New plan in California lets insurers use computer modeling to justify rate increases
California's insurance commissioner unveiled a controversial new plan on Thursday that would let insurance companies use computer models to justify rate increases.
It's a push to keep home insurers from leaving the state after major companies paused or restricted coverage less than a year ago. The new computer catastrophe modeling would allow insurers to predict possible wildfires and raise insurance rates based on them.
The problem with these models is they're owned by Wall Street companies who refuse to explain to us how they're getting the rates they're proposing," Executive Director Carmen Balber said.
Balber runs Consumer Watchdog and is concerned the computer modeling would be unreliable and would raise insurance rates unjustifiably.
"Insurance companies want catastrophe models because they are guaranteed to raise rates," Balber said. "We need to make sure that if we are pricing climate risks into insurance rates, we do it fairly and accurately."
This change would be California's most significant insurance reform in thirty years. Commissioner Ricardo Lara said the outdated rules have increased rates and the new modeling would make communities safer.
"We can no longer look solely to the past as a guide to the future," Lara said. "My strategy will help modernize our marketplace, restoring options for consumers while safeguarding the independent, transparent review of rate filings by Department of Insurance experts, which is a bedrock principle of California law."
Some foothill homeowners KCAL News spoke with said it might be a better way for insurers to determine liabilities.
"I mean, in a way, the insurance companies have to keep themselves in business," homeowner Ted Fraund said.
Others said they reduce liabilities by working with the fire department to clear brush around their homes every year.
"Personally, I don't think it's really a good thing. I think it lumps everybody into one basket. One computer basket," homeowner Brad Jenkins said.
