Major insurers like State Farm and Allstate may stop writing new policies for shop owners due to fears of massive losses from California wildfires
Automotive shops face new challenges finding insurance due to the California fires making coverage more costly in the future.
Major insurers like State Farm and Allstate may stop writing new policies for shop owners due to fears of massive losses from California wildfires. California is advancing a legislative package aimed at protecting property owners from new disasters. The proposed law will focus on three key goals: Consumer Protection, Climate Resiliency, and Market Strength.
Ricardo Lara, Commissioner of the California Department of Insurance, issued a one-year moratorium in January preventing non-renewals and cancellations of insurance policies.
He also issued a notice calling on all insurance companies to stop any pending non-renewals or cancellations for any properties located near wildfires, if they are not already protected by the mandatory moratorium. This includes non-renewals issued up to 90 days prior to January 7, but taking effect after the start of the wildfires. This pauses non-renewing and cancelling policies for six months.
Destruction caused by the Palisades Fire in January has rules set in place by Proposition 103 — known as the Insurance Rate Reduction and Reform Act — narrowly approved by voters in 1988 to oversee the industry after insurance prices spiked.
“It’s a real issue,” said Senator Roger Niello. “And it’s a problem because we passed an initiative 30 years ago with an extremely small margin of victory … in a market and under circumstances that were completely different than they are now.”
A lack of availability has left shop owners with only one option, the FAIR plan — an insurer of last resort strategy financially backed by several insurance companies.
In the event the new FAIR plan becomes insolvent, insurers will be on the hook to cover the losses, with each company paying out based on market share — thus incentivizing limiting liability by reducing exposure, according to a recent analysis.
Senator Sasha Renée Pérez said holders of commercial insurance policies need and deserve reliable insurance during a disaster like the wildfires we’ve just experienced.
The California Senate indicated that legislation should expand Commissioner Lara’s one-year moratorium to prevent cancellations or notices of nonrenewal on small businesses and nonprofit organizations. Some California insurers recently requested price hikes of 30 percent or more, and the Insurance Department is processing their applications.
Policy analyst Marc Joffe wrote in December 2024 for the Cato Institute, “Deregulation is a simpler answer. Hundreds of insurers can freely compete for business, with third parties informing consumers about each company’s financial status and claims-handling behavior by eliminating the Department of Insurance.”
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