According to data from the California Association of Realtors (CAR), high costs and low availability of home insurance are hindering the housing market in California this year. Compared to last year, the percentage of real estate agents losing transaction opportunities due to this factor has almost doubled.
In 2023, about 7% of real estate agents encountered difficulties in closing deals due to insurance issues, while this year approximately 13% of association members reported similar situations.
Jordan Levine, Senior Vice President and Chief Economist of the California Association of Realtors, told Epoch Times on October 28, “The challenges in insurance are increasing.” He pointed out that about 31% of real estate agents said buyers are facing difficulties in finding insurance.
According to CAR data, home prices, mortgage rates, and insurance costs are all higher than in recent years.
Levine stated that housing affordability has deteriorated compared to a few years ago, “Now, the cost burden per year has significantly increased due to insurance premiums… This may be a key factor preventing some people from becoming homeowners.”
He noted that this issue exists statewide. In urban areas, 1/4 of association members told CAR that insurance issues are affecting their business; while in rural areas, this situation is even more common.
Looking ahead, Levine expects opportunities for obtaining home insurance to increase, but costs will also rise. “I think the problem we can solve is availability,” he continued, “There is little hope for improvement in terms of spending.”
In recent months, several insurance companies have requested at least a 30% increase in insurance premiums, and are currently awaiting a response from the insurance sector.
Roger Niello, Vice Chairman of the California Senate Insurance Committee, told Epoch Times on the 28th, “The solution to the problem will involve raising insurance premiums, which people will not welcome.”
Some insurance companies have pointed out that rising reinsurance costs and slow regulatory adaptation in California are hindering the market’s free operation and keeping insurance businesses in California.
According to a report from digital insurance agency Insurify, homeowners in other states pay significantly higher home insurance premiums on average compared to California, even in some states with lower average home prices. For example, in Louisiana, the annual average cost of home insurance is about $7,000.
In Florida, residents pay about $11,000 annually for home insurance, while the average annual home insurance premium in California is around $2,000.
However, some homeowners told Epoch Times that they pay significantly more than $2,000 for minimum insurance coverage, as they have to rely on the FAIR plan, the last-resort insurance facility established by the state government and financially supported by the industry.
According to testimonies submitted to the state legislature, over 400,000 properties are covered by the FAIR plan, which earlier this year became overwhelmed due to a surge in calls. Insurance companies in the state express concerns about the risks posed by the FAIR plan.
The seven largest insurance companies in the state, along with dozens of businesses including State Farm, Allstate, and Farmers Insurance, have in recent years reduced their coverage scope in California or completely exited the market due to the impact of state regulations on profitability and increased risks.
Industry insiders point out that factors such as wildfire risks, inflation, and government regulatory measures to curb rate increases are reasons these companies are scaling back their coverage services in California.
“This is a problem,” Niello said. 30 years ago, California barely passed Proposition 103, known as the “Insurance Rate Reduction and Reform Act,” but the market and environment were vastly different back then compared to now.
He stated that industry regulations in the state need updating and called for swift action to help more insurance companies continue operating in the market.
Insurance Commissioner Ricardo Lara announced last year that regulations would be updated in March and June of this year, going into effect by the end of the year.
His actions will allow for forward-looking disaster modeling, increasing FAIR plan coverage limits to $20 million per building, and requiring insurance companies to increase policy counts by at least 5% in high wildfire risk areas.
Lara pledged to use his authority to improve the market. In a news release in August, he said, “Consumers are hurting, businesses are continuing to lose coverage, wildfires are raging in our state—there is no time to waste.”
Governor Newsom called these reforms one of the most impactful in decades and repeatedly urged swift intervention.
In recent months, boards of supervisors in at least four counties, including Placer County, San Bernardino County, San Mateo County, and Shasta County, declared states of emergency due to challenges in obtaining home insurance.
When initiating the resolution at a county board meeting on October 8, San Mateo County Supervisor Ray Mueller stated, “Currently, to say that the state is facing a crisis of affordability and availability of (home) insurance is not an exaggeration.”