While it sucks, people like me (and there’s a heavy majority of Californians like me) will get lower rates because we live in cities with low wildfire and low flood potential.
It doesn’t sound to me like this is the situation.
Insurers can offer whatever they want, but if they want to be able to sell to non-high-risk people, they will also have to complete a sufficient number of sales to high-risk customers.
The rule will require home insurers to offer coverage in high-risk areas, something the state has never done, Insurance Commissioner Ricardo Lara’s office said in a statement. Insurers will have to start increasing their coverage by 5% every two years until they hit the equivalent of 85% of their market share. That means if an insurer writes 20 out of every 100 state policies, they’d need to write 17 in a high-risk area, Lara’s office said.
That will cause them to need to set lower rates in higher risk areas than they normally would to be able to complete sufficient high-risk-area sales. That will decrease competition to provide coverage in low risk areas, which will raise insurance rates there.
I’d expect this to be causing people who live in low-risk areas to be subsidizing people who live in high risk areas via higher insurance prices in low risk areas than would be the case in an unconstrained market.
That is, this is a good deal relative to an unconstrained market for people living in high-risk areas and a bad deal relative to an unconstrained market for people living in low risk areas.
I’d expect this to be causing people who live in low-risk areas to be subsidizing people who live in high risk areas
To be fair, high-risk people are subsidized in nearly every type of insurance. Often unintentionally (due to actuarial uncertainty) but sometimes it is an explicit goal.
For example, community rating was deliberately introduced to health insurance in order to cause lower risk people to subsidize high risk people (eg those with preexisting conditions).
It doesn’t sound to me like this is the situation.
Insurers can offer whatever they want, but if they want to be able to sell to non-high-risk people, they will also have to complete a sufficient number of sales to high-risk customers.
That will cause them to need to set lower rates in higher risk areas than they normally would to be able to complete sufficient high-risk-area sales. That will decrease competition to provide coverage in low risk areas, which will raise insurance rates there.
I’d expect this to be causing people who live in low-risk areas to be subsidizing people who live in high risk areas via higher insurance prices in low risk areas than would be the case in an unconstrained market.
That is, this is a good deal relative to an unconstrained market for people living in high-risk areas and a bad deal relative to an unconstrained market for people living in low risk areas.
To be fair, high-risk people are subsidized in nearly every type of insurance. Often unintentionally (due to actuarial uncertainty) but sometimes it is an explicit goal.
For example, community rating was deliberately introduced to health insurance in order to cause lower risk people to subsidize high risk people (eg those with preexisting conditions).