Will big change mean more CA insurers?

A key part of the California Insurance Department’s plan to get companies to resume writing policies in the state is now in effect. Insurers have long wanted the state to allow them to use catastrophe modeling – which they say will let them incorporate projected wildfire risk and losses – in setting their rates. The new regulation, which the Office of Administrative Law filed with the Secretary of State on Friday, will allow the companies to do so if they commit to writing more policies in more high-risk areas.

The models are also supposed to take into account spending by property owners and communities to prevent wildfires. Insurance companies can start submitting catastrophe models to the department on Jan. 2.



Once a model is approved, insurers can submit rate reviews based on the new regulations. The department is expecting to finalize its last new regulation, which would allow insurers to also factor their costs of reinsuring risk into their rates, by the end of this year. Department spokesperson Michael Soller pointed to news last week that Farmers Insurance plans to start writing policies in the state again after a pause of more than a year as a sign that Insurance Commissioner Ricardo Lara’s overall plan to fix the insurance crisis is going to work.

“Companies are clearly watching this,” Soller said. But consumer advocates aren’t sold, warning of higher premiums for homeowners. Carmen Balber, Consumer Watchdog executive director, in a statement: “The rule will let insurance companies raise rates based on secret algorithms but not expand coverage as promised.

” She has criticized Lara for originally promising to require insurers to cover 85% of their market share in distressed areas but then releasing a regulation that allows some companies to choose a 5% option..