California Insurance Commissioner Ricardo Lara unveiled today an effort to force insurers to resume writing policies in high-fire-risk areas — part of an overall plan to address the state’s insurance crisis.
It consists of three different ways insurers can meet minimum requirements for writing policies in areas deemed “high risk” or “very high risk” by Cal Fire. Insurance Department regulators said this hybrid approach takes into account the state’s complex geography as well as the different risk levels that big and small insurers can afford to assume. Lara said this should help homeowners who have lost coverage or been forced to turn to the last-resort FAIR Plan.
Insurance companies would have these three options:
- Write 85% of their statewide market share in high-risk areas. The department explains it this way: “If a company writes 20 out of 100 homes statewide, it must write 17 out of 100 homes in a distressed area.”
- Achieve one-time 5% growth in the number of policies they write in high-risk areas.
- Expand their number of policies 5% by taking people out of the strained FAIR Plan, a pool of insurers the state requires to provide fire-insurance policies when property owners can’t obtain insurance elsewhere.
Insurers could meet these policy-writing quotas either at the county level or the ZIP code level. Specifically, they could apply the 85% or 5% option in counties regulators have identified as distressed, or in ZIP codes regulators have deemed “undermarketed” and high risk — meaning the ZIP codes have at least 15% of policies in the FAIR Plan and have a certain percentage of residents who can’t afford their premiums. Insurers who already meet the 85% threshold would be required to maintain that for at least three years after a…
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