A deal has finally been made to keep insurance companies in California. While some say the agreement allows insurers to raise rates with impunity, California Insurance Commissioner Ricardo Lara says the deal is a win for all involved.
Lara told KNX In Depth, "Under this historic agreement that we announced [Thursday], a company will write an average of up to 85% of its state market share in wildfire-distressed areas and also depopulate the FAIR Plan, which is the insurer of last resort."
He said this is a big deal for consumers because it gives more options to those living in areas previously stuck with the FAIR Plan as their only insurance.
To those, like Consumer Watchdog, who say this deal gives insurers the freedom to gouging businesses and home owners, Lara said, "They're entitled to their own opinion, but obviously they have the facts wrong."
He said insurance companies are losing money operating in California because of the pandemic, wildfires, and 'historic' inflation.
In his view, "As we're tackling these unprecedented issues and times that we're in, we have to work with the industry to lessen that risk" to get them to write policies here again.
While the Commissioner acknowledges many of the issues are not unique to California and are impacting the insurance industry at large, he does not believe in getting rid of private insurance companies and replacing them with a state-run option.
For example, he said, "In the eighties, when the legislature at the time forced insurance companies to write earthquake insurance after the Northridge earthquake, what the insurance companies did was stop writing earthquake insurance in general."
Lara said that left only 2% of Californians with earthquake insurance through the California Earthquake Authority and "leaves us very, very vulnerable to an earthquake."
Ultimately, Lara said California needs the industry, so we must work with them to lower their risk, leading to more coverage and, in turn, reducing the cost of insurance.
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