California Fire Insurance Policies Battle Heats Up
Sonora, CA – Administrators of the fire insurance pool, the California Fair Access to Insurance Requirements Plan, is taking on the state’s insurance commission over having to offer other types of policies, specifically liability, with its fire insurance.
Also known as the FAIR Plan, it only sells fire insurance, which often forces homeowners to buy a separate policy for things like liability. Insurance Commissioner Ricardo Lara has ordered the pool to sell more than just fire insurance to save homeowners from having to buy multiple plans.
Lara contends, “The FAIR Plan’s purpose is to take all comers. I believe it is falling short of its purpose and mission to be there for consumers when they need it most.”
The companies that fund the FAIR Plan dispute that claim and say that Lara’s order will actually increase costs for consumers. They also argue that it is “illegal” because it would put them in direct competition with the private insurance market. For those reasons on Thursday, they filed an appeal that asks a judge to block Lara’s order while they appeal an earlier lower court’s decision from this year that directed them to comply.
“The FAIR Plan was never meant to compete with traditional insurance carriers that already provide these coverage options,” FAIR Plan president Anneliese Jivan said, adding she hopes to “protect consumers from unnecessary rate increases.” Additionally, they question whether Lara has the authority to issue the order.
Lara has been trying to get California’s FAIR Plan to sell more comprehensive coverage since 2019. In July, a judge sided with Lara, ruling he had the authority to order the FAIR Plan to sell insurance policies that also covered liability, but only if the liability is related to the property itself. Lara argues, “Forcing its policyholders to purchase separate insurance policies for liability and contents, often from the very same insurance companies who dropped their coverage in the first place, only drives up the price for consumers.”
The FAIR Plan counters 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 homeowner’s policy, meaning homeowners would still have to buy a second insurance plan for full coverage. The add it would deter competition within the voluntary market, hurting consumers and the insurance industry.
Lara accuses the insurance industry of “once again putting its profits ahead of the needs of California consumers.”