California’s regulatory restrictions putting financial pressure on insurers: Triple-I

California’s regulatory restrictions are said to be putting financial pressure on insurers and contributing to limited availability of property insurance in high-risk markets, according to the Insurance Information Institute (Triple-I).

An Issues Brief released by the firm, examined the impact of Proposition 103, a 30-years-old measure that has made it hard for insurers to profitably write coverage in the state of California.

Across a consistently evolving risk environment that includes earthquakes, wildfire, landslides, and even in recent years, flooding due to atmospheric rivers, Proposition 103 and its regulatory implementation have prevented insurers from using the most current data and advanced modeling technologies, states Triple-I.

Instead, Proposition 103 and its regulatory implementation have required insurers to price coverage based on historical data alone.

Sean Kevelighan, CEO of the Triple-I, commented: “Much has changed in the world since 1988 when Proposition 103 came into effect, and it’s well over time to evolve California’s insurance regulatory system. While the recently proposed changes by the California Department of Insurance are a move in the right direction, it is becoming increasingly critical to quickly bring market stability into one of the largest state economies.”

“Insurance is a key driver to economic stability and growth, but it needs to function in ways that allow insurance to be accurately priced. Insurance prices are the effect rather than the cause of risk,” he added.

Further, the Issues Brief highlighted how Proposition 103 has also impeded premium rate changes by allowing consumer advocacy groups to intervene in the rate-approval process.

As a result, this has caused approval delays and rates that do not accurately reflect current risk.

The changes have also drove up legal and administrative costs, which ultimately has led, in some cases, to insurers deciding to limit or reduce their business in California.

Due to fewer private insurance options, more Californians are resorting to the California FAIR Plan, the state’s insurer of last resort, which offers less coverage for a higher premium, the Issues Brief added.

This website states: The content on this site is sourced from the internet. If there is any infringement, please contact us and we will handle it promptly.