I spoke to Rex Frazier, president of the Personal Insurance Federation of California, who cited several policies that no doubt contributed to State Farm’s decision to stop issuing policies, including various price controls that prevent insurers from raising prices to meet surging costs without the written approval of the California Department of Insurance.
“California is the only state in the country that doesn’t allow insurers’ rates to be based upon actual reinsurance costs,” Frazier said. “California’s regulations employ a legal fiction that each insurer uses its own capital to serve customers. As reinsurance costs go up, insurers cannot have their rates reflect those higher costs.”
State Farm General Insurance Co. last week became the latest insurer to retreat from California’s homeowners market. The culprit isn’t climate change, as the media claims in parroting Sacramento talking points. The cause is the Golden State’s hostile insurance environment.
The nation’s top property and casualty insurer on Friday said it won’t accept new applications for homeowners insurance, citing “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market.”
In other words, State Farm can’t accurately price risk and increase its rates to cover ballooning liabilities. Other property and casualty insurers, including AIG and Chubb, have also been shrinking their California footprint after years of catastrophic wildfires, which are becoming more common owing to drought and decades of poor forest management.
The five biggest auto insurers in Illinois have raised automobile insurance rates a whopping $527 million since January, an analysis by two consumer groups shows.
That follows about $1.1 billion in rate increases last year by the top 10 Illinois car insurers.
The analysis by the nonprofit Illinois Public Interest Research Group and Consumer Federation of America looked at auto insurance rate increases by the five largest companies in Illinois: State Farm, Allstate, Progressive, Geico and Country Financial, which together make up 62% of the Illinois market.
Now, state Rep. Will Guzzardi, D-Chicago, has introduced legislation to address those issues and crack down on insurers. Guzzardi’s bill would:
Require automobile insurers to get prior state approval for rate hikes.
Ban “excessive” insurance increases.
Prohibit using gender, marital status, age, occupation, schooling, home ownership, wealth, credit scores or a customer’s past insurance company relationships in setting car insurance rates.
It’s already illegal to use race, ethnicity and religion in setting rates. That would continue under Guzzardi’s proposal.
Author(s): Stephanie Zimmermann | Chicago Sun-Times
The Committee on Life Insurance Mortality and Underwriting Surveys of the Society of Actuaries sent companies a survey in May of 2019 on mortality improvement practices as of year-end 2018. The survey results were released in January 2022. The survey was completed by respondents prior to the onset of COVID-19. The present report provides an opportunity to update the results for pandemic-based changes and compare the before and after surveys. The 2022 survey was opened in March 2022 and closed by the end of April. Thirty-five respondent companies participated in this survey, with 29 from the U.S. and six from Canada. This group was further divided between direct writers (26) and reinsurers (nine). This survey focused on the use of mortality improvement and how it has changed for financial projection and pricing modeling following the initial stages of COVID-19. Details regarding assumptions and opinions on mortality improvement in general were asked of the respondents. National Association of Insurance Commissioners discussions on mortality improvement factors due to COVID-19 for reserving purposes have taken place, but this survey was conducted before any adjustments reacting to them. Seventy-four percent (26 of 35) of respondents indicated using durational mortality improvement assumptions in their life and annuity pricing and/or financial projections. Moreover, of those that used durational mortality improvement assumptions, attained age and gender were the top two characteristics in which assumptions varied. Respondents were asked to indicate the different limitations when applying durational mortality improvement assumptions. The Survey found that the most common lowest and highest attained age to which durational mortality improvement was applied were 0 and about 100, respectively. The lowest and highest durational mortality improvement rate ranged from -1.50% (deterioration) to 2.80% (improvement). The time period in which the mortality improvement rates were applied ranged from 10 to 120 years, but this varied between life (10/120) and annuities (30/120). The most common time period was 20 to 30 years for life; less consensus was seen for annuities. Analysis is provided in Appendix C for instances when highlights are shared in the body of the report.
Insurance Commissioner Ricardo Lara should reject Allstate’s proposed $165 million auto insurance rate hike and its two-tiered job- and education-based discriminatory rating system, wrote Consumer Watchdog in a letter sent to the Commissioner today. The group called on the Commissioner to adopt regulations to require all insurance companies industrywide to rate Californians fairly, regardless of their job or education levels, as he promised to do nearly three years ago. Additionally, the group urged the Commissioner to notice a public hearing to determine the additional amounts Allstate owes its customers for premium overcharges during the COVID-19 pandemic, when most Californians were driving less.
Overall, the rate hike will impact over 900,000 Allstate policyholders, who face an average $167 annual premium increase.
Under Allstate’s proposed job-based rating plan, low-income workers such as custodians, construction workers, and grocery clerks will pay higher premiums than drivers in the company’s preferred “professional” occupations, including engineers with a college degree, who get an arbitrary 4% rate reduction.
Insurance giants Chubb, Liberty Mutual, and AIG are three of the biggest insurers of fossil fuel infrastructure around the world. But thecompanieshave just announced plans to scale back their homeowner coverage in California, where they insist future climate-related losses will likely prevent them from turning a profit.
The coverage withdrawals may soon ignite a big money battle in the state’s legislature, pitting insurance giants against lawmakers trying to preserve coverage for their constituents. Meanwhile, climate campaigners are decrying what they say is a fundamental hypocrisy.
Last year, Chubb’s chairman and CEO Evan Greenberg said the company was reducing its coverage in parts of the state that were “both highly exposed, and even moderately exposed, to wildfire” because it was unable to obtain an “adequate price for the risk, and not by a small amount” due to both the costs of wildfires and California’s regulatory climate.
A main solution proposed by industry is that they be allowed to use “catastrophic modeling,” a method where rates are set based on predictions of future losses, rather than recorded past losses, as is currently the case. All other states allow the use of this technique in at least some cases.