A New California Controversy — Insurers, the FAIR Plan & Consumers

California Insurance Commissioner Ricardo Lara is working overtime to stabilize the state’s homeowners insurance market. He’s doing what he can to make things easier for the state’s FAIR Plan. His latest proposal for insurers and those insured by the FAIR Plan has led to more controversy and complaints from consumer groups and consumers.

Last week the California Department of Insurance sent insurers a bulletin stating a preliminary decision has been made where insurers would be required to pay for FAIR Plan losses up to $2 billion — that’s $1 billion for homeowners and $1 billion for commercial properties.

Lara has not made a final decision but under the current version of the plan, if the FAIR Plan runs out of money, and the insurers have spent the $2 billion, the remainder of losses will be covered by a surcharge being tacked onto insurance policies.

At the present time, over 419,000 properties are covered by the FAIR Plan and the plan has become one of the state’s largest insurers. As of June 30th of this year, the FAIR Plan insured properties valued at $400 billion.

That’s up 26% over the insured value on January 1st of this year.

“While the FAIR Plan hasn’t had a solvency crisis in 30 years, we are taking no chances,” Lara said. “The changes will strengthen the FAIR Plan’s financial reserves and backstops so it can fully and expeditiously pay all future claims from consumers.”

He made it very clear those loss costs will only be passed onto consumers when the FAIR Plan’s reserves, reinsurance and catastrophe bonds are gone.

As expected consumer groups aren’t happy with the decision. Consumer Watchdogs CEO Carmen Balber calls it a very bad decision for consumers.

“It’s outrageous and outside the law for the insurance commissioner to force consumers to bail out home insurance companies and then call that consumer protection,” Balber said. “If the FAIR Plan gets into trouble it will be because insurance companies dumped too many Californians onto its books. Those companies should be on the hook for the fallout, not every homeowner in the state.”

Source link: Insurance Business America — https://bit.ly/3XCYx6O

Source link: Insurance Journal — https://bit.ly/4cZ7CeH

Source link: PropertyCasualty360.com — https://bit.ly/3XmvQcP