsured can turn a crisis into a financial disaster. Waiting until after a catastrophic event such as a wildfire to review your coverage is far too late," said Kelly Butler, VP and Chief Underwriting Officer at Mercury Insurance. "That's why it is essential to meet with your insurance agent at least once a year to ensure your policy reflects current replacement costs and risks." The issue of underinsurance in California is shaped by a combination of evolving market dynamics and environmental challenges. Rising construction costs, the growing threat of wildfires, and shifts in the insurance market all contribute to a complex landscape for homeowners and insurers alike. Here's a closer look at some of the key factors: Rising Insurance Costs: In wildfire prone areas, premiums have increased in response to heightened risk and construction/materials costs. This can place financial strain on homeowners, and these insureds are most likely to allow their coverage to lapse or to underinsure their properties to lower their premiums. Market Adjustments: Some insurance companies have scaled back their offerings in high-risk regions due to increased losses. As a result, some homeowners need to turn to alternatives such as the California FAIR Plan, which provides basic fire insurance coverage, when private options are unavailable. So, what was originally intended as a provider of last resort is now used by 4% of the state's homeowners, up 300% from 2018. Homeowners may need to supplement FAIR Plan policies with additional "wrap-around" policies for broader protection. Increased Wildfire Risk: The growing frequency and severity of wildfires in California have made it more difficult — and costlier — to insure homes in certain areas. This has impacted both insurance availability and affordability. Regulatory Constraints: Proposition 103, passed in 1988, requires insurers to base rates on historical losses. While designed to protect consumers by regulating how insurers set rates, it has also created challenges for insurers that need to adjust rates to account for evolving risks and rising rebuilding costs, which adds complexity to the current insurance landscape. Policy Type Matters: Understanding the difference between actual cash value and replacement cost policies is crucial. The former may not cover the full cost to rebuild, while the latter aims to replace what was lost in today's dollars, up to the policy's limits. What Can Homeowners Do? Reducing wildfire risk on your property remains one of the most effective strategies. Creating defensible space, hardening your home, and taking other fire-mitigation measures can help lower your insurance costs — and may even qualify you for discounts. But homeowners can't solve this issue alone. Broader efforts are also underway to improve the availability and affordability of insurance coverage in high-risk areas. "Fortunately, it's not all doom and gloom," added Butler. "The state is beginning to make meaningful changes. Last year, Insurance Commissioner Ricardo Lara introduced California's Sustainable Insurance Strategy, which supports more accurate pricing in wildfire-prone areas and aims to expand coverage options for homeowners who need it most." By staying informed, proactive, and working closely with their insurance providers, California homeowners can better protect their properties and financial futures — even in the face of growing environmental risks. About Mercury Insurance Headquartered in Los Angeles, Mercury Insurance (NYSE: MCY) is a multiple-line insurance carrier offering personal auto, homeowners, and renters insurance directly to consumers and through a network of independent agents in Arizona, California, Georgia, Illinois, Nevada, New Jersey, New York, Oklahoma, Texas and Virginia, as well as auto insurance in Florida. Mercury also writes business owners, business auto, landlord, commercial multi-peril and mechanical protection insurance in various states. Since 1962, Mercury has provided customers with tremendous value for their insurance dollar by pairing ultra-competitive rates with excellent customer service, through nearly 4,100 employees and a network of more than 6,500 independent agents in 11 states. Mercury has earned an "A" rating from A.M. Best, as well as "Best Auto Insurance Company" designations from Forbes and For more information visit or follow the company on Twitter or Facebook. Contact: PCG – Shane Smith (424) 903-3665 (ssmith@ Media Contact Shane Smith, Mercury Insurance, (424) 903-3665, ssmith@ View original content to download multimedia: SOURCE Mercury Insurance Sign in to access your portfolio
Yahoo
21-05-2025
- Business
- Yahoo
How To Fix California's Self-Inflicted Homeowner's Insurance Crisis
