Major Insurer Gives California Homeowners Massive Sticker Shock - Latest Global News

Major Insurer Gives California Homeowners Massive Sticker Shock

Major insurer gives California homeowners massive sticker shock

California homeowners who want relief from high insurance premiums may want to prepare for a nasty surprise when purchasing travel insurance. The national insurance giant recently announced it would increase premiums for homeowners in the Golden State by an average of 15.3%. The move will affect an estimated 320,000 policyholders and will come into effect in June this year.

Although the average premium increase is 15%, some homeowners will see their rates increase by as much as 25%, which will only put more strain on California homeowners’ budgets. As hard as it may be to believe, the homeowners receiving the premium increases could be the lucky ones in this equation. Travelers also announced plans to cancel 6,600 policies for California homeowners.

The New York-based insurer cites the increased risk and costs associated with wildfires and other natural disasters such as mudslides or floods as the motivation for both the premium increases and the cancellations. Regardless of whether they received a policy increase or a cancellation, homeowners affected by this move will face a very difficult market when attempting to purchase new rates or a replacement policy.

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In recent years, California’s consumer insurance market has become increasingly difficult as more insurers choose to exit the market entirely rather than take the risk of writing policies. In addition to Travelers, major nationally recognized insurance carriers such as State Farm, Allstate and Farmers have also recently reduced their policies and dramatically increased the premiums on the policies they renew.

Just in March, State Farm announced it would eliminate policies for 72,000 homeowners in California. Like Travelers, all insurers pulling out of California are taking these steps because of concerns about coverage for natural disasters that are hitting the state more frequently and more severely each year. The California Insurance Commission has approved rate increases for travelers, which can only be seen as a recognition of the significant challenges facing the industry.

Travelers released a statement to Los Angeles-based KTLA News about the increases, saying in part: “The approved adjustments to California homeowners insurance rates are a necessary step to align prices with the risks our customers face Travelers’ increases also follow a recent proposal from the California Insurance Commissioner to allow insurers to use predictive models to calculate rate increases.

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The Commissioner also proposes to streamline and speed up the process of approving tariff increases. Both moves could pave the way for even higher insurance premiums, as insurers are currently limited to using actual losses from past claims as the basis for rate increases. This specific restriction was introduced in 1988 as part of a measure called Proposition 103, which also required insurers to obtain approval from the California Insurance Commission before increasing rates.

Since then, property values ​​in California have skyrocketed, and insurers say the current rate-calculation model is not consistent with the costs and risks of coverage for homeowners. California Insurance Commissioner Ricardo Lara said these concessions to the industry are part of his “Sustainable Insurance Strategy” plan, which aims to keep as many private insurers operating in California as possible.

Another pressing issue in the California insurance market is that as more insurers leave the state, only more homeowners will rely on California’s state FAIR plan. Although FAIR promotes itself as a last resort, its website receives thousands of applications each week from homeowners with prices above private rates.

Of course, all of this just adds to the misery for every Travelers policyholder who has just opened their renewal envelope. They probably look around and realize that they are lucky to have been given the option to renew in the first place. Many of their neighbors could be even worse off. California’s insurance crisis hasn’t hit homeowners as hard as Florida’s, but the trend is moving in that direction.

Whatever happens, both the California Insurance Commission and the private insurers operating in the state must reach a mutually beneficial agreement. If this is not possible, one of the most lucrative real estate markets in the world could be in for an incredibly bumpy ride, because it is simply impossible for a multi-trillion-dollar real estate market to exist if property owners cannot obtain insurance.

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This article, “Major Insurer Delivers Massive Sticker Shock to California Homeowners” originally appeared on Benzinga.com

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