Bay Area homeowners likely to see insurance premiums spike
SAN FRANCISCO -- Home insurance will likely go up across the state as the insurance commissioner announced new rules to regulate the industry. Experts said that could mean higher premiums for people living in cities as well.
For weeks, Brandon Esenther struggled to find a company willing to insure his San Francisco Victorian home built in 1900.
Farmers Insurance dropped his friend's policy. When he called his agent to check, he learned Farmers would drop his policy too because the company is not renewing policies for buildings constructed before 1925.
Esenther said he has always paid on time and has never filed a claim.
"There was no conversation, it was a very abrupt -- 'you're being dropped.' It doesn't matter what our history was in the past, what kind of client you've been to us," Esenther said.
In the past year, seven of the top 12 insurance companies doing business in the state have either paused or restricted new business in California, citing inflation and climate change.
"The data shows that companies are paying out $1.13 for every dollar they take in. This is not sustainable over the long haul," said Mark Sektnan, vice president of American Property Casualty Insurance Association, which represents insurance companies.
Sektnan welcomed Insurance Commissioner Ricardo Lara's announcement to reform the industry.
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Right now, California doesn't let insurance companies consider current or future risks when deciding how much to charge for a policy. They can only consider what's happened on a property to set the price.
Commissioner Lara said he will write new rules to let companies look at future climate models when setting rates.
"This will create more availability in the market. Companies that may have stopped issuing new policies or may have left the state may re-visit California," Sektnan said.
Harvey Rosenfield is the founder of Consumer Watchdog and the author of Proposition 103, which regulates insurance rates. He said premiums will go up by hundreds of dollars, maybe even thousands of dollars for those living in fire-prone areas.
"They're willing to pay the ransom or, more correctly, our elected officials are willing to make us pay the insurance industry's ransom," Rosenfield said.
Rosenfield said the new rules will only fatten the pockets of insurance companies.
"If we're gonna pay higher rates, what are we gonna get for it? Right now, nothing," Rosenfield said.
"I'm not surprised California caved but I'm disappointed," Esenther said.
Through a local broker, Esenther recently found a new company to insure his home. He said he's paying 20 percent more than his old policy.
"Total relief, we're covered. I won't miss having that additional stress hanging over my head," Esenther said.
Commissioner Lara said the new rules will take at least a year to go into effect.