California homeowners insurance rules could change

SACRAMENTO - The insurance struggle for California homeowners continues. This week, some Bay Area homeowners learned that Liberty Mutual will discontinue a certain type of fire insurance in the state.

The announcement comes as the California Department of Insurance looks for ways to encourage insurance companies to increase coverage in the state. 

Next month, California Insurance Commissioner Ricardo Lara will ask the public to weigh in on a plan to change some of the rules insurers must follow to do business in the state, including how they calculate the risk of wildfires and other disasters to set their rates.

Under the California Dept. of Insurance proposal, insurers that "Commit to writing additional policies or maintaining policies in distressed areas may be permitted to use forward-looking catastrophe models," according to a draft text of the proposal found on the State Department of Insurance website. 

Industry observers say the state is essentially saying, "We'll change the rules if you provide more coverage."

"Consumers should be very worried," said Carmen Balber, executive director of Consumer Watchdog. "What the commissioner is doing will jack up their rates, with very little in return."

Balber said under the proposal, insurance companies would have three years to fulfill their promise of more coverage, with no penalties if they don't. 

There would be no transparency about how the disaster models work since the algorithm behind them would be developed by third-party companies and is considered proprietary information.

Unlike the requirements under current regulations: "It won't make insurance companies show us the numbers to make sure their predictions are correct," Balber said.

Others have a more optimistic view. 

Karl Sussman is an insurance broker and industry analyst who says something needs to change. 

"The market right now is as bad as it's ever been," he said. 

Sussman believes more insurance providers in the market will eventually mean more competitive pricing for consumers.

"In the larger scheme of things, we're going to see all the carriers come back. That will bring their rates back down again," Sussman said. "Right now we're in the complete opposite of a competitive market because nobody's writing [new policies]."

Since 2022, seven of the state's largest property insurers, including State Farm, Allstate, and Nationwide, have either dropped or limited coverage for homeowners in California. 

This week, some Bay Area homeowners found out they're among the 17,000 Liberty Mutual customers in the state losing a specific type of fire insurance. 

"Dwelling" fire insurance covers the cost of the structure of a home, not the contents inside. It is a type of insurance many people who own rental properties or vacation homes rely on. 

The California Department of Insurance public hearing on this topic is scheduled for Sept. 17. 

The meeting will be held virtually, and people can call in to voice their concerns and opinions. No decisions are expected to be made at the hearing, but Lara has said he wants to approve these rule changes by the end of the year.