INSURANCE BLUES
“We need to get back to a point where insurance companies are once again competing for your business,” said Mary Beth Bykowsky, Community Relations and Outreach Branch of the California Department of Insurance (CDI).
On Wednesday, she gave a presentation on the CDI’s approach to the fire insurance crisis to the Mono County Board of Supervisors..
The crisis exists because insurance companies will not provide coverage in high risk areas unless they can cover 100% of consumers’ claims, their expenses, and earn a fair return, she said.
Rate filings have become more complex and can take longer than six months to review, and one entity alone can prolong rate filings. And unlike public utilities which are required to provide coverage to all residents and businesses, insurance companies can legally refuse coverage.
This means more and more insurance companies have denied coverage to property owners in California as wildfire risk has increased.
The credit rating agency AMVEST has downgraded the outlooks for top 12 companies like State Farm, AAA, and Mercury.
The California FAIR Plan (CFP) offers basic fire protection for people who can’t find private coverage. It is run and funded by insurance companies and only covers fire, lightning, smoke, and internal explosions.
To make that plan more affordable, the CDI has begun incentivizing fire preventative home improvements, as part of their “Safer from Wildfires” framework in August 2023.
“Under this regulation, we expect to see more businesses, homeowners, and communities making investments in wildfire safety, greater community resilience, reduced losses from wildfires, and more insurance coverage for mitigated properties,” Bykowsky said.
Homeowners should contact their broker to find out how to qualify and receive this discount.
In September 2023, the governor reached out to the commissioner to expedite another package of regulatory solutions called California’s Sustainable Insurance Strategy.
This regulation requires Insurance companies to cover at least 85% of homes and businesses in wildfire distressed areas. A preliminary list of distressed counties have been drawn up, and Mono County is one of them.
California’s Sustainable Insurance Strategy aims to bring FAIR plan policyholders back to private insurance, with priorities given to homes and businesses who took the mitigation steps outlined in the “Safer from Wildfires” framework.
The policy also explores allowing a California only reinsurance cost, meaning that Californians will not pay for the cost of hurricanes, fires, and floods across the nation and around the globe.
It also requires insurance companies to give insurance candidates their wildfire risk score and tell you what factors went into creating it.
The wildfire risk score or classification must be provided to the property owner at the following times: within 15 days of when they apply for a new policy, at least 45 days before you renew a policy, at least 75 days before they are non-renewed, and within 30 days of when they complete mitigation on your property and request a revised score.
“That’s one misconception – that when insurance companies pause or restrict new business, that consumers will be dropped immediately and left without coverage,” Bykowsky said. “It’s not six months, but you do have much longer time than you used to have.”
Additionally, CDI and the CFP reached an agreement to increase the commercial coverage limit to 20 million per structure. This agreement is new and probably won’t be enacted until the end of 2025.
And lastly, the regulation for the first time gives people the right to appeal through the CDI. They can make sure that the company followed all the rules and regulations for non-renewal.
The Department of Insurance will hold a virtual public hearing to take input on the proposed regulation on September 17, 2024, at 10 a.m.
