'I feel helpless': Homeowners struggle to find, afford insurance amid California's crisis (2024)

Another insurance company said it has informed the California Department of Insurance that it will withdraw from the homeowners business in the state.American National told KCRA 3 Investigates on Monday that it expects to “begin the non-renewal process by August, though that timing is subject to change.” The company said it had more than 36,000 homeowners policies in effect in California as of Dec. 31, 2023.“Impacted clients will receive a pre-non-renewal letter with more information followed by a formal non-renewal notice following all regulatory requirements,” said Scott Campbell, Chief Client Experience and Corporate Comms Officer at American National.This is just the latest insurance company to announce it will no longer provide coverage for homeowners in California.State leaders say the insurance industry here is in a crisis. Finding and keeping homeowners’ insurance is increasingly difficult.For those who can manage it, it may come at a high cost.“It’s a problem. It seems unsustainable to me,” said Paul Parks, who is looking to buy a home in California after living out of state for a few years.Even those trying to help homeowners find coverage say it is a challenge.“I feel helpless. I feel frustrated,” Insurance agent Kelly Leif said.She has worked in the industry for 36 years and said her job has never been harder.“People used to shop for insurance. Well, now you don't do that anymore,” she said.In the last year, seven of the 12 largest insurance groups in California have either paused or restricted new homeowner policies. For example, State Farm and Allstate have paused all new policies while Farmers is capping the number of new policies it will write each month, according to the Department of Insurance. Those three companies alone handle more than 40% of the business in California's insurance market. “It is a crisis. There's not enough carriers that are willing to write business, and the ones who say that they are, they make it so difficult,” Leif said.Cayafas found that out the hard way when he got a letter from his longtime insurance company.“We were informed about the beginning of December that they weren’t gonna renew our policy,” he explained.He lives in the Bar J Ranch neighborhood of Cameron Park. Cayafas tried to discuss it with his broker.“The reason we got from our broker was because we were in El Dorado County and due to all the fires that had happened,” he said. “I told her we’re in a pretty safe area of Cameron Park, and it’s a housing development with landscaped yards, not a lot of wooded areas around us, and she said it didn’t matter, it was just El Dorado County.”Portions of the large county, which spans from Folsom Lake all the way east to Lake Tahoe and the California-Nevada state line, experienced extensive damage during the Caldor Fire in 2021. He was told that the California FAIR Plan was likely his only option.“The California FAIR Plan is anything but fair,” Parks said, who also was faced with considering the FAIR Plan while house hunting in hopes of moving back to California. “It’s very minimal coverage, and it's not cheap.” The FAIR Plan is supposed to be the state's insurer of last resort, offering basic fire insurance when traditional companies won’t. However, because so many companies won't write policies now as the increasing cost of claims has outpaced insurance rates, the FAIR Plan says it has experienced historic growth.“They are inundated. They're overwhelmed,” Leif said.She said she often has trouble getting anyone on the phone there.The FAIR Plan told KCRA 3 Investigates that it is receiving about 1,000 applications per business day. They said most of those applications are being processed within five business days.To address the increased demand, the FAIR Plan said it transitioned to a new software system. However, the change had some dealing with glitches in the new system.“There have been some challenges during the transition and overlapping period of historic growth of customers turning to the FAIR Plan. To address these challenges, the FAIR Plan dramatically increased staffing, including tripling customer service representatives and doubling the underwriting team. These changes have greatly reduced delays and brought service levels back to a more normal level,” the FAIR Plan said in a statement to KCRA 3 Investigates.“This is unprecedented. We've never been in this situation before,” said Insurance Commissioner Ricardo Lara. KCRA 3 Investigates discussed Lara’s strategy to address the insurance crisis, which he first announced in September.“We’re going to modernize the entire insurance market in California,” Lara said.He is starting with regulation changes in hopes of improving the approval process when insurance companies ask to change their rates. “The existing regulations, created in an age of pagers and payphones, lack clarity and fail to specify the exact materials and information required in a complete rate filing application given the change in times and increased complexity of filings. This ambiguity can lead to confusion among insurance companies and delays in the review process, ultimately impacting consumers’ access to fair and appropriate insurance rates and insurers’ level of certainty on their filings and the review process,” the Department of Insurance said in a statement earlier this month, announcing the specific changes he has proposed.The California Office of Administrative Law published the proposed rules, and the public can now provide input before a hearing on March 26.Lara’s plan would also allow rate requests from insurance companies to factor in things, like climate change, using new risk assessment tools. In addition, they would be able to account for re-insurance, which is when insurance companies buy insurance to protect themselves.In exchange, insurance companies would be required to write policies in at least 85% of homes and businesses in wildfire-distressed areas.“We need to de-populate the FAIR Plan,” Lara said. “That's part of the strategy here.”While insurance rates may rise initially, his hope is that things will level off after more insurance companies bring their business back to California and the market becomes competitive once again.“Once we have availability, we're going to get those prices down because insurance companies will be competing for your business,” Lara said. Lara’s goal is to get the proposed regulation changes approved by the end of the year so that the Department of Insurance can then start implementing those changes “as quickly as possible.”“Which is why I say we should start seeing some reprieve in 2025,” Lara explained. “It’s not soon enough, and it's not fast enough,” Leif said. In the meantime, she said, homeowners in California are simply victims of the crisis.“It has been frustrating, but then, it's well, you just have to live with it. It's the sunshine tax,” Parks said.He said he is still looking for a place with affordable insurance.Meanwhile, Cayafas made a lot of phone calls and was able to find a cheaper alternative to the FAIR Plan. He said it would save him several thousand dollars a year.Overall, experts advise that homeowners who do have insurance now, do what they can to make sure they can keep. Now is not the time to try to shop around for a better deal.They also say home maintenance is very important, creating defensible space to reduce risk, because some companies use satellite images or even drones to check.Finally, those who do get a non-renewal notice from their insurance companies are encouraged to start looking for a new policy right away. Don’t wait because it may take time to find coverage.These are the 12 insurance companies with the largest market share in California.State Farm, 21.22%Farmers (10 companies), 14.9%CSAA (2 companies), 6.9%Liberty Mutual ( 6 companies), 6.6%Mercury, 6%Allstate (5 companies), 6%USAA (4 companies), 5.7%Auto Club, 5.1%Travelers, 4.2%American Family (3 companies), 2.8%Nationwide (2 companies), 2.5%Chubb (8 companies), 2.2%See more investigations from KCRA 3 Investigates here | Download our app.