DeMaio offers “Cap and Cut” Plan to shield homeowners from massive rate spikes by capping insurance rate increases for 4 years while driving down cost of insurance and reducing wildfire risks.
California faces a major insurance crisis – and state politicians are to blame. California homeowners are getting hurt with massive spikes in their insurance rates that range from 40% increases if they are lucky enough to keep commercial insurance coverage. Worse, many homeowners are seeing their insurance cancelled altogether and are facing double or triple rate increases in the government’s last-resort FAIR insurance plan.
To provide a comprehensive fix to the state’s insurance woes, CA State Assemblyman Carl DeMaio is introducing the CA Insurance Reform and Rate Stabilization Initiative (AB 567).
DeMaio’s bill would cap rate increases at no more than 7% a year for the next 4 years – and would force the state government to cover any insurance costs above the annual cap. DeMaio’s bill is expected to save the typical homeowner thousands of dollars and prevent a larger crisis from forming in the state’s housing market.
“California homeowners should not be forced to pay for the gross negligence of state politicians who have created this insurance crisis with their insane and costly regulations,” DeMaio says.
“The only way for us to streamline insurance costs and reduce wildfire risk is to penalize the politicians for the financial costs of their policy failures by taking funds from the state’s budget,” DeMaio says. “My theory with AB 567 is that politicians will clean up the mess they created only when they are forced to share in the pain of the problem,” DeMaio notes.
Democrat politicians falsely claim that the insurance crisis is being caused by “climate change.” DeMaio says that’s completely not true and has the stats and data to prove it.
DeMaio says California’s current insurance crisis is caused by three primary drivers. First, the massive surge in inflation under Joe Biden has caused the cost of home damage repair (construction/appliance costs) to skyrocket way above the assumed models that insurance companies expected when they set premiums in 2019-2024. Second, the severity of wildfires is worse because CA Democrat politicians have refused to adhere to proper forest and brush management practices. Third, the insurance regulations prevent insurance companies from providing cost-efficient policies that reflect rapidly changing market conditions.
“By falsely blaming climate change for their own policy failures, state politicians have been able to dither and delay in addressing these core issues – and the crisis is only getting worse,” DeMaio warns.
Among elements contained in DeMaio’s AB 567 insurance reform bill:
- Reduce Costly Regulations: DeMaio proposes an overhaul of insurance regulations to ensure that rate models accurately reflect the state’s fast-changing operating environment and to allow insurance companies to offer different kinds of coverage packages that give more options to consumers. In addition, since replacement costs are the biggest financial driver of the current crisis, DeMaio proposes major reforms to the state’s convoluted construction regulations and building codes and regulations to drive down construction costs linked to property damage.
- Fix Fire Management: DeMaio is demanding immediate action to reform fire management policies and regulations so millions of acres of high-risk land can be properly thinned to reduce the risk of severe and catastrophic wildfire. Specifically DeMaio proposes to allocate at least $1 billion a year in state funding for fuel reduction programs – and suspend all state and local regulations (CEQA, CARB, etc.) that impede clearing of brush to reduce fire risk. In return, the insurance industry would be required to commit to providing affordable coverage to areas where risk has been reduced through these programs.
- Stabilize Rates: While the reforms outlined in the first two proposals are done, DeMaio proposes immediate action to stabilize rates by capping increases at no more than 7% per year for the next 4 years. Any insurance costs in excess of this amount would be offset by the state government. To achieve the 7% cap, DeMaio is proposing to suspend the current state insurance tax applied to every premium. In addition, DeMaio is proposing to redirect funds currently wasted on climate change programs to offset insurance costs and utilize other state special and general funds if necessary.
- National Reinsurance Stabilization Program: DeMaio says federal intervention is crucial to address the national insurance crisis worsened by Biden administration policies and inflation. A reinsurance “bridge financing” program supported and organized by the federal government can help mitigate risks and stabilize the insurance market during this challenging period. With construction costs soaring nationwide, federal assistance is essential to ensure the financial stability of homeowners across the country.
DeMaio is available by phone or zoom for interviews – or in-person at the State Capitol.
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DeMaio to Introduce CA Insurance Reform and Rate Stabilization Initiative (AB 567)
DeMaio offers “Cap and Cut” Plan to shield homeowners from massive rate spikes by capping insurance rate increases for 4 years while driving down cost of insurance and reducing wildfire […]
