In 2023, three of California’s major home insurance companies denied claims at a higher rate than in other parts of the country, according to a new report.
Following the destruction of over 12,000 structures in Los Angeles by wildfires, questions have arisen about the state’s home insurance industry, or lack thereof.
The fires continue to rage as crews attempt to contain them. People who have lost their homes say they didn’t have insurance after many companies stopped offering home insurance in the state.
According to a Los Angeles Times survey of three of California’s largest home insurance companies, affiliates of Farmers Insurance, based in Los Angeles, denied approximately 50% of claims.
Two USAA affiliates declined 48 percent of claims in 2023, while Allstate Insurance, based in Illinois, denied 46 percent of claims that year. All were denied prior to the recent wildfires.
According to a Weiss Ratings report, the denial rate in the United States was approximately 37% in 2023. That figure is up by 12% from the denial rate 20 years ago (25%) but remains significantly lower than the rates of the three major California insurers.
“It’s not fair for me to say all of these [rejected] claims were legitimate, but it’s equally unfair for insurance companies to claim they’re all illegitimate,” Weiss Ratings CEO Martin Weiss told the Los Angeles Times.
Weiss hypothesised that major insurance companies were rejecting more claims as a result of the increased number of climate-related events that damaged or destroyed homes.
More frequent, extreme climate events, as a result of the human-caused climate crisis, have skyrocketed insurance costs and, in some cases, forced companies to drop clients in disaster-prone areas.
California’s Insurance Commissioner Ricardo Lara made certain that insurers could not use the same tactic on the victims of the Los Angeles wildfires. He prohibited insurance companies from dropping or refusing to renew any client affected by the LA wildfires for up to a year.
“Losing your insurance should be the last thing on someone’s mind after surviving a devastating fire,” Lara said in a statement. “This law gives millions of Californians breathing room and hits the pause button on insurance non-renewals while people recover.”
However, just because insurance companies cannot drop or refuse to renew a client does not imply that they must approve all claims, as detailed in the Weiss Report.
While the report appears to be somewhat critical of major California insurance companies, insurers who reviewed the Weiss report disputed some of its claims, according to the Los Angeles Times.
The insurers stated that many of the claims included in the report were closed with no payout because the damage reported did not exceed the policy’s deductible or was otherwise not covered by the policy.
While the end result is the same — the insurance companies did not pay to assist a homeowner — the insurers told the Los Angeles Times that the reason for the rejection was not simple.
Allstate responded to the LA Times by dismissing the report as “inaccurate.”
“We protect our customers, and our claims processes assist them in recovering by promptly providing fair payments in accordance with their policies.” “The data in this report is incorrect and significantly inflates the rate of unpaid claims,” the company said in a statement.
