California’s Insurance Crisis: Proposition 103

Many Californians might’ve heard about the ongoing insurance crisis. If they haven’t, they’re definitely gonna start seeing the effects of it on their monthly statements, or while shopping around for new policies. In this segment, we’ll be teaching California residents all they need to know about the insurance crisis, how it affects them, and what they can do to navigate this uncharted territory.

Today we’re gonna dive into the first of four main components of the crisis: Proposition 103. Passed by California voters in 1988, Proposition 103 was intended to protect consumers from unreasonable rate increases. This meant that approval would be required by the California Department of Insurance (DOI) before insurance companies could implement higher rates. But amidst the crisis, California insurance companies weren’t being approved for rate increases high enough to sustain any new policies. Given how expensive repair costs had become, insurers simply couldn’t have afforded the possibility of covering an increased number of claims for both existing and new customers without increasing their rates.

California Insurance Commissioner, Ricardo Lara (Yahoo News)

This inability to increase rates led some of the country’s most well known insurance companies to impose waiting periods on applicants, or require exstensive lists of pre-application documents and photos before purchasing a new insurance policy. Companies like Statefarm, Allstate, and Kemper even went to great legnths by leaving California altogether. On the brightside, news just broke that the Insurance Commissioner of California, Ricardo Lara, issued a bulletin threatening legal action against insurance companies who use these kinds of tactics to delay the insurance application process because they could be violating certain provisions of Proposition 103.

So if you’re a California resident, and you were scratching your head at the fact that your insurance company dropped you, why they double your premium, or why you haven’t been able to buy a new policy, this is just part of the reason!