You may have heard recently that several insurance companies will no longer be insuring homeowners policies in California. Wildfires, inflation, and regulations have all become too much for the following list of insurance companies to bare, I guess:
- State Farm
- Allstate
- USAA
- Progressive (property)
- Nationwide
- National General
- Pacific Specialty
- Stillwater
- Berkshire Hathaway GUARD
- American Modern
- Travelers (some restrictions)
- Safeco (some restrictions)
- The Costco Insurance Agency
- Lemonade
I’ll let my friend Jay Vorhees, of JVM Lending, explain the rest. Here are a few relevant excerpts (edited by me for length) from a recent blog:
Overview of How We Got Here
- Wildfires/Claims: 2017/2018 were two of the most destructive fire seasons, with a combined claims payout of almost $30 billion. Over 39,000 homes were destroyed by fires within the last five years alone.
- Inflation/Increased Costs: The cost to rebuild a home in CA is drastically higher compared to other states, while insurance premiums in CA are amongst the lowest in the nation. The cost of labor and supply have increased about 40% during the last couple of years, but insurance rates have stayed somewhat the same during that time period. This led to insurance carriers paying out more than they were bringing in. The industry average was about $1,85 getting paid in losses for every $1 earned in insurance premiums.
- Regulatory Environment: In order for insurance carriers to adjust their rates to match the increased fire risk and higher costs to rebuild homes, they have to go through an approval process with the Department of Insurance. This process has been challenging during the past couple of years. Approved rate increased dropped from 71% in 2019 to 29% in 2022. There were also a few moratoriums in place barring insurance companies from non-renewing policies in certain areas.
What Should Homeowners Do?
Home insurance rates will increase for current owners, often substantially, for several years. New homebuyers will have fewer options. More customers will have to use the CA FAIR Plan, which is state-run, and often more expensive than private policies.
So, I recommend homebuyers start shopping for insurance as early as possible. Waiting until the last minute will come back to bite you in this current insurance climate. Budget accordingly if you’re buying a home in California, too. Now you know, and high insurance rates should not shock you. There are also local brokers writing new policies in California. Here is a partial list:
- Bamboo
- Hippo
- CSE
- Traveleres
- Safeco
- Farmers
- Mercury
- Aegis
- Universal North America
I just had a client call me and tell me the home she closed on in the last month, the insurance company sent an adjuster out and was told her roof was 25% decrease in granulation. They told her they would cover the insurance through August but if she didn’t get a new roof by then, they would cancel the policy. She ended up going with Abdullah at Goosehead Insurance with no issues.
JVM refer borrowers to a few providers, but a standout is Abdullah Al-Hadeethi, as he is extremely professional, polished, and responsive. He is also a broker with access to numerous providers, and wrote most of the blog from JVM
Abdullah Al-Hadeethi; Goosehead Insurance; Agency Owner; (573) 592-9665; abdullah.alhadeethi@goosehead.com
Antonio Banuelos-Cruz; Banuelos Insurance Solutions (Farmers); (925) 258-1010; pedro.jbanuelos@farmersagency.com
Kevin Hennessy; Farmers Insurance; (925) 944-3588; khennessy@farmersagent.com
