The state is working on establishing new regulations to help the industry there recover
California Insurance Commissioner Ricardo Lara has reached out to insurers in the state, telling them that they must develop ideas beyond rate hikes to overcome the current crisis in the state.
Lara is simultaneously working on new state regulations
According to Lara, his office and the California insurance industry are “in a forced marriage,” in which “we’re staying together for the kids.” However, the commissioner was also able to find common ground with the Farmers Insurance CEO in Los Angeles while attending a first-of-its-kind summit.
The Global Sustainable Insurance Summit was held last week and was attended by other state commissioners, government officials, representatives from the industry, academics, and nonprofits from across the United States and around the world. The location for the summit was an interesting and relevant one, as residents are currently facing skyrocketing premiums for both their home and auto coverage. Many are struggling to find coverage at all.
Working together from common ground in the California insurance industry
At the summit, Lara addressed Raul Vargas, CEO of Farmers Insurance, a major insurer in the state and country. He asked him what would be required to bring insurers back to writing policies in the state once again after having delayed or stopped new business there.
According to Vargas, one of Lara’s recently unveiled regulations would make a substantial difference. It involved permitting insurers to use catastrophe modeling for establishing their rates in the state.
Catastrophe modeling has to do with conducting future risk assessments and using that data in combination with historical data as a component of determining the price of premiums charged to a given policyholder.
Confidence in California insurance business
“Insurers need the confidence to price correctly for the risk,” said Vargas, who pointed out that his company has been involved in “constructive conversations” with the state Insurance Department, making it possible for Farmers to continue being confident enough to do business there.
This statement was a notable one in the industry, as it meant that the head of a major insurer in the US was publicly supporting Lara’s plan. Industry trade groups have primarily spoken on behalf of insurers with regards to the California insurance situation.
