California is in crisis. Wildfires have raged through the state for several years. In some areas of the state it is nearly impossible to get homeowners insurance. If people can get it, the premiums are out of sight high.
Insurance Commissioner Ricardo Lara’s solution is changes in the state’s homeowners insurance of last resort, the FAIR Plan. On November 19th of last year he ordered the FAIR Plan to implement huge changes and offer comprehensive homeowners policies — AKA HO-3 — that can be added to the current fire-only coverage. It requires an expansion of coverage to go from $1.5 million to $3 million and forces the FAIR Plan to allow monthly payments and the ability to pay via credit card and do those transfers without fees.
The commissioner’s order requires the FAIR Plan to come forward with a plan of its own to implement the changes within 30 days. Instead, on behalf of the FAIR Plan — and the insurers involved — its president Anneliese Jivan has sued Lara and the insurance department.
She says Lara’s order violates the statutory mandate to provide basic property insurance and to be a stabilizing force in the homeowners market by providing and maintaining actuarily sound rates. The suit asks the Los Angeles Superior Court to force Lara to annul, vacate, or withdraw his order.
Along with the writ, Jivan also issued a statement.
“We have a responsibility to protect our policyholders and ensure their continuing access to affordable and reliable basic property coverage,” Jivan said. “We appreciate the efforts of the Commissioner to address the impact of California’s devastating wildfires on homeowners. Unfortunately, this Order, as written, would negatively impact consumers and further destabilize the voluntary insurance marketplace because the Order provides no incentive for the private market to offer insurance in areas at risk of wildfire. We regret having to take this action, but we will do everything we can to protect policyholders and provide stability in the insurance marketplace.”
Lara disagrees. He says the action is desperately needed to help homeowners find adequate coverage to protect their homes. The commissioner points out that he’s received hundreds of requests from homeowners and wildfire survivors who can’t find comprehensive coverage in the admitted marketplace and now only have the FAIR Plan to count on for homeowners coverage.
“My Department issued this revised plan of operation to show we are moving forward as required by law to protect homeowners throughout the state,” Lara said. “The FAIR Plan has become the only permanent option for many homeowners abandoned by the private insurance market. The plan will provide homeowners with the option of basic coverage they deserve in order to feel safe and protect our local economies from the state’s growing insurance availability crisis.”
The FAIR Plan is designed to be temporary. A homeowner can’t find insurance, goes to the plan, is covered and continues to search for an insurer who’ll insure the property. When they’re found, they leave the Plan.
Lara says under current conditions, the FAIR Plan has become the only option.
Jivan said by law the FAIR Plan cannot offer anything but basic coverage. The HO-3 coverage Lara wants adds liability, water damage and theft to policies and “processing and claims handling for the different perils is substantially different from what the FAIR Plan is equipped to handle nor does the FAIR Plan have expertise in these coverages.”
And she adds that attempting to comply with Lara’s order will “divert the FAIR Plan’s scarce resources from its core mission and lead to significant new costs absorbed by FAIR Plan policyholders.”
However, she — and the FAIR Plan — do agree with three parts of Lara’s order:
• Coverage expansion from $1.5 million to $3 million
• The credit card payment option
• The monthly payment plan option
Source link: PropertyCasualty360.com