Guest Blog By Kimberly Lilley, CIRMS, CMCA, EBP
On Wednesday, July 13, 2022 the California Department of Insurance (CDI) called a hearing in order to hear from the public about how well the California FAIR Plan (FAIR Plan) has been fulfilling its role as “the insurer of last resort,” and to help determine any actions needed for it to evolve to meet the changing needs of California consumers.
The FAIR Plan, established by legislation, but run by a board made up of the mandatory Plan members (insurance carriers admitted in the state) and some non-voting consumers, was established so that homeowners and businesses that could not get property coverage any other way, could still get basic property insurance – some sort of financial help in case the structure burned down and needed to be rebuilt. It is not insurance one expects to stay with forever… hopefully better options will evolve and take an owner out of the FAIR Plan market.
What seemed to be a theme during this eight-hour meeting of presentations from the CDI and the FAIR Plan, as well as testimony from the public, was that, while the coverage is understood to be “basic,” and the FAIR Plan is understood to be the “insurer of last resort,” that does not mean customer service and accessibility should be poor.
Tom Stinson, from Assembly Member Marie Waldron’s office, pointed out that insurers have increased the number of policies they are canceling, which means the FAIR Plan has to be able to serve a rising number of Californians, while El Dorado County Supervisor Wendy Thomas aptly called the situation in her area a “state of crisis.”
Those of us who represent condominiums in California know what they are talking about. And for these owners, so often first-time or retired homebuyers, the huge hikes to premiums and/or the complete inability to get insurance is indeed a crisis they and their families do not have the resources to weather. Deputy Insurance Commissioner Bryant Henley pointed this out in his initial presentation on behalf of the CDI, based on input he had received from the CAI-CLAC Insurance Task Force. Joe Pradetto, speaking for the Riverside County Supervisor’s Office of Chuck Washington, added that while the FAIR Plan was supposed to be the “insurer of last resort,” he said, “The FAIR Plan is becoming the Plan of the ONLY choice.”
Customer service was a large focus for this hearing, and Amy Bach, co-founder of United Policyholders, stated that, “They need to become more customer-centric.” Or, more dramatically, “There seems to be no there, there.”
Some calls were made to increase the coverage options the FAIR Plan would offer, something that was met with mixed response. Stephen Young of the Independent Insurance Agents & Brokers of CA was not a fan of the idea, stating that, “it’s like taping some fiberglass panels on [a Pinto] and calling it a Corvette.” The FAIR Plan board members present insisted they did not want to do anything that would compete with the traditional insurance market.
But being able to get insurance AT ALL…..was what a lot of folks wanted to discuss. The impacts are more than just having to pay for something yourself if it is destroyed in a fire. An insurance broker in the LA area, Jose Olivares, stated, “You can’t get insurance, you can’t get a loan.” MANY folks in condominiums who have not been able to get insurance to full value for their association know what that feels like. One young condominium owner had spent the last of her savings in order to meet the increased insurance needs of her association, finally getting to a point where she could no longer afford to live there. Finding out that selling would be MUCH harder due to needing to find a cash-only buyer was devastating to her.
Many folks on the call were bemoaning their difficult choice of whether or not to go uninsured, when condominiums (and other common interest developments) don’t have that option! Nor is the “insurer of last resort” even a last resort to them, since most condominiums in California do not meet the capricious underwriting guidelines of the FAIR Plan.
Was it a success? Well, it was a packed hearing with hours of testimony, so yes, people were heard. Now what?
For the part of the CAI-CLAC Insurance Task Force, we heard multiple speakers who understand and share our perspective. We have new possible allies in our work to make the FAIR Plan not only accessible to condominiums in California, but also to provide a product that would allow for layering…something less basic to meet the range of needs we have in the state. We will be continuing to work with the CDI and looking for ways to take the pressure off our communities, including giving our input to the new wildfire regulations they are working on.
And the best thing we can all do right now is everything we can to prevent large losses due to wildfire. Help your community become a Firewise community and do what you can around your own home. Meanwhile, we will strive to make our “insurer of last resort” really function as such.
Let’s continue to work together to educate legislators and the California Department of Insurance (CDI). If your community association has been hit by massive and un-budgeted insurance increases, we want to know! The CAI-CLAC Insurance Task Force continues to meet with the Insurance Commissioner Ricardo Lara and the CDI on issues impacting common interest developments (CIDs). Share your story and make your voice heard by visiting our Current Campaigns page.
We encourage you to stay involved and informed. Please subscribe to our email list and follow us on Facebook, Twitter and LinkedIn for real-time updates. You can find more information regarding the California FAIR Plan on their website here. If you have any questions, you can contact us at firstname.lastname@example.org.
Here are a few photos from the Investigatory Hearing into the California FAIR Plan Association:
Kimberly Lilley, CIRMS, CMCA, EBP is the Director of Business Development for Berg Insurance Agency and may be reached at email@example.com.