I wanted to walk you through something important that just came across my desk from CalMatters Housing about where we stand with homeowners insurance here in California. It's a story that affects every single client conversation I have, so I think it's worth understanding what's really happening beneath the surface.
According to CalMatters Housing, insurance companies are starting to write new policies again after years of pulling back from California due to wildfire concerns. The state's Insurance Department is celebrating this as proof that the new regulations are working, announcing each time a company decides to sell policies again. But here's the rub – the state hasn't actually told us how many new policies are being written. That's where Consumer Watchdog, an advocacy group, stepped in and did the math themselves by going through rate filings. Their estimate is that insurers have committed to about 12,000 new policies since the new rules kicked in earlier this year.
Now, Consumer Watchdog makes an interesting point. The insurance companies that have committed to writing these new policies have been approved for roughly 571 million dollars in rate increases. The advocacy group is saying that's a lot of money Californians are paying in higher premiums for what amounts to a relatively small number of new policies. The Insurance Department disputes this analysis, saying the numbers are incomplete and that they plan to release their own data when they're ready, though it's unclear if that will happen before the commissioner's term ends.
The way these new rules work is that insurance companies can use more sophisticated risk modeling and factor in their reinsurance costs, but in exchange they have to commit to selling more policies in high-risk areas. According to Consumer Watchdog's analysis, only about half of the companies that got rate increases have actually committed to writing more policies. Some of the bigger companies like Farmers have committed to several thousand new policies, but when you look at the context, the state's backup FAIR Plan still has around 697,000 policies and keeps growing, even if slowly.
What I am seeing locally in Fremont and across the East Bay is that this is a real challenge for my clients. Yes, there are signs of improvement in the insurance market, and that's encouraging. But we're dealing with premium increases that are meaningful for homeowners while the actual availability piece is moving slower than people hoped. The smart approach right now is to work with your insurance broker early in any transaction, get your home inspected and fire-proofed if possible, and understand that availability is coming back, but it's coming back selectively and at a cost.
