California's homeowners insurance crisis is growing and spreading to car insurance
Ken May owns an insurance agency in Carlsbad. He laughs as he says he used to be mostly ignored at the monthly mixers for local real estate agents and industry leaders. Now, he says, he’s like Tony Robbins, but for insurance. Everyone wants to hear him speak and has questions.
At a June meeting of the Oceanside Realtor Caravan, agents asked him about their clients who are having issues getting home insurance.
One of those agents was Adela Chocano, who has been selling properties in San Diego for 25 years. She said insurance companies are finding problems with properties that would usually be insured without any issues.
“This is the first time we are experiencing this, and we are worried because I don’t know what's going to happen with the next escrows,” she said.
“The system is broken, and it led to this and I talked about two weeks ago about the perfect storm and it’s happening and it’s gonna blow deals,” May told the group. “If the insurance industry collapses in California we’re all screwed."
Some insurance carriers have stopped writing new homeowner policies in California. The most recent are the largest so far: Allstate and State Farm.
The companies declined an interview request, but sent similar statements saying they’re pausing new policies to protect current customers because rebuilding costs have gone up.
Consumer tips and resources:
If you are buying a home:
- Shop early, and look for insurance before you get preapproved for a loan.
- If you find a home, know your risk. Search a hazard map to avoid an uninsurable home or pricey insurance policy.
- Don’t put in a bid on a home until you know the home is insurable and the cost.
- Get that quote in writing.
Keeping your coverage is crucial:
- Do not let your insurance lapse.
- Do not be late on your bill.
- Do not drop insurance for an increase. You may be required to get a home inspection and end up with costly repairs and no insurance.
- Ask your agent about renewals early and what to expect (increased cost, inspections, new carrier).
If you get dropped by a carrier, a non-renewal notice or can’t get insurance:
- Start looking for insurance immediately.
- Call your agent and insurance company; ask why and if it’s fixable.
- Request it in writing; by law insurance companies have to give you a valid reason in writing.
- File a complaint with the Department of Insurance if it’s not justified or if the company dropped you despite costly repairs.
If you are buying a new car:
- Shop early, and shop around for insurance before you buy your car.
- If you’re adding a car, ask how long you have to wait to be insured.
- Get an insurance quote before you commit to the car, because the premium may make your monthly payment unaffordable.
- Ask if there is a waiting period for the insurance.
- Do not drop insurance before registering a car to find a quote.
- Ask for detailed information about payment due dates.
- If you're a good driver and are denied insurance or dropped, file a complaint with the state Department of Insurance.
"State Farm independent contractor agents licensed and authorized in California will continue to serve existing customers for these products and new customers for products not impacted by this decision," said the State Farm statement — which also said its decision to stop accepting new policy applications would not affect auto insurance.
But when we spent time at May’s insurance business, that was not the case.
“I just want to show you how hard it is,” he said as he typed away on his computer, looking for auto insurance quotes for a client. A screen came up with names of insurance companies. May said would typically see prices next to the names, about 14 quotes, but not this time.
“And watch all the rates that come up," May said, looking at his screen. "Not one. Not one.”
He said the names that do come up are unfamiliar carriers. Plus, he’s finding only one or two willing to write a policy. And he said after he signs up his client, chances are the policy will take up to 20 days to take effect.
He said some of his clients have not been able to renew their driver’s licenses because they need proof of insurance, and others have not been able to take their dream car off the dealer’s lot.
We listened as May talked with Eugene, a customer who had to wait 10 days to get a new car insured, leading to trouble getting it registered. Eugene said he just tried to make sure he was driving carefully.
“Every time I would see someone get pulled over, I’m like, 'Man, I hope it’s not me the next one to get pulled over, even though I paid for my insurance,'” Eugene said.
Adding to the headaches — some drivers are finding the grace period for premium payments is gone.
“I had this woman call me yesterday," said Laine Caspi, who runs an insurance agency in Granada Hills. "Beautiful, lovely woman, who had just gotten out of surgery. (She) forgot her payment. She was one day late for her payment on her auto policy, and there’s literally no way to insure her.”
Caspi said drivers who miss a payment are now labeled uninsurable. She said another thing making people go "bare" — driving without insurance — is that companies are demanding entire policy payments up front, making it more difficult for people in vulnerable situations and marginalized communities to have insurance.
“Illegal is what it should be called, but it’s unethical for sure. There’s some redlining going on, they’re cherry picking," she said.
May said he has never seen anything like this.
“I’ve gone up the ladder and talked to company people … and I said, ‘I understand what you’re saying but what you’re doing to this client is wrong, it’s not right and we’re not going to forget,’” he said. “I don’t like the way insurance companies are treating my clients.”
May and Caspi said they foresee some dark times for people who will now be forced to drive without insurance because they can’t afford it or are blacklisted. They said people who get into accidents and are at fault can get sued and lose their savings and their homes to pay for the damages and injuries.
Where agents go for help
"Never in my career have I received so many phone calls and emails from agents," said Michael D’Arelli, the executive director of the American Agents Alliance. He represents over 400 insurance agents across the state.
D'Arelli said the calls go something like this: “'I’m so angry, because I have consumers in my office literally in tears because they need insurance whether it’s home or auto and I can’t fulfill their needs … and it’s killing me.'”
He said the agents add that it’s not about the money, because they make more if they charge more.
D’Arelli puts the blame on California Insurance Commissioner Ricardo Lara, saying companies leaving in droves should have been a red flag and wake up call.
"What could happen is we could have a death spiral," D'Arelli said.
Lara isn’t taking all of the blame: There’s also Proposition 103, passed by voters in the 80s when insurance rates were out of control. Under the law, the commissioner has to approve rate increases, but that didn’t happen during the COVID-19 pandemic.
