California Commissioner Introduces FAIR Plan Reforms and Modernization

As part of his reform-based Sustainable Insurance Strategy plan, California Insurance Commissioner Ricardo Lara introduced ways last week to reform and modernize the state’s insurer of last resort, the FAIR Plan.

“Modernizing the FAIR Plan is a crucial step in our strategy to stabilize California’s insurance market,” Lara said in his news release. “It’s critical for Californians to understand that a growing FAIR Plan contributes to our insurance crisis. By strengthening the FAIR Plan while providing financial stability and solvency protections, we are creating long-term security for consumers, homeowners, and businesses across the state that is long overdue.”

The reforms have been agreed upon by the FAIR Plan board and are set to go into effect in 30 days. They will expand FAIR Plan coverage for homeowners, condo associations, farms, builders and business with multiple buildings in one location.

Lara said this will help “break the cycle” by adding strength to the FAIR Plan as he pursues other insurance market reforms.

Here are some specifics:

• Expanded Coverage: Establishing a new “high-value” commercial coverage option with limits up to $20 million per building, along with past increases for residential policies.
• Financial Stability: Creating a sound financial formula to protect policyholders in extreme loss scenarios.
• Improved Transparency: Requiring increased public reporting on FAIR Plan activity and customer service metrics.

“Ultimately, we want to reduce the number of homeowners and businesses on the FAIR Plan by strengthening the market overall,” Lara added. “My action is intended to close coverage gaps in the short term for many homeowners’ associations, housing construction projects, and larger businesses, so they aren’t forced to pay even higher costs or go without insurance.”

He said the requirement to force the FAIR Plan to take more steps to protect policyholders will give homeowners and business an effective safety net until he can complete all of the reforms of his Sustainable Insurance Strategy plan.

APCIA vice president for state government relations Mark Sektnan likes the plan and said it has many benefits.

“[The] action is an important step toward restoring the FAIR Plan’s financial stability and ensuring consumers have access to the coverage they need,” Sektnan said. “While some details still need to be finalized, we appreciate the Department’s commitment to implementing reforms that will bring balance back to the insurance market and increase access to coverage for all Californians.”

Several groups have responded positively to Lara’s plan. They include California’s Farm Bureau, the Community Association Institute, the California Building Industry Association, the California Association of Winegrape Growers and the California Association of REALTORS® (C.A.R.).

As expected, California’s Consumer Watchdog Executive Director Carmen Balber opposes Lara’s plan.

“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,” she 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: California Department of Insurance — https://bit.ly/3A5fJso

Source link: Insurance Business America — https://bit.ly/46uch6w

Source link: Insurance Journal — https://bit.ly/4c4q2dt