By RHEA-FRANCES TETLEY
Staff Writer
State Senator Rosilicie Ochoa Bogh’s recent town hall Zoom meeting with Department of Insurance representatives Julia Juarez and Joel Lawcher, Rex Frazier from the Personal Insurance Federation of California and Philip Irwin, who has three decades of work with insurance and the FAIR Plan, was both encouraging and disappointing.
The insurance commissioner’s office promises big changes are coming, but not until the middle of next year; rates will be much higher when those changes finally are written.
It was admitted in the meeting that California is facing an insurance crisis. There are more wildfires, it faces devasting earthquakes and has serious car accidents that result in lawsuits. The insurance companies are not writing policies to cover all these potential disasters for all homeowners that want policies at this time, forcing many to get their coverage through the California FAIR Plan.
The FAIR plan is designed as a method for those unable to get insurance to buy a policy, but it was designed for a small percentage of any area, not the vast number of policies concentrated in one area, such as the mountains are currently experiencing.
There were 154,000 properties under the FAIR Plan in 2019 in California and now 408,000 to 450,000 are being insured under this “insurance of last resort.” It is not state-funded and not taxpayer-funded and is not for profit. It is is funded by the insurance companies but, with such a large number being insured, if it faces a large loss impact, it may be unable to pay all the claims.
It was said that 100 percent of the policies written by the FAIR Plan are policies that the for-profit insurance companies would not write, so the FAIR Plan must write all of those policies that are requested.
Currently, the FAIR Plan department is understaffed, and delays are now occurring, resulting in those policies taking a while to write, which is causing frustration with the customers. Insurance brokers are not agents of the FAIR Plan. The FAIR Plan is not comprehensive insurance; it covers only limited, defined losses, mostly from fire and smoke, leaving most who suffer other losses underinsured.
In January, the insurance companies will be forced to show their data for rate increases and where in the state they intend to write policies and their supporting bond rates. However, changes that consumers will see in rates and new policies are not expected to actually arrive until the middle of next year. This will leave many who are currently facing uninsurability in the insurance gap of coverage, which mortgage companies do not accept.
In the past, insurance companies have based rates on historical figures of where fires have previously occurred and then they did their rates by ZIP Codes, not individual property situations. The insurance companies have asked for approval of rate increases in the range of 35 to 68 percent of current rates. But, beginning next year, people and communities that are being proactive and making serious decisions to make homes firesafe, will be facing new rates that need to be based both on those historical figures and also on the individual actions taken by homeowners to make their homes firesafe and communities making themselves Fire Wise. Already, 10 percent of communities in the state have been identified as Fire Wise and over 5 percent of homeowners have hardened their homes, but these actions have not previously been reflected in rate reductions or coverage.
These past few years, many property owners have been spending money to make their homes safer, many spending tens of thousands of dollars to fire-harden their dwellings and insurance companies have still canceled them or not written policies for them. That’s what needs to change and that’s the heart of the new sustainable insurance strategy.
The new concept in regulations will allow insurance companies to use forward-looking data that looks at the benefits of any wildfire mitigation being performed by communities and the individual property owners, so the people that have made their homes safer and communities and fire departments that have put in fire breaks to make their homes and communities safer will for the first time get some consideration by the insurance companies when pricing those future rates.
It has been proven in Wrightwood that, during the recent Bridge Fire, and in Running Springs, during the Line Fire, that those who clear and maintain defensible space around their property give the fire agencies space to save their homes and community during massive wildfires.
Insurance companies will also have to show the Department of Insurance that they’re writing policies in underserved areas, such as the San Bernardino Mountains, where they have been canceling policies and not writing new ones. Now the insurance companies must show that they are using the forward-looking-based models. It is said that this style of regulation will ultimately help make rates become more stable, although admittedly at a higher cost to consumers since the insurance companies must be assured they will make a profit or they will completely pull out of the insurance market in California, such as some companies already have done, or are doing through non-renewals and cancellations.
Currently, when a company wants to non-renew, they must give the homeowner a 75-day notice of its intention and give detailed reasons and describe what needs to be mitigated. When given that notice, a homeowner must do the mitigation and get their agent diligently seeking new insurance coverage. Consumers may go to the site www.Uphelp.org to complain or to the insurance commissioner, if they feel the non-renewal is unfair.
Right now, many homeowners in the mountains are suffering from cancellations and an inability to buy insurance other than through the FAIR Plan, which the insurance commissioner states has too many high-risk policies and needs to cut down on the number of policies on the FAIR Plan, especially when they are all concentrated in the same areas.
Currently, because of the recent Line Fire, insurance companies are not permitted to cancel policies locally, except for non-payment or not doing reasonable upgrades to decrease the risk of fire. According to Insurance Commissioner Ricardo Lara, there is now a one-year moratorium on policy cancellations. Many changes will be seen in January, because that is when the new regulations will be rolled out.
At the end of the town hall meeting, few were satisfied with the reports, the current inability to get insurance written in the near future and the prospect of great insurance rate increases in the near future and beyond, especially since rates for many have doubled in the past two years, to retain any insurance coverage at all. Senator Ochoa Bogh was not encouraged by the reports, which did not seem to benefit the people she represents and promises to hold another town hall meeting when anything definitive has been decided or may be implemented. She wants everyone to be informed.
Those homeowners who have questions about their insurance, or an unfair cancellation, should go to www.insurance.ca.gov or call (800) 927-4357. Questions can range from finding insurance to addressing problems with claims and cancellations.
0 Comments