Latest news with #Proposition103
Newsweek
16 hours ago
- Business
- Newsweek
California Proposes Major Insurance Reform
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. California Insurance Commissioner Ricardo Lara is pursuing sweeping reforms for California's FAIR plan to stabilize the state's insurer of last resort. In a press release issued on Wednesday, the California Department of Insurance said FAIR Plans' expansion in the last 10 years has revealed "flaws in a system that was never designed to bear the weight it now carries." Under Proposition 103, insurance companies have been allowed to bypass high-risk areas including those prone to wildfires, leaving many homeowners and businesses in the state resorting to the FAIR Plan for coverage. "The FAIR Plan needs to be a temporary option, not the only option," Lara said in the press release. "My top priority is for people to have more choices in a competitive market. And for those unable to find coverage right now, the FAIR Plan needs to provide the services and benefit payouts they deserve, quickly and fully." Why It Matters The reforms come amidst a crisis in California's insurance market, where increasing wildfire risk has led many providers to limit or abandon coverage. The number of policies held on the FAIR Plan, which offers insurance to those who cannot find coverage on the market, has boomed in recent years. As of March 2025, the FAIR Plan's total policies in force is 573,739—a 23 percent increase since September 2024, and a 139 percent increase since September 2021. What To Know Through Lara's Sustainable Insurance Strategy, he is aiming to restore the FAIR Plan to a "temporary solution, not a permanent one," and to give Californians "more options and stronger protections." His reforms include: Expanded coverage : Starting July 26, 2025, the FAIR Plan will temporarily offer high-value commercial coverage—up to $20 million per building and $100 million per location—through 2028, including coverage for HOAs and affordable housing. : Starting July 26, 2025, the FAIR Plan will temporarily offer high-value commercial coverage—up to $20 million per building and $100 million per location—through 2028, including coverage for HOAs and affordable housing. Increased transparency : As of July 1, 2025, the FAIR Plan must publicly report exposures, policy counts, and financial data to inform policymakers and the public. : As of July 1, 2025, the FAIR Plan must publicly report exposures, policy counts, and financial data to inform policymakers and the public. Market stabilization : In response to insurer withdrawals, Lara moved to stabilize the market and on June 23, 2025, urged dismissal of a lawsuit by Consumer Watchdog that he says undermines reform efforts. : In response to insurer withdrawals, Lara moved to stabilize the market and on June 23, 2025, urged dismissal of a lawsuit by Consumer Watchdog that he says undermines reform efforts. Wildfire claims oversight : The Department of Insurance is investigating FAIR Plan responses to smoke damage claims from the Los Angeles wildfires and has directed improvements in staffing and claims handling. : The Department of Insurance is investigating FAIR Plan responses to smoke damage claims from the Los Angeles wildfires and has directed improvements in staffing and claims handling. Operational review : A financial examination report on FAIR Plan operations, based on 2022 recommendations, is expected soon to assess progress on governance and service reforms. : A financial examination report on FAIR Plan operations, based on 2022 recommendations, is expected soon to assess progress on governance and service reforms. New financial tools: Lara has co-sponsored Assembly Bill 226, allowing the FAIR Plan to seek bonds, loans, and credit lines—pending Insurance Commissioner approval—to expand fire insurance access. An aerial view of a mobile home park destroyed by the Palisades Fire on May 7 in Pacific Palisades, California. An aerial view of a mobile home park destroyed by the Palisades Fire on May 7 in Pacific Palisades, California. Justin Sullivan/GETTY What People Are Saying Commissioner Lara said in Wednesday's press release: "Decades of neglect have created a crisis of availability. We want homeowners and business owners to have choices – not just a last resort. We cannot accept the growth of the FAIR Plan as inevitable. My continued reforms create the first-ever requirement for insurance companies to write policies in wildfire-distressed areas if they want to use forward-looking models or the cost of reinsurance in their rates. This is about reforming the limits of Proposition 103 and delivering on the promise of insurance access for every Californian." What Happens Next? Researchers at the comparison website Insurify have estimated that homeowner insurance premiums on the market will continue to rise this year, by as much as 21 percent throughout 2025, with an estimated average annual premium of $2,930, compared to $2,424 paid by California homeowners in 2024.
Malaysian Reserve
14-06-2025
- Business
- Malaysian Reserve
State Farm Cites Newly Announced CDI Market Conduct Exam to Oppose Consumer Participation in Rate Hearing, Says Consumer Watchdog
LOS ANGELES, June 13, 2025 /PRNewswire/ — At a hearing today before the California Department of Insurance, State Farm opposed Pacific Palisades homeowner Merritt David Farren's petition to participate in the ongoing rate review proceedings, citing the Department's newly announced market conduct examination of the company's claims handling practices following the January wildfires in Los Angeles. State Farm argued that allegations concerning its failure to properly pay wildfire claims were not relevant to its request for yet another rate hike—despite having already secured a 20% increase in 2024 and a 17% emergency interim increase earlier this year, which is now proposed to be folded into a larger 30% permanent increase. 'State Farm wants to shut the public out because it argues a market conduct exam would take too long,' said Ben Powell, a consumer protection attorney at Consumer Watchdog. 'But just weeks ago, State Farm pushed the Department to approve an emergency rate hike with unprecedented speed—even though it hadn't submitted all the required information. When it comes to raising rates, State Farm demands urgency. But when it comes to protecting consumers, it wants regulators to slam on the brakes.' Consumer Watchdog emphasized that Proposition 103 guarantees any member of the public the right to intervene in insurance proceedings—a safeguard designed to hold insurers accountable. 'If the Department is willing to act quickly for insurers, it must act just as quickly to protect policyholders,' Powell added. 'No one should be excluded from this process—especially not consumers left without fair claim payments after the fires.' Today's hearing concluded with the Administrative Law Judge taking the matter under submission. A decision on Mr. Farren's intervention petition is expected soon.
Yahoo
13-06-2025
- Business
- Yahoo
State Farm Cites Newly Announced CDI Market Conduct Exam to Oppose Consumer Participation in Rate Hearing, Says Consumer Watchdog
LOS ANGELES, June 13, 2025 /PRNewswire/ -- At a hearing today before the California Department of Insurance, State Farm opposed Pacific Palisades homeowner Merritt David Farren's petition to participate in the ongoing rate review proceedings, citing the Department's newly announced market conduct examination of the company's claims handling practices following the January wildfires in Los Angeles. State Farm argued that allegations concerning its failure to properly pay wildfire claims were not relevant to its request for yet another rate hike—despite having already secured a 20% increase in 2024 and a 17% emergency interim increase earlier this year, which is now proposed to be folded into a larger 30% permanent increase. "State Farm wants to shut the public out because it argues a market conduct exam would take too long," said Ben Powell, a consumer protection attorney at Consumer Watchdog. "But just weeks ago, State Farm pushed the Department to approve an emergency rate hike with unprecedented speed—even though it hadn't submitted all the required information. When it comes to raising rates, State Farm demands urgency. But when it comes to protecting consumers, it wants regulators to slam on the brakes." Consumer Watchdog emphasized that Proposition 103 guarantees any member of the public the right to intervene in insurance proceedings—a safeguard designed to hold insurers accountable. "If the Department is willing to act quickly for insurers, it must act just as quickly to protect policyholders," Powell added. "No one should be excluded from this process—especially not consumers left without fair claim payments after the fires." Today's hearing concluded with the Administrative Law Judge taking the matter under submission. A decision on Mr. Farren's intervention petition is expected soon. View original content to download multimedia: SOURCE Consumer Watchdog
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
