I’m Worried About My Insurance

When was the last time you fell to your hands and knees and kissed the ground because you got an insurance renewal bill in the mail?

I don’t know about you, but if I do get my renewal in May, that is exactly what I will be doing!

Prior to the Los Angeles fires, insurance carriers in high-risk states – like California and Florida – have been reeling from the devastating losses of hurricanes and fires. The risk of depleting reserves and running into insolvency is great. As a result, insurance companies have been non-renewing high-risk policies and even talking about leaving perilous states altogether. ⁽¹⁾

How did we get here?

Insurance companies are required to evaluate potential risks and hold enough reserves to cover possible losses. When financial reserves are not adequate the carriers need to raise rates.

But it’s not that easy. At least for California.

In 1988 California voters passed Prop 103, mandating that a carrier may not raise rates without prior approval from the Insurance Commissioner. ⁽²⁾ The process for assessing rate increases goes through an “intervenor” who determines if the rate increase is fair and reasonable. While this process is supposed to take 60 days, the intervenors are 1 ½ years behind, putting carriers at risk of not meeting reserve requirements. With an inability to protect themselves financially, many carriers needed to stop writing new policies and are canceling existing policies in high-risk areas.

Can my insurance be cancelled?

On Friday, Jan 10^th, 2025 Insurance Commissioner Ricardo Lara ordered insurance companies to have a one-year moratorium on insurance non-renewals and cancellations. The problem is that this only applies to people impacted by the Palisades and Eaton fires. So – yes – you can be non-renewed. ⁽³⁾

Where will we get insurance if we are cancelled?

The California FAIR plan offers insurance for people who cannot get traditional policies. ⁽⁴⁾ I went on to the website and the policy information is unclear and convoluted. It’s not a great alternative and covers very little. Fire, flood, earthquake, and other losses must be purchased under separate policies. It’s worth noting that this is not a government funded plan and runs the risk of depleting. If that happens, consumers and private insurance will need to figure out how to pay for further losses. ⁽⁵⁾I cringe when I think about how this may look.

Is it time to worry?

I think it’s too soon to panic. I am an optimist. I believe that our insurance companies and the insurance commissioner will get this resolved. I do think it’s a good time to plan for much higher insurance premiums and to build emergency savings for higher deductibles. Then thank your lucky stars if you get an insurance renewal!

Please give us a call if you wish to discuss this or have any other concerns. We are here for you!

Barbara

January 12, 2025
I’d like to thank my insurance agent, Vladan Trifunovic, for his contributions to this memo. As always, he’s been a gem for his willingness to help and for his depth of knowledge.

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I’m Worried About My Insurance

I’m Worried About My Insurance

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