The earthquake premium is 50% higher than a regular homeowners policy, and one would think that insurance companies would be happy to write the business. One would be wrong.
Last month we received notice (right) that our provider won't renew the earthquake policy, so we'll have to start looking.
We should count ourselves lucky that we do have homeowners coverage through July, 2024. Insurance giants Allstate and State Farm have stopped taking new customers.
It was not immediately clear what prompted Allstate’s pullback on new policies. But State Farm, the largest provider of property and casualty insurance in California, made waves in late May by announcing it would stop issuing new homeowner policies in the state due to inflation, wildfires and rising reinsurance costs.The WSJ blames California regulators for the dwindling number of suppliers:
The nation’s top property and casualty insurer on Friday said it won’t accept new applications for homeowners insurance, citing “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.”Only California can make insurance companies sympathetic.
In other words, State Farm can’t accurately price risk and increase its rates to cover ballooning liabilities. Other property and casualty insurers, including AIG and Chubb, have also been shrinking their California footprint after years of catastrophic wildfires, which are becoming more common owing to drought and decades of poor forest management.
Wildfires in 2017 and 2018 wiped out two times the underwriting profits that insurers had accrued over the prior 26 years. Yet state Insurance Commissioner Ricardo Lara won’t let insurers raise premiums to account for increasing wildfire risks.
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