Southern CA Homeowners’ Insurance- Availability & Pricing
There are many challenges for those who lost their homes in the recent Southern California fires and for those in close proximity to the destroyed areas. Over 1500 homes were lost in the summer/fall fires of 2007 and the estimated cost of damages is expected to exceed one billion dollars. These are significant numbers for the insurance industry to absorb.
Historically, the reaction from the insurance companies has been the tightening of underwriting, and the pricing process. Inevitably, some insurance companies are unwilling to write new policies, or decide not to renew existing policies. Fortunately, there have always been some other insurance companies willing to jump into the market place to offer coverage and fill this void.
From a political and regulatory perspective, all eyes will be on how the insurance industry responds to claims, renewals and future pricing of homeowners insurance in the stricken areas. Insurance Commissioner Steve Poizner has assured homeowners that rates will not increase and insurers will not leave the market. He stated that insurers in California are healthy and have the money to pay out claims. There are numerous press reports stating that Allstate Insurance Company stopped writing new homeowners insurance policies this summer, citing financial risks from natural disasters like wildfires and earthquakes. These reports raise concerns that other insurers may follow suit.
Commissioner Poizner will have his hands full with balancing the needs of homeowners, while the insurance companies push to recover from the payouts. Backing up the insurance companies are the reinsurance companies who typically are hard hit in a catastrophe. With increasing cost of reinsurance, insurance companies will be hard pressed not to pass this cost on to the homeowner.
As we move into the 2008 legislative session, legislators and Commissioner Poizner are expected to examine whether the legislation responding to the 2003 wildfires in San Diego and Southern California has worked as intended in simplifying the claims and settlement process, or whether additional measures need to be enacted to assist the response to the 2007 wildfires.
Commissioner Poizner is responding to the challenge of timely settlements for homeowner claims. To assist with the prompt processing of insurance claims, Poizner has issued a declaration to allow California Department of Insurance (CDI-licensed insurance adjusters) and insurance companies to use the services of non-CDI licensed adjusters, such as those from out-of-state, to assist with the processing of the multitude of insurance claims arising from the firestorms. However, the work performed by the non-CDI licensed adjusters must be under the active direction, control, charge, and/or management of a CDI-licensed insurance company or adjuster. In addition, insurance companies and insurance trade associations are coordinating with the Governor’s Office of Energy Services to establish additional claims and assistance centers in order to make it convenient for homeowners to file claims.
In conclusion, the recent wildfires have placed a strain on insurance companies providing home insurance in Southern California. Insurance Commissioner Poizner is actively working to provide prompt and fair claims services and keeping watch over how insurance companies react.