Californians looking to buy a house face some of the country’s most expensive real estate prices and wildfires that threaten scores of housing tracts. Now there’s another obstacle: finding an insurer willing to cover their dream home.

State Farm General Insurance Co. said last week that it’s no longer accepting new applications for property and casualty coverage in California because of soaring wildfire and construction costs and “a challenging reinsurance market.”

Now, Allstate Corp. has told the state Department of Insurance that it stopped selling new home insurance policies last year. The notice was part of a recent request for a nearly 40% rate increase for home and business property and casualty insurance.

The move by the two insurers — State Farm was California’s largest property insurer and Allstate was fourth as of 2021 — could worsen what the FAIR Plan, a state-mandated insurance pool, has called an “impending insurance unavailability crisis.”

“We have a lot of people going naked, which means they have no insurance,” said Bill Dodd, a Democratic state senator representing fire-scarred Napa County and other parts of Northern California. “What my constituents want is insurance.”

The FAIR Plan, which offers minimal coverage at high rates, is meant to be a provider of last resort, but enrollments have surged 70% since 2019 to 272,846 homes in 2022.

A series of catastrophic wildfires in recent years has increased calls from insurers to weaken the state’s consumer-friendly policies that have held down rates for decades.

The average California homeowner’s annual insurance premium is $1,300, compared with more than $2,000 in other states with wildfire risk and $4,000 in hurricane-prone Florida, according to the Insurance Information Institute.

But new home buyers could be forced to pay more, regardless of their home’s proximity to wildfire dangers. Before State Farm’s announcement, the company requested a 28% rate hike on homeowners’ insurance; Allstate has filed for a 39.6% increase.

The insurance crunch is affecting buyers across the state already, even in areas where the wildfire risk is low. In San Francisco, real estate agents say they have seen deals fall through because would-be buyers couldn’t get insured.

“What we’re hearing is that now, when buyers present an offer on a property we’re not only asking them for pre-approval for a lender, we’re also asking them if they’ve spoken to their insurance agent if they’ll insure the property,” said Joske Thompson, a broker at Compass Inc. with 40 years’ experience in the area.

https://www.latimes.com/business/story/2...california

**** we haven't had the big insurance companies in Florida in some time. I think State Farm is now back but only for 500k homes and up

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(06-03-2023 06:31 PM)fsquid Wrote:  **** we haven't had the big insurance companies in Florida in some time. I think State Farm is now back but only for 500k homes and up

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76% of lawsuits filed over homeowner coverage are filed in Florida. The private insurers could not make any money and they could get reinsurance (insurance on claims paid), so they pulled out.

I’m guessing California is going to start up a state backed insurer like you have in Florida (Citizens Insurance).

That’s one of the problems of commercial insurance. No one wants to insure anything they might lose money on. Same with health insurance. Their tolerance for risk is very, very low—which is strange for an industry that exists to mitigate risk.

(06-03-2023 10:33 PM)Todor Wrote:  That’s one of the problems of commercial insurance. No one wants to insure anything they might lose money on. Same with health insurance. Their tolerance for risk is very, very low—which is strange for an industry that exists to mitigate risk.

It's an industry that primarily invests money...insurance premiums are just a way to get the $$ in the door.

(06-03-2023 06:31 PM)fsquid Wrote:  **** we haven't had the big insurance companies in Florida in some time. I think State Farm is now back but only for 500k homes and up

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Florida has had both auto and property insurance issues going back a couple of decades at least. Primarily because they have tried the California model of "twiddling and forcing" insurance carriers to do certain things. (Which most states at some point try, some are simply more extreme at it. ) Florida also had an enormous fraud issue with auto accidents until they began to crack down on them.

When your state begins to twiddle and force carriers to provide certain coverages, your state is in trouble. The carriers leaving are telling you the way you are running your state makes it difficult to offer those coverages without exposing them to enormous risks that are difficult to account for.

Part of the "twiddling" is the way a state will tell a carrier that they have to charge the same rate for some coverage, such as hurricane coverage or flood coverage, for the entire state. They do this to ensure that those at the highest risk can get coverage, but what they are doing is drilling those in less exposed areas in the butt by driving their premiums way up. So someone who lives in an area that hasnt had a flood in a century pays the same rate as someone who's house gets destroyed every 5 or 10- years from a flood. And eventually, the carrier will say its not worth it, and pull out completely.

To get carriers to want to come into a state en-masse, the state needs to stop fiddling and forcing, and allow the free market to take control. That will mean that some people who have bad driving records may have to pay a very high price for auto insurance. Or someone who's house gets destroyed every 10 years from a flood will be basically paying 12% of their home's value every year for flood insurance. Because if they dont, they will end up not having insurance carriers in their state.

Back when Florida had an enormous fraud issue (mainly in the maimi area of the state) a lot of carriers pulled out. That left few carriers, which allowed them to jack the rates way up. The state couldnt tell them no, or else those carriers would also leave. So those carriers made decent money, despite the fraud, because everybody in the state was paying for it. You may have lived in the Destin area, but you auto premium was sky high because of the fraud issue in Miami-Dade county. When Florida finally addressed the fraud issue, carriers began to come back into the state and the rates fell.