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Commissioner Mandates State FAIR Plan Insurers Offer Full Coverage

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Sacramento, CA – State officials are ramping up response actions as more high wildfire risk area homeowners are being turned away for insurance coverage.

On Wednesday, State Insurance Commissioner Ricardo Lara, who has the power to revoke approval of how the state’s FAIR Plan operates, ordered that association of insurers to offer a comprehensive homeowner insurance policy in addition to the current dwelling fire-only coverage by June 1, 2020.

The FAIR Plan, established under state law as the homeowners’ “insurer of last resort,” currently offers fire insurance, requiring consumers to purchase additional policies in order to attain coverage for other potential hazards, such as liability, water damage, and theft.

Lara also mandated doubling coverage limits from $1.5 million to $3 million, a no-fee monthly payment plan, and the ability for policyholders to pay by credit card or electronic funds transfer without any fees.

“I am taking this action after meeting with thousands of California homeowners across the state who are struggling to find coverage to protect their homes,” Commissioner Lara explains. “People forced to use the FAIR Plan as temporary insurance deserve the same coverage provided by traditional insurers. This crisis requires the FAIR Plan to provide a comprehensive option for Californians who have no other option for homeowners insurance.”

Mother Lode Lobbying Efforts Continue 

Lara’s office has been receiving consistent input from government officials in impacted counties, including Tuolumne and Calaveras, and industry groups like the Tuolumne Association of Realtors (TCAR), which spearheaded a local survey to gather hard data and anecdotal accounts of homeowners’ experiences with multiple cancellations, non-renewals, and surging premium costs. Back in August, Lara confided homeowners’ complaints about nonrenewals at his office were up 600 percent a few weeks before a volatile town meeting hosted by his office and local officials in Sonora, as reported here.

As reported here, it was back in April that TCAR officials were sounding the alarm, describing the growing unavailability of homeowners and fire insurance as a spreading epidemic that would increasingly threaten home values, real estate transactions and tax revenues as well as have other far-reaching impacts. At that point, Lara attributed local premium increases as pricing catch-ups in previously “suppressed” markets.

TCAR spokesperson Ron Kopf comments that while he thinks it is good that Lara is looking at FAIR Plan comprehensive coverage that will be applicable to all homeowners, the key issue to look at is that the FAIR Plan tends to be expensive. “I’m hoping that they will look at some of the variable costs to make it affordable for people as well and take into consideration the condition of individual lots and [wildfire safety measures] that people do…to provide the defensible space.”

“Then I hope our state and federal governments get together to work on our public lands to address the excess fuels on these lands that have caused a lot of these catastrophic wildfires to start which caused a lot of this insurance issue to begin with.”

FAIR Plan insurers earlier this year agreed to provide more transparency in their meetings, allow the Department of Insurance to participate in those sessions, and obtain the Department’s approval before disbursing operating profits back to participating insurers.