Commentary: Insurance crisis riddled with deceit
Blackmail has been the rule for the last year as insurance companies scared
The blackmail began when company after company canceled policies last winter, while threatening to pull out of the state's insurance sales market. When Commissioner
This comes via manipulation of Lara, who is desperate for the companies to keep existing policies and write new ones for owners of property in areas the insurance industry deems endangered by wildfires, even if those areas have never burned.
Instead, Lara could have stood tall, telling the industry, "Either sell property insurance here, or sell no other coverages, either, like auto or life."
Here's how the new situation looks: If a company increases its market share in supposedly endangered areas to 85% of its statewide market share, that company will be authorized to use secret, so-called "black box" algorithms (another term for formulas) to set its rates in all parts of the state.
If a company writes 20% of all property policies statewide, it could get secrecy in rate-setting by insuring 17 out of every 100 homes in threatened areas. If a company writes 10 percent of policies statewide, it could get rate freedom by selling 9% of policies in threatened places.
All other Californians will pay for such new availability in fire-prone areas via higher premiums. It was no accident that
But wait. Now deception kicks in. For in order to get those increases, companies won't really have to raise their market share in possible wildfire areas to 85% of their statewide market share.
Rather, they could get still get full freedom in setting premiums if they merely increase their number of policies in risky areas by 5 percent. If, say,
What's more, the rate levels from which that 5% increase would be figured would be the latest ones, not counting policies they previously canceled.
This is complete deception, coming after Lara trumpeted the supposed 85% of overall market share figure as a consumer boon.
The reality is that his new rules will put even more pressure than before on homeowners whose mortgage lenders require them to have fire coverage. Go without a homeowner policy for long and you could end up homeless.
This pressures homeowners to turn to the already overused state Fair Plan,
So the coverage expansion that was supposed to help consumers and eliminate panicked hunts for coverage will for the most part be small potatoes if this plan goes forward.
The bottom line here is that rates will soon rise for every Californian, including renters for whom insurance rates are often a pass-through added to their monthly expense.
Said
What's more, price hikes will likely start quickly, while even the tiny requirements for more policies in the hardest-hit areas won't begin until two years from now.
While Lara said the 5% increase alternative for sales in threatened areas is intended for small companies, it could also be used by giants like
It adds up to a pernicious mix of blackmail and deception with every property owner in the state now figuring to be victimized by rate increases topping even those already assessed over the last two years.
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