Gavin Newsom aims to reform California’s property insurance landscape

California Governor Gavin Newsom is taking measures to address the ongoing issue of property insurers exiting the state, which has been largely attributed to significant financial losses. During a recent briefing on the May revisions to his budget proposal, Newsom announced plans to expedite the rate-approval process for insurers by drafting a trailer bill. This legislative move aims to reduce the approval timeline for property insurance rate increases from the current period to just 60 days. The governor believes this action is critical to alleviating residents’ concerns over the potential cancellation of their insurance policies.

The insurance industry is also facing significant personnel changes, highlighted by competitive elections for insurance commissioner positions across four states in November. Notably, North Carolina’s race attracted attention as incumbent Republican Mike Causey narrowly defeated Democratic contender Natasha Marcus by a margin of just 4%. Marcus commented on the close results, stating, “We ran a strong, honest, grassroots campaign and brought the concerns of many North Carolinians to light,” expressing hope that her campaign would spur positive changes within the state’s Department of Insurance.

In California, the Insurance Commission announced a “modernization” initiative for the California FAIR Plan Association, aimed at regulatory reforms. However, this move has drawn criticism from consumer advocate Carmen Balber, who claims that the plan shifts the financial responsibility onto homeowners. Balber asserts that if the FAIR plan encounters financial difficulties, it will be due to the private insurance market transferring high-risk homeowners onto it, and that the accountability for such a move should rest with the insurance companies rather than on policyholders.

Recent research also underscores shifting consumer preferences, particularly among Millennials and Generation Z. The Embedded Car Insurance Study conducted by Polly identified a strong inclination towards embedded insurance options at car dealerships, with 81% of surveyed consumers in these demographics indicating a preference to buy insurance concurrently with their vehicle acquisition. This trend suggests a notable shift towards integrated purchasing experiences for insurance products, as highlighted by Polly’s Chief Marketing Officer Mike Burgiss.

Marsh McLennan Agency’s 2024 Commercial Property Insurance Trends report outlines critical factors affecting the commercial property insurance sector. Among these factors are rising losses from secondary perils, such as tornadoes, hailstorms, and floods, which have become a significant challenge in the industry. The report mentioned that these secondary peril events often lead to substantial financial losses, with floods emerging as the leading contributor in the United States. Notably, a protection gap exists, as only a small percentage of global flood losses are currently insured.

At the forefront of innovation within the insurance sector, Honeycomb Insurance introduced a new property qualification programme at the Insurtech Insights conference in New York. This service allows insurance agents and brokers to efficiently quote multiple commercial properties and assess associated risks. By utilising data from various sources, Honeycomb aims to streamline the quoting process, thereby addressing common pain points for industry professionals.

In the broader landscape of insurance, new regulatory guidance from New York emphasizes insurer accountability when utilising artificial intelligence in underwriting and pricing processes. Karthik Ramakrishnan, co-founder and CEO of Armilla, highlighted that insurers cannot transfer liability to third-party technology providers, underlining the importance of maintaining accountability for the outcomes derived from AI implementations.

As the insurance landscape continues to evolve with emerging technologies and changing consumer expectations, these developments highlight the industry’s efforts to adapt to new realities and challenges. The ongoing discussions and legislative actions reflect the significant impact of economic pressures, climate events, and technological advancements on business practices within the insurance sector.

Source: Noah Wire Services