The bad news for California homeowners just keeps rolling in, the result of left-wing politicians letting fanatical green ideology determine fire prevention measures.
Or to be more accurate, the lack of fire prevention measures.
Left politicians elected by these same homeowners.
We wrote here about how all California home insurance policyholders could be on the hook for the losses of the state run FAIR Plan.
The FAIR Plan is the last-ditch home insurance policy option for homeowners who can’t get insurance from a private sector firm.
And as one would expect a state-run insurance program is run poorly.
Before the Los Angeles wildfires FAIR only had reserves of $385 million.
Following the wildfires, FAIR’s liabilities are estimated to be $450 billion.
Now the "could" is "will."
The San Francisco Chronicle has the bad news, "The California FAIR Plan does not have enough money to weather the impact of the record-breaking Los Angeles wildfires on its own. Instead, it will turn to private insurers for help — triggering a process where insured California homeowners across the state will end up paying part of the bill.
The California Department of Insurance approved the FAIR Plan’s request to collectively charge private insurance companies $1 billion in order to help pay claims, the department announced Tuesday. . . . A new agreement, brokered last year by Insurance Commissioner Ricardo Lara and the FAIR Plan, means insurers will be able to pass along half of such extra charges — in this case $500 million — to their policyholders."
And this pass-through charge won’t be made in monthly installments like your insurance bill. It will be a lump sum assessment due on arrival.
The only good news is the bill will be divided in some manner between 8.3 million policyholders.
That is not all the bad news. If FAIR is hit hard during the upcoming summer wildfire season (California must be the only state that has home–burning seasons, yet doesn’t do much to prevent the fires!) instead of 50% of the shortage being passed on to California homeowners who didn’t vote for the politicians that caused the fire, 100% of the shortage can be passed on.
"What may be more concerning, to both insurers and to homeowners, is if wildfires later this year cause another assessment, said David Russell, a professor of insurance at CSU Northridge.
"Lara’s agreement with the FAIR Plan allows insurers to pass on 50% of their costs to consumers up to the first $1 billion of residential and commercial assessment fees each per calendar year.
"If another assessment happened later in the year, Russell said it’s possible 100% of those costs could flow to policyholders' bills."
What’s more, policy holders in the private market are facing a double whammy.
The LA Times has this bad news. "State Farm General, California’s largest home insurer, asked state officials for an emergency rate hike averaging 22% Monday, saying the Los Angeles County fires have put the company in dire financial straits.
"The insurer, a subsidiary of State Farm Mutual Automobile Insurance Co. of Bloomington, Ill., said the company has already received at least 8,700 claims and paid more than $1 billion to customers. It expects to pay out ‘significantly more,' with the fires being the costliest natural disasters in its history."
And this 22% increase is on top of a 30% increase the company requested in June.
That’s a 52% rate increase in one year — if approved — for approximately 20% of the privately insured homeowners in the state who may not have been close enough to the wildfires to even smell the smoke.
Lest you think the FAIR policy holders are getting quite a deal, they aren’t. Their coverage is bare bones at best.
The California home insurance market is, dare we say it, a dumpster fire. Companies are leaving the state and those that stay, like State Farm are deciding not to write new policies and refusing to renew some policies.
This is the result of letting people who love trees more than they love people set government policy.
It could be the companies that decided to leave the state have made the best decision. We will not be surprised if homeowners, hammered by the threat of fire and the reality of soaring insurance rates, decide to follow.
Michael Reagan, the eldest son of President Ronald Reagan, is a Newsmax TV analyst. A syndicated columnist and author, he chairs The Reagan Legacy Foundation. Mr. Reagan is an in-demand speaker with Premiere Speaker's Bureau. Read Michael Reagan's Reports — More Here.
Michael R. Shannon is a commentator, researcher for the League of American Voters, and an award-winning political and advertising consultant with nationwide and international experience. He is author of "Conservative Christian's Guidebook for Living in Secular Times (Now With Added Humor!)" Read Michael Shannon's Reports — More Here.