Since 2017, home insurers have quietly withdrawn from the California marketplace one after another Creating a very tough situation for homeowners. The reason home insurers have been leaving the California insurance marketplace is fairly straightforward- they are unprofitable. The reasons why they are unprofitable is:
- Natural disasters- Wildfires in California from 2017 through 2021 have caused tens of billions in insured losses, unprecedented in scale in the history of insurance.
- Inflation- Rapid inflation from 2019-2023 has caused insurers claims cost to spike dramatically.
- Reinsurance costs have spiked 50-100%. Behind every home insurer and home insurance policy is a reinsurer. Insurers need to purchase reinsurance in order to be able to provide home insurance policies. These reinsurance are large global companies, who have decided that the wildfire risk in California is too great, and they do not want to take that risk anymore. Reinsurers have raised their rates on retail home insurers. Because of consumer laws passed in the 1980’s in California, home insurers are not able to pass these reinsurance rates on to consumers.
- Global disasters- the size and frequency of natural disasters globally has affected the national insurance markets. Places like California which are high risk for catastrophe claims like wildfires and earthquakes has made already wary insurers and reinsurers reevaluate their willingness to do business in high risk states and locations.
- California State regulators- Because California is a highly regulated state- The State government and California Department of Insurance has been slow to take action to shore up the insurance market in California after rapidly changing conditions over the past five years- mainly the natural disasters and rapid inflation. Insurers have chosen to do business in states and countries where they can charge adequate rates for the risk. In California, the insurers are regulated and are currently unable to charge appropriate rates for the risk and inflationary costs that they have incurred in recent years due to regulations and laws. This has driven insurers out of California.
As a result, many hundreds of millions of Californian’s have lost their home insurance over the past five years. And many more have seen their rates increase due to a smaller pool of home insurers writing policies. Less insurers means less competition.
Would you like to know what will happen next? Please stay posted by subscribing to our blog, or reach out to us anytime as we are up to date with the trends in the California insurance marketplace.
Here at Baxter Insurance, we have helped thousands of homeowners secure coverage for their homes since 1989. We our company mission is to assist and serve our clients. Feel free to reach out to us if you would would like to move your policy to our agency, or for a free quote.
