CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, FEBRUARY 9, 2023, OR THEREAFTER
BY THOMAS D. ELIAS
“INSURANCE CRISIS EVEN WORSE IN OTHER
STATES"
So you
think California has a serious property insurance crisis, with one company
(State Farm) getting a 20 percent increase just as 2023 ended and others
demanding even higher increases as some threaten to halt new policy sales in
the state?
As big as
this crisis is, it does not compare with what’s going on in other states like
Florida and North Carolina, where Republican-dominated legislatures may soon be
forced to take measures the GOP has long called “socialistic.”
Take
Florida, whose Republican governor and former presidential hopeful Ron DeSantis
loves to seize on every difficulty that arises in California, blaming
everything from homelessness to high electric rates on Democratic dominance of
state government.
Florida
already has a state-owned and -run insurance company called Citizen Property
Insurance, which functions much like California’s Fair Plan. These agencies are
funded largely by extra-high premiums paid by homeowners who for a variety of
reasons can’t get policies from private companies.
In
California, most of the problems are confined to discrete areas the insurance
companies deem subject to wildfires, either because they’ve already had some or
because their foliage, climate and terrain makes them vulnerable to everything
from a stray match to arsonists to negligence by electric companies.
But in
Florida, where the biggest waves of claims stem from hurricanes, there are no
discrete boundaries, as hurricanes have hit almost all parts of the state.
Home
insurance costs there have risen hugely without a law like California’s 1988
Proposition 103 to restrain them. The cost of home insurance in the Sunshine
State lately saw the average Florida homeowner paying more than $6,000 in 2023
and more increases on the horizon. That was an increase of more than 102
percent over the last three years.
It
doesn’t quite make up for the difference in home prices between California and
Florida, but it does make Florida real estate more expensive than prices and
rents make it appear.
Enter
“socialism.” Fully 15 insurance companies have pulled out of Florida in recent
years and homeowners therefore suffer problems getting coverage. So the GOP-led
Legislature is considering a huge increase in the maximum value of homes that
can be covered by Citizen Property. The limit is now $1 million in assessed
value, but lawmakers are considering upping that by half, to $1.5 million. That
would leave very few Florida homes ineligible.
DeSantis
suggests making up for all this with decreases in property taxes, which are
much higher than California’s because Florida lacks limits like those in this
state’s 1978 Proposition 13.
Republican
legislators previously killed expansions of Citizen Property due to the
“socialism” tag, but two GOPers are lead sponsors of the current expansion
plan.
Things
are not quite so extreme in North Carolina, but homeowners are about to be hit
almost as hard there as in Florida and much harder than in California.
Insurance companies have not yet left North Carolina en masse, but several now
seek increases between 42 and 99 percent in annual premiums. Increases could be
even higher in the hurricane-prone eastern areas of that state.
These
levels of proposed increase would arouse huge protests in California, where the
Consumer Watchdog advocacy group – whose founder Harvey Rosenfield wrote
Proposition 103 – is now working to cut State Farm’s 20 percent rate hike,
which seems paltry compared to what’s happening elsewhere.
It’s one
case of a serious California crisis with far worse counterparts elsewhere.
Yes,
California has weather-related disasters, but when they happen in Texas and
Florida, they can be even more devastating than ours. What’s more, insurance
companies have had it easier here since they leveraged their losses from the
1994 Northridge earthquake to end their obligation to write quake insurance.
Instead, the state-run California Earthquake Authority has lucked out for
almost 30 years, taking in large premiums from property owners without
experiencing any truly massive temblors since Northridge in 1994.
That’s
allowed its reserves to pile up more than anyone could have expected back in
the 1990s.
It’s all
just another example of why moving away from California doesn’t necessarily
lead to the problem-free existence many emigrants expect in other states.
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