Recap of the February Chalk Talk: State of the Insurance Industry
February’s Chalk Talk on the State of the Insurance Industry included the subheading “Will My Insurance Company Cancel My Homeowners Policy” which was the real meat of our Chalk Talk and also what many attendees are concerned about when it comes to home insurance. We’ve heard about insurance companies eliminating coverage in wildfire-prone areas, exiting the state and other insurance companies that limit, drop or no longer sell new policies to homeowners. Our Chalk Talk mostly describes what has happened in California, however we’ve seen this all across the country. Regardless of where you are, it’s unsettling to face either paying an enormous premium or being kicked off of insurance.
A little bit of history on where it started, in 1988 California passed Prop 103 which was a consumer-friendly proposition which held insurance companies responsible for the rate increases that they were proposing, capping the rates at 6.9%. Insurance companies would need to go through a public hearing to increase rates higher than 6.9% which they were unlikely to do. Today, the last five or six years have been extraordinary in terms of weather, wildfire, storms, floods, and hurricanes across the state and the nation, and the rates haven’t been able to keep up with the payments. The insurance companies stopped making a profit, paying out more than they were bringing in. It hit a breaking point a few years ago when the insurance companies said they were either leaving California or going to put some moratorium in place, which closed the marketplace for a lot of consumers.
Fast forward to September of 2023, Governor Newsom declared a state of emergency and things started to happen. The Department of Insurance started listening to legislators, consumers, realtors, mortgage brokers and everybody who was losing their minds not being able to get insurance or getting non-renewed. That 6.9% cap is going to disappear and insurance companies will be able to file rates appropriately for the claims that they’re paying out, looking at a forward-thinking model instead of rates based on a historical look back. This doesn’t mean rates will go down but should prevent more insurance companies from exiting the marketplace.
You can take steps as a homeowner to avoid being kicked off of your own insurance. Ramona discussed issues that could cause non-renewal. These include:
- Roof over 25 years old or appears to be in poor condition
- Trees too close to the structure
- Breaker panel more than 25 years old
- Plumbing (what you can see) is old
- Furnace more than 25 years old
- Having a wall heater vs central forced air
The insurance companies are looking to see that your maintenance is done, no debris in the yard, no cracked walkways or leaning fences. Ultimately, they’re looking for a nice, tidy, no-hazard kind of home. Additionally, filing small claims can be a cause for non-renewal and can affect your ability to get insurance for 5 years. This also allows you to increase your deductible to whatever you can manage, and benefit from a premium reduction!
For the full recording of this Chalk Talk, free to existing clients, please reach out to info@mainstreetplanning.com or contact your advisor.