According to a recent news story, California's raging home insurance woes are a result of climate change. That's certainly true if the climate we're talking about is the state's regulatory climate. Like many of California's problems, the insurance crisis is a self-inflicted wound—in this case, one suffered when residents and regulators turned a once-competitive market for insurance into a command economy in which insurers are increasingly unwilling to operate. Fortunately, the market for home insurance can be improved if Californians are willing to address their (regulatory) climate problems. "Just months after fires devastated parts of Los Angeles, one of the leading home insurers in California, State Farm, is temporarily raising rates 17 percent," The New York Times' David Gelles wrote May 15. He cited this rate hike, which follows on an even larger one last year, as "just the latest example of the indirect but increasingly costly ways that climate change is affecting the American economy." But the "insurance crisis" that Gelles points to in California and sees "spreading across the country" isn't just the result of temperature fluctuations or shifts in humidity. It's a foreseeable outcome of state residents voting themselves discounts at the expense of insurance companies, and of politicians catering to the public's desire to pay what they want rather than market rates. "This insurance market crisis is downstream of California's cumbersome, voter-approved insurance regulations that limit the ability of insurers to raise rates to cope with increased wildfire risks," Reason's Christian Britschgi noted in February after the Los Angeles wildfires made a bad situation even worse. In 1988, Californians passed Proposition 103 which, according to the state's summary of the measure, "required that every insurer reduce its rates to at least 20% less than the rates that were in effect on November 8, 1987 unless such rollback would lead to a company's insolvency." The California Supreme Court modified this to allow for what state officials considered "a fair rate of return," but there are more voters paying premiums than working for insurance companies, with predictable results. According to a 2023 paper from the International Center for Law and Economics, as of 2020, despite sky-high property values and well-known wildfire risks, Californians "paid an annual average of $1,285 in homeowners insurance premiums across all policy types—less than the national average of $1,319." When insurers need to raise rates to reflect risks and costs, they can only do so after extended hearings and a government review process designed to please voters, not to reflect economic reality. Unsurprisingly, well before the Los Angeles fires, insurers were limiting coverage and leaving the state. Even Insurance Commissioner Ricardo Lara admits insurers "don't have to be here, and when we try to overregulate, we'll see what happened after the Northridge earthquake, when the legislature came in and tried to overregulate, and they no longer write earthquake insurance in California." To avoid further destroying the market for insurance, California needs regulatory reform. To get reform, more state officials and residents will have to admit that they created the problem. "The root cause of California's current crisis lies in a combination of increasingly destructive wildfires and a regulatory framework that is both inefficient and inadequate in addressing the growing risks," comments the Independent Institute's Kristian Fors in a recent policy report proposing reforms for California's homeowners' insurance market. Kors points out that a functioning insurance market hedges against low probability but expensive events by spreading the costs across a pool of people paying premiums. The market works best when people are sorted by "risk classes" that more or less reflect different likelihoods that they'll ever collect on that bet over a low-probability event. All else being equal, homeowners living on a well-cleared island in the middle of a lake should probably pay lower premiums than those living amid dry brush. As mentioned above, California interferes in the market in crowd-pleasing ways, lowering costs for the insured and reducing the chance that insurers will make a profit or even break even if they participate in the market. As Kors notes, "prohibitions on using forward-looking 'catastrophe models' for assessing wildfire risks have further compounded the exposure faced by insurance companies." The state finally backed off that prohibition in December 2024. Allowing catastrophe modeling is a step in the right direction, according to Kors, "but the prior-approval process still hinders the efficient pricing mechanisms of free markets to operate." That is, California needs to get out of the business of regulating insurance rates and allow the market to operate. "Insurance companies should be able to raise and lower their prices freely, in accordance with changing market conditions, and they should also be free to incorporate any variables associated with risk in their actuarial assessments." To do that, Proposition 103 will have to be repealed. The growing severity of wildfires also needs to be addressed through better land management. "One of the most critical errors made by Cal Fire and other agencies was to focus on fire suppression rather than prevention," Kors notes. That will require forest thinning and prescribed burns to reduce the risk of uncontrollable fires. As it is, California committed in 2020 to treating 500,000 acres of forest land per year, but it has only met about a fifth of that goal (the federal government also lags in its land-management obligations). Kors adds that "a well-functioning insurance market would also minimize wildfire risk by properly incentivizing home hardening and fire mitigation practices." It would also discourage building in high-risk areas without taking steps to reduce fire danger. While a big part of the reason so many homes are built in high-risk wildland-urban interface (WUI) areas is regulatory restriction on market rates that would reflect risk, Kors adds that the state's expensive restrictions and delays on constructing new homes in desirable areas push settlement into higher-risk areas: "Eliminating the restrictions that prevent housing development would alleviate the pressure that people from all socioeconomic backgrounds, but especially those of lower incomes, experience that push them into fire-prone WUIs." That will require reform not just of insurance rules, but of zoning laws, permitting, urban growth boundaries, and other red tape that obstructs housing construction. Climate may change and risks can rise and fall, but insurance markets are capable of adjusting—if they're allowed to do so. If Californians want insurance to deal with their wildfire problems, they're going to have to undo a lot of bad policy choices. The post How To Fix California's Self-Inflicted Homeowner's Insurance Crisis appeared first on
