Insurance rates could go up under new homeowners bill

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(The Center Square) – Homeowners’ insurance policy rates could go up by an estimated 15% to 20% if a new insurance bill is passed in California.

Under Senate Bill 876, Californians who lose their homes to natural disasters like wildfires would get the full cash value of their lost house paid to them by insurance companies. The new bill aims to ensure full compensation for homeowners like the ones who lost their homes in the Pacific Palisades and Eaton fires in January 2025.

However, some worry that middle- and lower-class homeowners in California would assist in offsetting the cost for high-income homeowners with properties in high-risk locations, one insurance industry professional told The Center Square.

“A lot of this is centered around high-end, high-net worth homes,” Seren Taylor, vice president of the Personal Insurance Federation of California, told The Center Square on Friday. “This is about very high-net worth people in Berkeley Hills and Malibu, places like that, that are going to really be taking advantage of these rich benefits, whereas average people who have zero risk are just going to be paying more money.”

Already, increased exposure to insurance companies because of worsening wildfires have made homeowners insurance rates go up by 10%, according to research by the Terner Center for Housing Innovation at UC Berkeley.

If insurance companies are required to pay higher costs for claims on homeowners insurance policies, premiums would go up for many homeowners, industry professionals predict.

“That means premiums are going to go up more than they already are,” Steve Young, senior vice president and general counsel at Independent Insurance Agents and Brokers of California told The Center Square. “It’s going to make insurance substantially more unaffordable for people who have this expanded coverage, but the larger concern is that insurance companies are not writing this coverage now, and the theory is that they would stop writing it if this were some sort of a mandate.”

Guaranteed replacement costs are incredibly expensive, Young said, and the bill, in its current form, would make it more difficult for homeowners in California to get homeowners insurance policies.

Despite the risks of insurance costs going up for policyholders, advocates for the bill want to see those who lose their homes in fires and other natural disasters to recoup the full loss of their homes, according to written responses from proponents of the measure.

“After every disaster, impacted households struggle with inadequate coverage (underinsurance) and disputes with insurers that slow and impede their recovery,” wrote Amy Bach, executive director of United Policyholders, to The Center Square. “Previous California legislative reforms have alleviated some of those challenges, but not prevented them. SB 876 seeks to ensure that future disaster victims have enough coverage to replace their homes and cover their temporary living expenses until they can move back home, be freed from the trauma of having to list every single item they lost just to collect the benefits they've paid for.”

Bach also wrote that the bill would increase penalties for unfair insurance practices.

“We expect quite a lot of drama this legislative session as insurers, whose professional lobbyists normally have the upper hand in Sacramento, face off with grassroots lobbying by highly articulate and well organized Los Angeles wildfire survivors,” Bach wrote to The Center Square.

Bach and other representatives of United Policyholders did not respond to requests for an interview on Friday.

Senator Alex Padilla, D-El Centro, who introduced the bill, was not available for an interview about the bill on Friday.