Current:Home > Contact-usWildfire-prone California to consider new rules for property insurance pricing-Angel Dreamer Wealth Society D1 Reviews & Insights
Wildfire-prone California to consider new rules for property insurance pricing
View Date:2024-12-23 17:01:59
SACRAMENTO, Calif. (AP) — A new plan from California’s insurance commissioner aims to stop the nation’s top insurers from leaving the wildfire-prone state by letting them consider climate risks when setting their prices.
Unlike most states, California tightly restricts how insurance companies can price policies. Companies aren’t allowed to factor in current or future risks when deciding how much to charge for an insurance policy. Instead, they can only consider what’s happened in the past on a property to set the price.
At a time when climate change is making wildfires, floods and windstorms more common, insurers say that restriction is making it increasingly difficult for them to truly price the risk on properties. It’s one reason why, in the past year, seven of California’s top insurance companies have paused or restricted new business in the state.
A recent report from First Street Foundation said about one-quarter of all homes in the nation are underpriced for climate risk in insurance.
On Thursday, California Insurance Commissioner Ricardo Lara said the state will write new rules to let insurers look to the future when setting their rates. But companies will only get to do this if they agree to write more policies for homeowners who live in areas with the most risk — including communities threatened by wildfires.
“Everyone is harmed if an insurance company goes insolvent because it cannot pay its claims,” Lara said at a news conference.
The American Property Casualty Insurance Association, which represents insurers, called Lara’s actions “the first steps of many needed to address the deterioration” of the market.
“California’s 35-year-old regulatory system is outdated, cumbersome and fails to reflect the increasing catastrophic losses consumers and businesses are facing from inflation, climate change, extreme weather and more residents living in wildfire prone areas,” Denni Ritter, vice president for state government relations, said in a statement.
The rule change could mean higher rates for homeowners who are already seeing dramatic increases. But looking to the future to set rates doesn’t have to always be pessimistic. Insurers can also consider the billions of dollars the state has spent to better manage forests and make homes more resistant to wildfires — all things insurers aren’t allowed to consider when setting rates under the current rules. They could also consider things like whether power lines have been put under ground in an effort to reduce risk.
‘I think something had to give,” said Amy Bach, executive director of United Policyholders, a national insurance consumer organization. “We’ll have to see what happens to rates.”
Other states already let insurers do this, most notably Florida, although that state does have restrictions on how much they can do it. States with less regulated insurance markets have insurers who build current and future events into their models.
Some consumer groups, including the nonprofit Consumer Watchdog in California, say they are not opposed to insurance companies using a model to look to the future to set their rates. But they want to see what is in that model. It’s not clear if California’s new rules will allow that. State regulators will spend much of the next year deciding what the rule will be.
—-
Associated Press writer Ken Sweet contributed from New York.
veryGood! (15)
Related
- Steelers' Mike Tomlin shuts down Jayden Daniels Lamar comparison: 'That's Mr. Jackson'
- Natalie Portman Briefly Addresses Benjamin Millepied Affair Speculation
- 7 Black women backstage at the Grand Ole Opry, talking Beyoncé and country music
- IVF supporters are 'freaking out' over Alabama court decision treating embryos as children
- Gossip Girl Actress Chanel Banks Reported Missing After Vanishing in California
- Olympian Scott Hamilton Shares He's Not Undergoing Treatment for 3rd Brain Tumor
- Biden to create cybersecurity standards for nation’s ports as concerns grow over vulnerabilities
- Toshiba Laptop AC adapters recalled after hundreds catch fire, causing minor burns
- Todd Golden to continue as Florida basketball coach despite sexual harassment probe
- Ex-FBI informant charged with lying about Bidens had Russian intelligence contacts, prosecutors say
Ranking
- Stock market today: Asian shares meander, tracking Wall Street’s mixed finish as dollar surges
- Green energy, EV sales are growing remarkably in the US as emissions fall. Is it enough?
- Utah school board member censured over transgender comments is seeking reelection
- When does tax season end in 2024? Here's when you should have your taxes filed this year.
- Lee Zeldin, Trump’s EPA Pick, Brings a Moderate Face to a Radical Game Plan
- Natalie Portman Briefly Addresses Benjamin Millepied Affair Speculation
- Blake Lively Reveals She Just Hit This Major Motherhood Milestone With 4 Kids
- It’s an election year, and Biden’s team is signaling a more aggressive posture toward the press
Recommendation
-
Brianna LaPaglia Reacts to Rumors Dave Portnoy Paid Her $10 Million for a Zach Bryan Tell-All
-
Tony Ganios, 'Porky's' and 'The Wanderers' actor, dies at 64 of heart failure: Reports
-
Amy Grant says 5-hour surgery to remove throat cyst forced her to relearn singing
-
NFL franchise tag candidates: What is each team's best option in 2024?
-
Former West Virginia jail officer pleads guilty to civil rights violation in fatal assault on inmate
-
Bipartisan bill aims to make it safer for pedestrians to cross dangerous streets
-
The Best Makeup Removers by Type With Picks From Olivia Culpo, Chloe Bailey, Paige DeSorbo, and More
-
MLS opening week schedule: Messi, Inter Miami kick off 2024 season vs. Real Salt Lake