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CRMBC CEO and insurance industry expert Kaya Stanley explains how there is no state surplus to cover the catastrophic economic losses associated with the Los Angeles wildfires.
The insurance industry is pulling back after that Vice President Kamala Harris suggested that insurance companies have canceled policies for victims of the California wildfires, calling his claim “false, wrong and dangerous.”
During a news conference on the ongoing wildfires on Thursday, Harris said: “Many insurance companies have canceled insurance for many of the families that have been affected and will be affected, which is only will delay or place an additional burden on their ability to recover.”
Vice President Kamala Harris speaks to the media about the federal response to the Los Angeles wildfires at the White House in Washington, DC, on Thursday. (Tasos Katopodis/Getty Images/Getty Images)
“I think that’s an important point that needs to be raised,” he continued, “and hopefully there’s some way to address this issue, because these families, many of them, otherwise won’t have the resources to recover in a significant way, and many of them have lost everything.”
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David Sampson, president and CEO of the American Property Casualty Insurance Association (APCIA), said FOX business“It’s false, wrong and dangerous to even suggest that insurers are abandoning their customers, and it’s especially troubling coming from a former California state elected official who should know the law.”
He added: “Insurers are committed to protecting the safety of those affected and providing prompt relief to their policyholders for covered losses.”
Plumes of smoke are seen as a wildfire burns in Pacific Palisades, California, on Tuesday. (David Swanson/AFP via Getty Images/Getty Images)
Sampson noted that California law prohibits insurers from canceling an insurance policy during its term, with very limited exceptions such as nonpayment of premiums or fraud.
He added: “So the implication that people who have insurance cover effective on January 7th are canceling, just to give people that impression and create that fear, is irresponsible in my view “.
FOX Business has reached out to the White House for comment.
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Even before this week’s wildfires broke out, California was in the midst of an insurance crisis, with many residents unable to obtain homeowner’s insurance due to various companies limiting their exposure to ‘state or have pulled out completely in recent years due to heavy losses and the inability to adequately raise premiums or assess risk due to California regulations.
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The state’s largest homeowners insurance company, State Farm, announced in March of last year that it would not renew about 72,000 home and apartment policies this summer. The company cited inflation, regulatory costs and the growing risk of catastrophes for its decision and had previously stopped accepting new applications from the state.
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Several other leading insurers, including All State, Farmers and USAA, have also slowed new policy applications in California in recent years as part of an effort to limit their exposure to policies that carry what they see as undue risk given what state regulators have allowed. to be collected from the insured. Similar reasons of increased risk, high repair costs and rising reinsurance premiums have been cited in these decisions.
While it is illegal to insurance companies to cancel policies before they expire in California, many homeowners whose policies were not renewed have struggled to obtain or afford coverage as the number of carriers in the state continues to dwindle.
Homes burn as strong winds fuel the Eaton Fire in Pasadena, California, on Tuesday. (David McNew/Getty Images/Getty Images)
Because of this situation, many homes destroyed by the ongoing wildfires were not insured.
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After the recent wildfires in Southern California, some critics have blame the insurance companies to not cover properties in fire-prone areas of the state. But Sampson says he has been warning California regulators about the vulnerability of the state’s insurance market for years.
He explained: “Over the last decade, for every dollar of homeowner’s premium we’ve collected, we’ve paid out $1.09 in claims, and that’s not sustainable.”
Eric Revell of FOX Business contributed to this report.
