California fire insurance policy battle escalates
SACRAMENTO, Calif. (AP) – Massive wildfires are making it harder for some California homeowners to get home insurance, pitting the state insurance commissioner against the industry in a dispute that will likely escalate until 2022 statewide elections.
Private insurance companies often refuse to sell policies to people who live in areas prone to forest fires because the risk is too great. When this happens, state law requires these companies to pool their money to provide coverage for people who cannot purchase policies because of where they live.
This pool – the California Fair Access to Insurance Requirements Plan – only sells fire insurance, often requiring homeowners to purchase a separate policy for things like liability. Insurance Commissioner Ricardo Lara, a Democrat, ordered the pool, also known as the FAIR plan, to sell more than just fire insurance. He says this will save homeowners the money and hassle of having to purchase multiple plans.
But the companies funding the FAIR plan say that’s not true, arguing that Lara’s order will increase costs for consumers. They say his order is “illegal” because it would put them in direct competition with the private insurance market. On Thursday, they asked a judge to block Lara’s order while they appealed a lower court ruling earlier this year that ordered them to comply.
“The FAIR plan was never designed to compete with traditional insurers who already offer these coverage options,” said FAIR plan chairwoman Anneliese Jivan, adding that she hopes “to protect consumers from unnecessary rate increases. “.
Lara accused the insurance industry of “once again putting profits ahead of the needs of California consumers.”
“Forcing its policyholders to purchase separate liability and content insurance policies, often from the same insurance companies that gave up coverage in the first place, only increases the price for consumers,” said Lara, who will be re-elected next year. . âThe objective of the FAIR plan is to take all comers. I think it falls short of its goal and mission of being there for consumers when they need it most. “
Since 2018, California has experienced more than 32,700 wildfires that have destroyed more than 38,400 structures and burned more than 13,220 square miles (34,239 square kilometers), according to the California Department of Forestry and Fire Protection. From 2015 to 2019, state data shows insurance companies refused to renew nearly 350,000 policies in areas at high risk of forest fires. This data does not include information on how many people were able to find coverage elsewhere or at what cost.
California’s FAIR plan was established in 1968, one of many such pools that sprang up across the country as a result of damage from urban uprisings during the Civil Rights Movement. As of 2020, 31 states and the District of Columbia offer FAIR plans, according to the Insurance Information Institute.
Lara has been trying to get California’s FAIR plan to sell more comprehensive coverage since 2019. At the time, he ordered the pool to sell traditional home insurance policies that cover a range of losses other than fire.
In July, a judge ruled that Lara had the power to order the FAIR plan to sell insurance policies that also covered liability, but only if the liability was related to the property itself. Liability coverage is when someone is injured on the property and it is the owners fault.
The FAIR plan says that even if it starts selling these modified insurance plans, it still won’t be enough to cover everything that is included in a traditional home insurance policy. This means that homeowners will still need to purchase a second insurance plan for full coverage.
âCommissioner Lara is trying to put an even greater burden on homeowners by forcing the FAIR plan to deliver comprehensive policies at high cost, rather than trusting Californians to get the best deal on the coverage they need through products available on the voluntary insurance market. FAIR Plan lawyer Spencer Kook said.