Home and auto insurance coverage is increasingly difficult to obtain in California and other disaster-prone regions. The most recent measure is that of smaller insurers. Merastar Insurance Company, Unitrin Auto and Home Insurance Company, Unitrin Direct Property and Casualty Company, and Kemper Independence Insurance Company plan not to renew their policies. In January, the mainstream media reported that some of the country's largest insurance companies were pulling out of the California market. According to a CBS News article, Progressive had stopped advertising in the state and GEICO had closed its California offices.
The article quoted an insurance broker as saying that State Farm only offered in-person quotes and not over the phone. California is one of only four states that require insurers to sell insurance to good drivers, and it's the only state that requires insurers to offer a 20% discount to good drivers. Some state insurers haven't received permission to increase rates in more than three years, despite the increase in financial risk mentioned above. Another rider, Victor Lopatyuk, said he had a similar experience with Geico when looking to insure a 250 cc dirt bike that he had been refurbishing for a year.
This is a real problem for insurers that are already withdrawing from markets they consider difficult and for homeowners who are confident in their coverage. In some neighborhoods in West Palm Beach, Florida, for example, residents are leaving due to skyrocketing insurance premiums, according to an Oct. 17 Wall Street Journal report. In California, for example, insurance companies must obtain permission from the state insurance commission to increase rates.
For example, in Northern California, 20% of homebuilders surveyed at the time said that buyers' concerns about property insurance were slowing sales a bit, and in Southern California, 29% of builders said the same. However, government agencies and insurance companies have begun to try to introduce changes that may alleviate the problem. Four homeowners insurance companies say they will not renew policies for people in California starting next year. In addition, the survey mentioned above showed that 32% of Florida homebuilders say that buyers' concern for insurance is slowing sales, at least little.
A spokesperson for the California Department of Insurance (CDI) offered journalists a different perspective, saying that “while insurance companies focus on raising rates, the insurance department is focused on protecting drivers and helping them get the most out of the premiums they pay. However, since most major insurers offer home and auto insurance, among other products, rising costs in one category still affects the company's bottom line and, therefore, the ability to make money in a given market. California drivers say they have to wait longer than usual for coverage, and when they finally find an insurance company and a plan, they have to pay their premiums in advance.
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