LIVERMORE — Homeowners insurance has become a hot topic at the state Capitol as millions of Californians struggle to find affordable plans after some of the major insurers decided to stop selling new policies in the state.
For months, major insurers have been cutting coverage in California, blaming devastating wildfires, rising costs and strict regulation.
There have been rumours of a possible legislative deal to stop insurers from abandoning California.
The deadline to get it done in time for the end of the legislative session on Thursday has passed. Some consumer advocates say that’s a good thing, noting that it would have essentially been a bailout for the industry, potentially leading to huge rate increases.
Livermore resident Sheri Ramsell told KPIX she was dropped by her insurance company after filing a claim for water damage. She hasn’t been able to find a new company to insure her home.
“Everybody here has a pool in their backyard, and we’re all cement, so there’s really no fire risk,” Ramsell said, pointing to the houses on her block. She has lived on the west side of Livermore, off Concannon Boulevard, for 17 years and has had homeowners insurance from Mercury since day one.
She said she’d never had any major problems until one morning last December.
“The float on the back of the toilet got stuck. I didn’t even know that could happen. And it flooded everything in here,” she said.
The water found its way into the walls, cupboards, carpets and the floor.
“We talked about, oh, if we make a claim, our rates will go up, but we had to do something because we didn’t know how extensive the mould was,” Ramsell explained.
The total cost of repairing the water damage was around $35,000, which was eventually paid for by Mercury Insurance.
Last week she received a letter from Mercury.
“It said ‘Notice of non-renewal’,” Ramsell read. It was a letter saying that Mercury Insurance was dropping her as a customer. The reason given: “Underwriting reasons. Loss history.”
Ramsell said she was shocked when she read the letter. Then she got angry. She said she felt it was unfair to drop her after one claim when she’d paid premiums to Mercury for 17 years.
“We didn’t realise how bad it was going to be. We thought, ‘OK, we’ve got to find a new insurance company. But then when we started making calls, we realised, ‘Uh-oh, we’re in trouble,'” she said.
“I think you’re going to see a lot more of this,” said Fred Fisher, an insurance consultant with more than 50 years in the industry.
He said consumers are having a hard time finding a new company for homeowners insurance across California, even in areas that aren’t considered high-risk for fires, like Shari’s neighbourhood in Livermore.
That’s because three major insurance companies – State Farm, Allstate and Farmers – have all publicly announced that they will not write new policies for any homes anywhere in the state. They say they are paying out too much money in fire claims.
“Insurance companies cannot survive having natural disasters and huge losses year after year after year. It’s not sustainable,” says Fisher.
As for Ramsell, she says she’s done with California and is packing to move to Nevada to be closer to her daughter.
“This was kind of the last straw that made us want to go,” she said.
But until she can sell the house, she still has to find new insurance.
“We can’t not have it, so we’re just going to keep calling until we find someone,” Ramsell said.
Insurance experts say the problem of finding new homeowners insurance isn’t going away anytime soon, and could eventually affect millions of people across the state. The last resort is the California FAIR Plan, which provides basic fire insurance to homeowners who can’t get a policy on the traditional market.
KPIX 5 contacted Mercury Insurance for comment. A spokesperson said their claims and underwriting teams are looking into Ramsell’s case.
Last week, advocacy group Consumer Watchdog asked state Attorney General Rob Bonta to investigate possible collusion to drive up prices in the industry.
Consumer Watchdog founder Harvey Rosenfield said he believed the companies were trying to derail Prop 103, which controls insurance rates in California.
“I’m convinced that this is an attempt by insurance companies to use the excuse of wildfires and climate change to get around what the voters mandated, which is fair pricing for insurance,” he explained. “The insurance industry is basically holding a gun to our head and saying, ‘You have to surrender and pay the ransom or we’re going to fire the gun and leave the state.
Rosenfield says that without a bill, companies will now try to put pressure on the state’s insurance commissioner, Ricardo Lara. He also noted that consumer advocates have been left out of the conversation so far.
KPIX has reached out to the insurance commissioner and hasn’t heard back, but he told the Bay Area News Group that legislation is just one of many options.
