Deadly winter storms have battered California since December, wrecking vehicles and flooding homes across the state. Many homeowners are now guessing their insurance rates will spike, especially as more rain is expected this week.
Experts who spoke to The Standard agree rates are going up. At the same time, they say residents can’t blame the weather for it—not yet, anyway.
“The rate increases we are seeing are due to inflation,” said Janet Ruiz, communications head for the Insurance Information Institute, a U.S. insurance industry association.
Inflation, high labor costs and supply-chain issues have all increased, which bumps up the costs of claims paid out by insurance companies. These increases are ultimately passed on to the consumer, according to Dmitriy Golodriga, principal of San Francisco-based insurance agency Broad Spectrum Insurance.
“It’s a trickle-down effect,” Golodriga said. “The customer is not going to see the cause and effect. It takes time for rates to catch up.”
Part of the reason for this delay is because of California’s Department of Insurance, which requires insurers to file forms and data proving why these companies need to increase their rates or change their coverage policies. Insurance companies can only do so if the department approves it, and the process can take months.
“They’re pretty detailed filings,” said Michael Soller, a deputy insurance commissioner with the state’s insurance department. “There’s a lot of data.”
“Sometimes, people feel like something’s happened [that will increase their rates]. But it’s a larger process than that,” Ruiz said.
Ruiz said that any rate increases taking effect now or in the near future would most likely be from around events that happened in mid-2022.
Ruiz also said that outright cancellations of insurance are unlikely to happen in relation to recent storms. A sudden cancellation has happened to homeowners living in high-risk wildfire areas before, but that's because of the likelihood that a wildfire could completely destroy a home, leading to huge claims. Storms are less likely to cause irreparable damage.
“A hole in the roof, a tree in the roof, water coming in from the top down, that’s all covered,” Ruiz said.
There is not enough data at this time to determine whether claims or payouts have spiked following windy weather last week, according to Ruiz and Soller.
“It will be awhile before claims and losses show up in data,” Soller said.
More Rate Hikes Coming?
Golodriga, of Broad Spectrum Insurance, is confident insurance companies will ask the state to let them increase rates once winter storm damage claims are paid out and the total costs are known.
“I’m sure when they assess the damage that they’re going to say, in six to 12 months, ‘OK, we need to increase rates, because this is the kind of damage that can happen with climate change,’” Golodriga said.
For any homeowners who need to file an insurance claim after the storms, Ruiz recommends taking as many pictures as possible, especially of any temporary repairs made before more substantial damage can be fixed.
Ruiz also recommends that people keep receipts from temporary repairs and file claims quickly so homeowners are paid out as soon as possible.
The California Department of Insurance also has tips for those affected by winter storms, including documenting all correspondence with insurance companies in a “claim diary” and checking the licensing status of any contractors hired to prevent potential fraud.