In a May 4 social media post, Cato Institute policy analyst Marc Joffe highlighted the difficulties Californians are facing in securing homeowners insurance across the state, not limited to areas prone to wildfires.
"It's hard to get homeowners insurance in most of California: not just wildfire areas," said Joffe, according to X. "State price controls and regulations undoubtedly play a role. It's nice to think you can limit prices, but sellers have the option to go on strike."
According to a report by the San Francisco Chronicle, insurance has become a significant hurdle for California residents attempting to buy or sell homes. Major insurance providers such as State Farm and Allstate have curtailed their operations within the state, resulting in fewer options and increased costs for residents. Real estate broker Diane Britto noticed towards the end of 2023 that insurance was becoming an issue for potential buyers struggling to secure coverage. Britto stated that first-time home buyers are "always shocked" by the high prices when they do find coverage.
State Farm, which holds the title of largest private insurer in California, implemented a 20% increase in home insurance rates effective from March 15, as reported by the San Francisco Standard. The company also hiked car insurance rates by 21%, effective from February 26. These rate increases affected over five million Californians.
In November's House Financial Services Committee hearing, testimony from the American Property Casualty Insurance Association (APCIA) indicated that "legal system abuse" is one of the primary factors driving up insurance costs for consumers. APCIA cited larger jury verdicts, third-party involvement in lawsuits, and an influx of attorney advertisements as contributing factors to this legal system abuse. This situation compels businesses to raise their prices to compensate for increased risk costs.
The Northern California Record previously reported that rising insurance costs due to excessive litigation are especially impacting low-income Californians already dealing with high inflation. Car insurance costs surged by 24% last year and are expected to rise another 7% in 2024. Consequently, low-income families in California are finding it challenging to afford basic expenses due to these escalating costs.
Joffe's role at the Cato Institute involves conducting research on state and federal financial policies, as per the think tank’s website. He has prior experience in the financial sector, including a stint at Moody’s Analytics. His research has been utilized by organizations such as the California State Treasurer's Office and the California Policy Center.