“For 31 months, this insurance commissioner did not approve rate filings or rate increases for automobile insurance, and it has clogged the pipeline,” D'Arelli said. "It can't be business as usual. The department needs to fast-track rate approval."
D'Arelli also suggested creating an advisory board of agents, consumer advocates, consumers, insurance companies and regulators, to catch issues early and come up with solutions before problems get out of control.
“Insurance companies have told me that the regulatory landscape has gotten so poisonous and the process of getting rates approved has just been weaponized in Sacramento at the Department of Insurance. Companies would rather write business where there’s a friendlier regulatory scheme,” D'Arelli said.
May, Caspi and D’Arelli all said the state needs to allow the companies to get the increases and let the fair market sort it out. They said only then will prices stabilize because it will create competition as consumers just won’t buy from overpriced carriers.
The consumer advocate
“The agents are only repeating the misinformation they’re given by the insurance companies,” said Harvey Rosenfield, the head of the nonprofit consumer advocacy group Consumer Watchdog, and the author of Prop. 103.
He said every agency is pointing fingers at this state, but it’s really not just about California.
“Florida and Texas and all over the country, the insurance companies are raising rates and pulling out of neighborhoods,” Rosenfield said. “The difference is, in California they have to go through a process that protects the public, and the insurance companies can't stand that!”
Rosenfield said companies are flat-out lying, purposely creating a shortage in the market by pulling out and claiming they won't be able to cover current customers claims.
Rosenfield heard this song and dance before when he fought to put the protections in place in the 80s, he said. A month after Prop. 103 passed, he testified next to Ralph Nader before the House Commerce Subcommittee on Consumer Protection.
"The lesson of Prop. 103 ... is, you can fight insurance companies and win," he told the subcommittee then. "You do not have to endure high rates, you do not have to endure abuse and discriminatory practices."
Rosenfield's arguments today are very similar to the ones he made in 1988. And so are the arguments from the insurance industry.
“Companies have just had enough, and in terms of what the profit is, it’s such a highly regulated process that companies can’t charge what they want and Harvey knows that,” D’Arelli said.
Rosenfield and D’Arelli do agree on one thing: Commissioner Lara must act, or, they will.
“(The) thing that we’re looking at very carefully is to sue the commissioner to force him to obey the law,” Rosenfield said.
D'Arelli said he is hearing suggestions of even stronger actions. "People are asking these questions now: 'How do you impeach the insurance commissioner? Can he be recalled?' I've never heard this sort of thing, but that's the level of frustration,” D’Arelli said.
Caspi, the Granada Hills agent, said she would sign a recall petition if there was one. “The commissioner lost complete control of the insurance industry like three years ago and it gets worse every single day,” she said.
- My Hazard Map
- Fire Hazard Zone Map California
- Flood Zone Maps
- Geologic Hazard Maps (earthquake, fault lines, landslide,tsunami, liquefaction zones)
Finding an agent/broker
- CA Department of Insurance (DOI) Home Insurance Finder
- DOI Insurance company list
- DOI Homeowners coverage comparison tool
Consumer protection information
The response from the commissioner's office
KPBS reached out to Lara several times and were told he was too busy for an interview. But Deputy Insurance Commissioner Michael Soller was available. He said he could not comment on a lawsuit or a recall, but he listened to every story the agents had shared.
When asked if he saw a crisis, Soller said, “Californians are covered. Those companies are not leaving. They’re continuing to serve their existing customers ... But it does point to the need and continued need to reduce the overall risk.”
Soller noted that auto insurance in California "functions a little differently. California has a good driver law. It requires every insurance company writing private passenger coverage to insure good drivers,” he said, adding that most Californians are good drivers, thus giving them options.
He also said California has the most competitive market for auto insurance in the nation in terms of companies writing insurance, and that Californians have benefitted from strong consumer protection over the years.
Regarding the agents’ stories of the difficulty in getting quotes and long waits for policies, Soller said it’s vital for people to report these incidents to the Department of Insurance.
“Our branch is looking into these (stories) and we are going to take these (concerns) very seriously,” Soller said.
Soller pointed out some of what the department has done: issuing notices to the insurance companies during the pandemic to get drivers millions in refunds, and increasing coverage for homes and businesses forced onto the California Fair Plan, a fire insurance pool that provides basic coverage when traditional insurers do not.
But there are some things the department will not do. Soller said giving mass approvals for rate increases is out of the question.
“We’re not going to cut corners on consumer protection,” Soller said. “We are going to do a transparent and comprehensive review of every filing to make sure Californians aren't being overcharged and that’s never going to change. That’s bedrock, who we are as a department.”
He also said the commissioner can’t force the insurance companies to reverse their actions.
“There’s a reason why what they are saying has never been done by any insurance commissioner, and it’s because it is not supported by law, plain and simple,” he said.
Rosenfield, the consumer advocate, later told KPBS that’s false. “The insurance commissioner may not want to use the power the voters gave him to protect us in a crisis like this, but he does have the power," Rosenfield said, adding that voters “gave the insurance commissioner the initial responsibility to enforce those laws and he is not doing it.”
When will people find relief?
“This is not going to be solved overnight but there is real work happening throughout the state,” Soller said. “Through our actions we’re going to leave California better than it was just a few years ago.”
But some feel the solutions needed may not exist, or will come too late to change their fortunes.
“I’m worried for my business, I’m worried for my clients, I’m worried for me, I’m worried for my employees,” May said.
Caspi said things cannot stay as they are. “It will destroy this entire state.”
Their advice to consumers for now: don’t make any changes to your coverage or try to change companies. And don't miss a payment — or you may find yourself among California’s uninsured.