Yahoo
13-05-2025
- Business
- Yahoo
State Farm Wins 17% Emergency Rate Hike for Homes After LA Fires
(Bloomberg) -- State Farm has been approved for an emergency 17% rate increase on homeowner insurance policies in California, part of an effort to shore up the state's largest insurer after the devastating wildfires in the Los Angeles area. As Coastline Erodes, One California City Considers 'Retreat Now' A New Central Park Amenity, Tailored to Its East Harlem Neighbors What's Behind the Rise in Serious Injuries on New York City's Streets? Lawsuit Challenges Trump Administration Policy on Migrant Children The hike, which takes effect in June, also allows a 15% boost for condo coverage, according to Insurance Commissioner Ricardo Lara. It follows a three-day hearing in April, where an administrative law judge found that the adjustment balanced consumer protections with the company's financial stability. The judge's proposed order was adopted by Lara on Tuesday. 'Let me be clear: We are in a statewide insurance crisis affecting millions of Californians. Taking this on requires tough decisions,' Lara said in a statement. As a condition of the increase, regulators ordered the insurer to bring in a $400 million cash infusion from its parent company and barred it from issuing mass non-renewals through the end of the year. State Farm has struggled with wildfire-related pressure and its credit rating was downgraded this week by S&P Global Ratings, which cited the January wildfires and ongoing climate risks. The Palisades Fire and the Eaton Fire in nearby Altadena in January killed 30 people and destroyed 16,000 structures, causing as much as $131 billion in economic losses. State Farm had initially sought a 22% hike but agreed to scale back the request during last month's hearing. A University of California at Los Angeles analysis estimates the company could face $7.6 billion in claims from the Palisades and Eaton fires, which caused $45 billion in insured losses statewide. Consumer Watchdog, a nonprofit advocacy group, criticized the decision to allow the rate increase, arguing that State Farm didn't provide enough evidence to justify charging higher premiums under Proposition 103, the state law governing insurance pricing. 'Today's decision that would make consumers pay now but allow State Farm to wait months before having to show its math is a great disappointment for consumers,' said Consumer Watchdog Executive Director Carmen Balber. Cartoon Network's Last Gasp Trump Has Already Ruined Christmas The Recession Chatter Is Getting Louder. Watch These Metrics US Border Towns Are Being Ravaged by Canada's Furious Boycott Maybe AI Slop Is Killing the Internet, After All ©2025 Bloomberg L.P.
Yahoo
13-05-2025
- Business
- Yahoo
Proposed Decision Approving $749 Million State Farm Home Insurance Rate Hike Goes to Insurance Commissioner Lara, Says Consumer Watchdog
LOS ANGELES, May 13, 2025 /PRNewswire/ -- A proposed decision recommending approval of State Farm General's request for an interim rate hike was issued by an Administrative Law Judge yesterday and sent to Insurance Commissioner Ricardo Lara. If approved by Lara, the settlement would impose a 17% rate increase for homeowners, 15% increase for renters and condo owners, and a 38% increase for rental dwelling policies as soon as June 1. Read the decision. "Today's decision that would make consumers pay now but allow State Farm to wait months before having to show its math is a great disappointment for consumers. Voter-approved Proposition 103 says a rate hike shouldn't come before the rate justification, but that's what happened here. We urge the Commissioner to reject the proposed decision so State Farm policyholders, many of whom are struggling to get their claims paid by the company after the Los Angeles fires, aren't overcharged," said Carmen Balber, executive director of Consumer Watchdog. Recent serious allegations have emerged regarding State Farm's mishandling of fire claims following the Eaton and Palisades fires in Los Angeles. Numerous policyholders have reported delays, denials, rotating adjusters, and inadequate assessments of damage, leading to financial hardship and widespread criticism of the insurer's claim handling practices. "It adds insult to injury for consumers to be forced to pay significantly more for coverage when some of these same consumers may be simultaneously trying to recover from the fires while State Farm is mishandling their existing claims," said Balber. Under the proposed decision, State Farm's rate hike will be subject to review in a full rate hearing, where the company will be required to fully justify the rate. That hearing is now tentatively scheduled for October. The agreement also promises refunds if the rate is ultimately proved to be excessive. "Refunds will be too little too late for homeowners who are already struggling to pay their home insurance premiums," said Balber. "Nevertheless, we will fully defend consumers' right to fair rates in the upcoming hearings where State Farm will finally have to justify what they want to charge." View original content to download multimedia: SOURCE Consumer Watchdog Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Wire
