This year’s wildfire fire disasters, including the Lilac fire, could change insurance policies in California. Insurers are likely to take a massive hit as 2017 is now the worst wildfire season in the state’s modern history. Here’s what you need to know:
Insurance rates could slightly go up with all these wildfires
Homeowner insurance rates could go up in fire-prone areas, but state laws will likely hold back any dramatic increases.
Regulators like the California Department of Insurance are quick to say that rates are based on 20-year averages, so one year is not going to make a significant difference. By California law, insurance companies can’t increase rates without government approval and the state can reject increases it deems excessive.
But, Cathy Seifert, equity analyst at CFRA Research, said insurers will still ask the state to allow them to charge more because of the severity of recent wildfires.
“These losses are likely to review their risk assessment and how much exposure they want to these areas,” she said.
However, California’s Proposition 103 gives state regulators tools to prevent major increases. Since 2011, the department has rejected nearly $2.6 billion in requested premium increases by insurers.
Also, the proposition calls for “catastrophe loading” by insurance companies where large losses are spread out over a 20-year period.
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