Saturday, March 18, 2023

Insurance Companies Are Quietly Fleeing California - WSJ

This regulatory environment explains why California insurers can’t charge rates that reflect their actual risks. It also shows why there’s so little competition in the state’s insurance industry. Over the long run, competition keeps rates low. Insurance commissioners can certainly hold premiums down by edict, but the result is a contracting market. Homeowners then have little choice but to buy inadequate policies in a government-run marketplace.

Proposition 103 isn’t the state’s only insurance problem. In 2018 Gov. Jerry Brown signed a law banning insurance cancellations and nonrenewals in wildfire-affected areas for a year after the fires—and Mr. Lara continues to force the already overstressed FAIR Plan to offer additional coverage. Such edicts further burden an overextended backup insurance fund.

Lawmakers often talk about the need to help consumers and businesses in California’s many disaster-prone areas to secure affordable coverage, yet those same lawmakers impose edicts that impair the ability of insurance markets to do so. As a result, insurance may soon join droughts, fires, floods, infrastructure, traffic congestion, homelessness and crime among California’s many crises.


Last year my fire insurance was cancelled because I was uninsurable at the current regulated (see above) rates. But I need insurance -- so say my mortgagers. After a diligent search, I saw I had no choice but to buy the State of California's supplementary insurance (the FAIR plan, so called because it's not) on top of a policy from Farmer's. All for a lot more than a policy from a less regulated market would have been. So regulating prices leads to higher prices. This should surprise no one and it probably doesn't.

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