The devastating wildfires in California are expected to exacerbate the state's insurance crisis. Experts point to a 1988 law, Proposition 103, which they say hinders insurance companies' ability to adjust rates, leading to a withdrawal from the state.
California's insurance crisis is expected to worsen following the devastating wildfires. Experts attribute the situation partly to a 1988 law, Proposition 103, which grants the state's Department of Insurance the power to approve or even roll back insurance rates. This regulatory process can take months or years, hindering insurance companies' ability to adjust rates to reflect losses and risk. Critics argue that Prop 103 essentially acts as price controls, stifling the market.
This has led to insurance companies withdrawing from California, particularly after previous wildfire events. While some blame climate change for the crisis, Greenhut argues that the state's regulatory system prevents insurance companies from setting appropriate rates, ultimately reducing competition. Recent attempts to address the crisis include allowing rate increases and enacting reforms, but changing Prop 103 requires a ballot initiative, which lacks current political support. California has also implemented the FAIR Plan, a state-created insurer of last resort, but its capacity is being stretched thin due to soaring demand, raising concerns about its solvency.
INSURANCE CRISIS CALIFORNIA WILDFIRE PROPOSITION 103 REGULATION FAIR PLAN
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