As we pray for those impacted by the fires in L.A., we also know that many of those who are losing their homes and possessions do not have fire insurance. One of the main reasons is that insurers have been prohibited from charging premiums that reflect the risk. Many of these people live in an area that has a historically high risk for fire and the increased urbanization and poor fire management policies has increased that risk. Despite this, insurers can’t increase premiums enough to make insuring those people viable. Why?

Proposition 103, approved by California voters in 1988, requires the “prior approval” of the state’s insurance regulator before insurance companies can implement property and casualty rates, including homeowner’s insurance.

 

“California has a consumer-friendly approach with Proposition 103, and the insurance industry hates it,” said Kenneth Klein, a California Western School of Law professor and expert on natural disasters.

 

Added Klein, “The insurance industry has been battling that proposition for a long time.”

 

Under Proposition 103 and other California insurance regulations, property and casualty insurance companies cannot take all the losses associated with one event, such as this year’s wildfires, and then simply put them onto next year’s rates. The state requires a longer-term trend, not a one- or two-year disaster impact.

California’s prop 103 did a few things to cap insurance premiums. It restricted insurers from passing on the cost of individual events by requiring them to only factor in the historical trend. It also prohibited insurers from creating risk models for the future. They were only allowed to look at historical data. Well, what happens when insurance customers are looking at future weather patters, the effect of urbanization, and policy choices that increase risk? Doesn’t matter. The insurers can’t use that data to set rates.

If insurers are looking at real actuarial data that calculates a risk and the premiums necessary to insure that risk, but they are not allowed to use that data or charge those premiums, what is the rational decision? They stopped insuring people, of course. Since Prop 103 was passed, numerous insurers have left California completely and many more dropped customers if the insurers couldn’t charge a rate that made insuring them worth it.

It’s gotten so bad, that California actually changed the rules at the beginning of this year to try to alleviate it.

The regulations that take effect Jan. 2 arose out of a broad agreement Lara reached with the industry that gave insurers regulatory concessions, including the use of the computer models, in exchange for a commitment by large insurers such as State Farm, Farmers and Allstate to write policies in neighborhoods prone to wildfires equivalent to 85% of their statewide market share. That would mean, for example, an insurer with a 10% share of the state’s homeowners insurance market would have to cover 8.5% of the homes in riskier neighborhoods as identified by the department. No such requirement currently exists.

It’s a cockamamy scheme cooked up by bureaucrats that probably won’t work in getting a significant number of additional people insured, but the story is that even in California, they realized that they have made it economically inviable for insurers to provide homeowners insurance and they are trying to do something about it.

All this to point out that here in Wisconsin, Governor Tony Evers is proposing that Wisconsin adopt direct ballot measures like California. Prop 103, which is leaving thousands of Californians uninsured and homeless, was one of these direct ballot measures. It was an idiotic policy that passed on an emotional wave of ignorance and hate of insurance companies stirred up by activists.

No, we don’t want this here in Wisconsin.

If you want to see why this is a bad idea, you need not look any further than California. A Republic with representative government is the least bad form of government. Straight democracy is mob rule. Thank goodness this proposal is DOA.

Wisconsin Gov. Tony Evers’ plan to let voters repeal and create state laws without legislative involvement met opposition on Monday from Republican leaders of the Legislature, who signaled that the idea is likely to be rejected for a second time.

 

[…]

 

Evers said on Friday that the state budget he plans to unveil next month will include a mandate that legislators take up a constitutional amendment allowing voters to petition for ballot proposals to repeal state statutes and create new ones. Evers made a similar proposal in 2022 for voters to repeal the state’s 1849 abortion ban, but Republicans killed the plan.