By Patrick Prendiville, CIRMS
The City of Laguna Niguel hosted Insurance Commissioner Ricardo Lara on August 10, 2023 in a town hall meeting to address the current state of wildfires and related implications. In front of a packed house, Commissioner Lara laid out the insurance market, pending items that may provide relief, and a few comments about Common Interest Developments (CIDs).
Below are highlights from Mr. Lara’s comments, which provide some insight into the California Department of Insurance’s views regarding insurance issues that we are facing in our industry.
Current State of the Market:
- While rates are rising, California rates remain in the middle compared to the rest of the Nation.
- Lara reminded the attendees that the California FAIR Plan should be the market of last resort. However, The California FAIR Plan has grown significantly. In 2017, there were 5,000 insureds in San Diego, and as of 2022, the number has grown to 14,000. Orange County has grown from 2,500 to 4,600 in the same time frame.
- Although many insurance companies have suspended issuing policies in California, Lara pointed out that the Insurance Commissioner has no authority to mandate insurance companies issue policies. Lara claims, “At this point, insurance is not about affordability, it’s about availability. We need more availability. “
Work to be done:
- Lara believes that all Californians must participate in the solution. Homeowners in downtown Los Angeles should not be paying 30% less just because they are far from wildfires.
- Regarding Safer from Wildfires, also known as Firewise, Lara wants to find ways to incentivize Californians to invest in fire prevention, beyond insurance discounts. Monetary relief needs to be directed to low-income owners to fire harden homes. Providing the necessary assistance to fortify will avoid the hopscotch approach within neighborhoods where some have taken fire prevention measures, and some have not.
- Lara believes we cannot rely on historical data to base rates. Multiple requests have been made by insurance companies to use catastrophe models. Lara is open to using these models, but with contingencies: What transparency will the insurance companies provide? What assurances do we have that the insurance companies will stay and continue to write policies in California after receiving acceptance of the models?
- Wildfire risk score: Insurance companies should be required to provide a wildfire risk score to consumers when they buy or renew a policy, or anytime the owner has completed mitigation measures on their property. Owners finding themselves in difficult areas should have a right to appeal their wildfire score.
- The California Department of Insurance recently increased the ability of CIDs to access the California Fair Plan by increasing the allowable replacement value to $8.5M. Another increase is set to take place allowing CIDs with replacement values of $20M.
- [Lara just recently announced that they will allow HOAs to access the FAIR Plan if each building, rather than the entire development, is valued at under $20M. This move will dramatically increase the number of CIDs that could access the Fair Plan.]
In his closing comments, Commissioner Lara stressed that realizing solutions and game plans would take time, but that the department was working diligently to bring a resolution to this ever-present problem to all Californians.
Since this Town Hall Meeting, Commissioner Lara announced a Sustainable Insurance Strategy to improve the state’s market conditions for consumers.
“We applaud Commissioner Insurance Commissioner Ricardo Lara for reaching a breakthrough agreement that increases insurance availability and supports community safety. This much-needed insurance reform will expand options and create long-term sustainability in our marketplace, helping millions of Californians, including seniors, first-time home buyers, and many others across our state,” explains Kieran J. Purcell, Esq., CCAL, CAI-CLAC Chair.
The CAI-CLAC Insurance Task Force continues to collaborate with the CA Department of Insurance. On behalf of CAI-CLAC, Brian Kalmenson, CIRMS, CID Insurance Specialist, testified during the California Department of Insurance (CDI) Catastrophe Modeling Workshop to provide solutions on how to bring carriers back to California.
“California community associations can’t stress enough that wildfire is its own catastrophic peril,” explained Kalmenson. “The state has been very forward-looking in a lot of what’s been going on in recent years, but the sooner we acknowledge that wildfire is different than fire, the sooner we can start exploring new solutions and bring those to the table to restore health to the California Admitted Insurance Market – because that is going to be the ultimate solution.”
Continuing to address climate-intensified wildfire risks to California communities is a high priority for the State of California. Thank you, CDI, for continuing to listen, seeking public input, and partnering with us to improve insurance regulations and available options.
Patrick Prendiville, CIRMS, owns Prendiville Insurance Agency and may be reached at Patrick@PrendivilleAgency.com