Things to know about California's new proposed rules for insurance companies

abcnews.go.com:

California's insurance commissioner says he will write new rules for insurers in the nation's most populous state

SACRAMENTO, Calif. — Months after California's home insurance market was rattled by major companies pausing or restricting their coverage, the state's top regulator said Thursday that he would write new rules aimed at persuading insurers to continue doing business in the nation's most populous state.

Seven of the 12 largest insurance companies by market share in California have either paused or restricted new policies in the state since last year.

Some state lawmakers tried to come up with a bill that would address the issue. But they failed to reach an agreement before the Legislature adjourned for the year last week.

Here's a look at what California Insurance Commissioner Ricardo Lara proposed and how it would affect the state's insurance market:

WHAT ARE THE RULES FOR INSURANCE COMPANIES?

Unlike most states, California heavily regulates its property insurance market.

In 1988, California voters approved Proposition 103. It said insurance companies had to get permission from the state Department of Insurance before they could raise their rates.

When setting their rates, insurance companies cannot consider current or future risks to a property. They can only use historical data.

Insurance companies also buy insurance themselves, a process known as reinsurance. Companies are not allowed to consider their reinsurance costs when setting rates for California homeowners.

WHAT IS THE PROBLEM?

Climate change has intensified wildfires in California. Of the 20 most destructive fires in state history, 14 have occurred since 2015, according to the California Department of Forestry and Fire Protection.

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