‘I’ve had more stress than I’ve ever felt’: AB 2167 is detrimental to many Californians

As Californians continue to navigate the many challenges 2020 has thrown their way, residents in wildfire-prone areas have one more threat to be concerned about: Assembly Bill 2167.

The state Senate will soon take up this bill, which increases the cost of insurance for homeowners and weakens consumer protections. AB 2167 is an insurance industry wish list, opposed by the California Department of Insurance and consumer groups.

This bill couldn’t come at a worse time. The cost of home insurance in suburban and rural areas had already been increasing dramatically even before the pandemic threw household budgets into chaos due to record high unemployment.

The Department of Insurance has held more than two dozen town halls and heard from thousands of Californians struggling with the rising cost of their home insurance.

One of them was Meredith Solomon, a resident of Magalia whose home survived the Camp Fire only to see her insurance premium double.

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“Since this news, I’ve had more stress than I’ve ever felt in regards to the diminished equity in my home AND how am I going to afford the $8,500 that it is now going to cost me to just insure my home and personal property!” she writes.

She is not alone:

▪ A disabled Vietnam veteran in Placerville, living on a fixed income, who cannot afford $12,000 a year for fire and home insurance.

▪ A homeowner in El Dorado Hills near Sacramento who was quoted eight to 10 times more than her current rate of $3,800 a year -- $24,000 to $30,000 for full coverage, despite being in a home that is well defended and just a few miles from a fire station.

▪ A realtor in Amador County who is losing sales when her clients find out the cost of insurance is double or triple what they assumed.

▪ An Oakland hills homeowner whose premium went from $1,500 to $10,000.

▪ A 91-year-old homeowner in Tuolumne County on a limited budget who saw his premium more than double -- for fire-only coverage, not for comprehensive coverage.

Insurance companies have asked for and received hundreds of rate increases under the current approval process to make up for record losses from recent wildfires. At the same time, non-renewals for wildfire risk have climbed steadily for many areas of our state.

Most Californians in areas without wildfire risk are immune to this. If you own a home costing $550,000 in the center of Sacramento (the state average, according to data from Zillow), you are probably paying close to $1,600 a year for a comprehensive policy.

But if you are one of millions of people living in the wildland-urban interface, an area of California that stretches from the Sierra to San Diego to Marin and Sonoma to San Bernardino, you are paying more and more, if you can even find an insurance company willing to write you a policy.

Now, imagine paying that on a fixed income, or on a declining income due to the pandemic. When there is a huge fire, we hear a lot about Malibu mansions. But when you spend a lot of time in these communities as we do, you see it is working families, veterans, retired teachers and first responders who are getting squeezed the hardest between rising rates and decreased availability of home insurance.

Now, with the COVID-19 crisis, and legislation being pushed through the process with little public scrutiny, the insurance industry appears to be exploiting the situation to wring out even more cash from struggling households and reduce regulatory oversight of their pricing.

If legislators vote for AB 2167, they will be voting in favor of higher premiums for people who already cannot afford them, with no guarantee that shopping options will increase. The bill cuts price controls and consumer protections that have been in place for more than 30 years, and lets the insurance industry pass along reinsurance costs that are not regulated and that the California Supreme Court described as “a possible loophole.”

This does not further the purpose of Proposition 103, which was passed by voters in 1988 to stop discriminatory insurance rating practices and which the industry has been trying to weaken ever since.

In an era where climate change is contributing to more severe and frequent wildfires, homeowners need more protection – not less. COVID-19 might be the Legislature’s primary focus, but we cannot let the insurance industry use it to gut important consumer protections that have existed for decades.

The Legislature should take a page from wildfire defensible space rules it passed last year, and stay far away from this bill.

Ricardo Lara is California Insurance Commissioner. Richard Holober is president of the Consumer Federation of California.