California to consider getting private insurance

California to consider getting private insurance | Insurance Business America

California to consider getting private insurance

State officials have suggested that California get private insurance, to help cover costs during severe wildfire seasons and to protect taxpayers.

California insurance commissioner Ricardo Lara and state treasurer Fiona Ma suggested that legislators allow the state to purchase private insurance coverage instead of self-insuring.

“It works just like your home insurance, but for our actual state,” Lara explained to reporters, adding that if the premiums, terms, and coverage are not favorable, the state can simply walk away.

Lara then cited Oregon’s private insurance arrangement; the state paid $61 million in premiums over a span of almost 40 years, but managed to recoup some $102 million in insurance payments. Lara also mentioned FEMA’s purchase of $1 billion in flood insurance in 2017, with a payout triggered by $4 billion in losses – the government received the full benefit in 2018.

The insurance commissioner added that buying private insurance is part of a larger discussion on how the state can better respond to worsening wildfires, exacerbated by climate change. The state is also looking into taking out bonds to pay for wildfire costs, Lara noted.

Dodd commented that private insurance could potentially be used to cover for the costs of other disasters, such as earthquakes and tsunamis.

The Associated Press reported that California has outspent its emergency budget in seven of the last 10 years. The state spent nearly $950 million two years ago on wildfires and $677 million last year.