Some of the nation’s largest home insurance carriers, such as State Farm and Allstate, have made headlines recently for their withdrawal from underwriting in California. What does that mean for homeowners, buyers and sellers across the state? We asked our partners at Agencia Insurance powered by Bubble, to break down the headlines and tell how this shift could impact current and potential homeowners in California.
A number of large home insurance carriers have withdrawn from underwriting in California. Can you tell us why?
First, it’s important to note that this move by big insurers refers mostly to new policies and not renewals. They’ve cited many reasons for the withdrawal, including climate change with its geographic and event severity unpredictability, such as recent wildfires, brush fires and flooding. Also, high inflation has rendered the state’s previously approved premium rates inadequate due to the significantly higher replacement costs for residential construction, including increased labor costs, supply chain issues and rising building and material costs. California has seen a higher surge in inflation than other states.
Are the premium rates the sticking point for home insurance carriers?
Yes, it’s currently an unbalanced market for insurance carriers. In recent years, premium rates have remained frozen or inadequate while costs to replace and rebuild have surged. The big carriers are waiting for approval from the California Department of Insurance and the commissioner for an upward revision in rates.
So what does this mean to new and potential homebuyers?
The home insurance market in California, while damaged, is not inactive. A number of home insurance carriers are still writing policies in different parts of the state. Over 400,000 homes are expected to change hands over this year in California alone. It’s inconceivable that a market of this size would be permitted to be frozen, whether by the private sector or state inaction. Agencia Insurance leverages many of the actively underwriting insurance carriers in supporting homeowners.
How will this be resolved?
Many carriers are waiting for approval from the California Department, and it’s our belief that many of the revisions will be approved over the next few months. Moving forward, geographic-based underwriting will be needed to ensure better risk assessment and pricing of risk based on location. We’re also hoping to see better coordination and consortium development by state institutions and the private sector, as well as a more reasonable regulatory structure.
How is Agencia Insurance adapting to the current market?
We’ve been closely following the activities of the California Department of Insurance, the national and regional home insurance carriers, as well as the general risk environment as it pertains to California as a result of climate change. Bubble is a pioneer in accessing the impacts of climate change, with our proprietary Bubble HomeScores™ that take into account all the perils and hazards by zip code within California and elsewhere in the United States. We also will be publishing city-wide flyers in specific areas with ways and means for homeowners to take preventive measures against climate change impact.
Interested in learning more? Reach out to your agent or contact our partners at Agencia Insurance for a home insurance quote or more information.