12-05-2025
- Business
- Business Wire
Triple-I Report: Lower-Risk Parcels Can Be Found in Wildfire-Prone California Communities
SAN DIEGO--(BUSINESS WIRE)--The Insurance Information Institute (Triple-I) today published a whitepaper addressing wildfire insurance access in underserved areas of California, one of the most pressing challenges facing the Golden State's volatile property insurance market. Triple-I's research shows that with more detailed, property-level analysis, insurers can confidently offer property insurance coverage in areas of California previously deemed too risky. The study, G etting Granular to Find Lower-Risk Properties Amid Wildfire Perils, comes at a critical time as California continues to grapple with regulatory obstacles related to actuarially sound underwriting and pricing. Using Guidewire HazardHub predictive Wildfire Score methodology, Triple-I's research demonstrated how granular geospatial data analysis can identify lower-risk properties, even in areas traditionally considered high-risk. 'The traditional approach to wildfire risk assessment has left many Californians without access to affordable property insurance coverage,' said Dale Porfilio, FCAS, MAAA, Chief Insurance Officer, Triple-I. "Our research shows that with more detailed, property-level analysis, insurers can confidently offer coverage in areas previously deemed too risky." The report examines three ZIP codes identified by the California Department of Insurance (CDI) as 'undermarketed' by insurers: Los Angeles (90210), Mendocino (95490) and El Dorado (95667). The Triple-I analysis of HazardHub insights reveals strong fire-suppression success rates of 90%, 95% and 97%, respectively, in these areas, suggesting many properties are less risky than previously thought. 'To sustainably write insurance in California and other wildfire-prone states, insurers need access to granular property-level data, modern wildfire risk models and a regulatory environment that embraces innovation,' said Leo Tenenblat, Senior Vice President and General Manager, Data and Analytics at Guidewire. 'The Triple-I analysis highlights how next-generation tools and data can uncover lower-risk properties – even in high-risk areas – empowering insurers to expand coverage confidently and responsibly.' Key findings from the Triple-I study include: California's insurance availability challenges stem largely from Proposition 103, regulatory interpretation of which has restricted insurers' ability to offer coverage at actuarially sound rates, which are sufficient to pay expected future losses. Wildfire mitigation and home hardening can reduce the risk of wildfire damage by up to 70%. Granular risk assessment incorporates all vegetation types, drought conditions and fire-suppression success rates in addition to more traditional variables like fuel density, slope and aspect. The California FAIR Plan, the state's insurer of last resort, has become increasingly important but is not a sustainable long-term solution. Triple-I's research supports the CDI's Sustainable Insurance Strategy, which requires insurance companies to offer homeowners coverage in California's under-served areas if they want to use advanced, forward-looking wildfire models in their rate filings. To meet this requirement, insurers must write policies in those areas equal to at least 85% of their total market share across the state. If a carrier has 10% market share in the state, they must have 8.5% of the 'under-marketed' area, which makes up about 15% of properties in the state for a 1.275% share of the market, less than 1.3% of their portfolio. The report concludes that addressing insurance availability/affordability challenges in California requires a multi-pronged approach with a focus on high-quality, reliable data that allows for targeted risk assessment at the property level. About the Insurance Information Institute (Triple-I) Since 1960, the Insurance Information Institute (Triple-I) has been the trusted voice of risk and insurance, delivering unique, data-driven insights to educate, elevate and connect consumers, industry professionals, policymakers and the media. An affiliate of The Institutes, Triple-I represents a diverse membership accounting for nearly 50% of all U.S. property/casualty premiums written. Our members include mutual and stock companies, personal and commercial lines, primary insurers and reinsurers – serving regional, national and global markets. About The Institutes The Institutes® are a not-for-profit comprised of diverse affiliates that educate, elevate, and connect people in the essential disciplines of risk management and insurance. Through products and services offered by The Institutes and nearly 20 affiliated business units, people and organizations are empowered to help those in need with a focus on understanding, predicting, and preventing losses to create a more resilient world. The Institutes is a registered trademark of The Institutes. All rights reserved.
