Insurance Landscape in California

As the insurance landscape in California undergoes significant changes, it's essential for homeowners to stay informed and proactive. This month, we're focusing on the current state of home insurance in our region and offering some crucial tips to help you navigate this challenging environment.

 

 

California's insurance market has seen a drastic reduction in the number of insurers. From a robust pool of around 50 insurers, we now have fewer than 12 operating in the state. This consolidation has created a more competitive and challenging market for consumers seeking coverage.

 

 

The North State is particularly impacted by these changes, with only about 70 local insurance agents available to serve our communities. This low agent-to-consumer ratio means that our local agents are overwhelmed, and it may take longer to get the assistance you need. Patience and persistence are key when dealing with insurance matters in our area.

 

 

If you receive a notice of non-renewal from your insurance provider, don't panic. Contact your insurance agent immediately. Often, agents can communicate with insurers to identify possible solutions or "fixes" that may allow you to retain your coverage. It's crucial to act quickly and explore all available options.

 

 

It's important to note that insurance companies have strict policies regarding marijuana plants. The presence of marijuana plants on your property is a sure way to face policy cancellation. Insurers don't mess around with this issue, so it's best to avoid any activities that could jeopardize your coverage.

 

 

There is some positive news on the horizon. The state is improving its timeliness in responding to rate increase requests from insurers. What used to take 6-8 months for a response is now seeing improvements, which can lead to a more predictable and stable insurance market in the future, as it help ensure carriers to stay in the state, or possibly return.

 

 

There's no word yet on when the other large insurers might return to the California market however, they are in negotiations with the state, and it is anticipated they will return when the conditions are more feasible.

 

 

While California faces significant challenges, local insurance agents tell us that Florida currently has the biggest insurance woes in the country due to floods and hurricanes.  California is not alone in their struggle with the insurance market.

 

 

Insurance is posing new challenges in real estate transactions. In an already competitive market, having claims on record for the person seeking insurance or the home itself can further complicate obtaining insurance. Here are some specific considerations for buyers and sellers:

 

- Be cautious about providing an insurance quote for the property as part of your marketing plan. The buyer's individual factors such as age, occupation, lines of coverage, and claims history can affect whether the same company will offer them insurance or at what rate.

- Consider requiring buyers to provide a written offer for insurance within seven days of entering escrow. This ensures that if the buyer is unable to obtain acceptable insurance and cancels escrow, your home won't be off the market for too long.

 

- Be aware that insurance rates and availability are volatile. Purchase within a budget that allows you to withstand potential increases in insurance costs over the years.

- Explore the FAIR Plan, the state's privately operated insurance option for those unable to find coverage from other carriers. While this type of insurance used to deter potential buyers, it has become more common in today's market. Ensure you can afford the coverage and discuss its limitations with your insurance agent, as it often needs to be supplemented with other types of coverage.

 

 

Fortunately, there is change on the horizon as legislators actively work on laws to address these insurance challenges. Faster responses from the state to rate increase requests and enhancements to the FAIR Plan coverage are positive steps forward. For a more detailed read on these changes, you can read this article.

 

 

Industry Changes:

The de-coupling of real estate agent commissions, a topic we covered in last month's newsletter, is currently slated to take effect on August 17, 2024. This change will have significant implications for how real estate transactions are conducted, so stay tuned for more details as the date approaches.