What you should know…
If you have recently received a notice of non-renewal for your home insurance, you are not alone. It can be very destabilizing and the Oaks Neighborhood Association has received a number of emails from neighbors in the community asking what they can do.
We have been in touch with the Hillside Federation (an association that represents neighborhoods all along the Santa Monica mountains) and they have also been looking into the issue. The California Department of Insurance (CDI) gave a presentation to the Hillside Federation recently highlighting the situation and reported that natural disasters and global inflation have increased insured losses and costs. As the risks and the losses grow, insurance markets are contracting.
California laws have restricted insurance companies’ ability to raise rates to cover the increased costs of claims and to include the carriers’ costs for reinsurance (the insurance that carriers buy to cover large catastrophic losses). This may seem crazy considering the high premiums we pay but it’s the case nonetheless! The result is that these costs have made carriers unprofitable and as a result they are leaving the state, cancelling policies, and refusing to underwrite new ones. As a consequence, the California Fair Plan (which was supposed to be the insurance of last resort) is taking on an increasing share of the CA market, something it was never designed to do.
California Insurance Commissioner Lara announced at the end of last year that he was working on a plan to get the carriers to the discussion table and bring competition and markets back to CA by the end of this year. The understanding is that he’ll allow the large rate increases carriers are asking for (some up to 60+%) but also force them to write much of their business in high-risk areas like ours. It will take time.
Meanwhile, the problem is now reaching a crisis point throughout the state. Until state legislators and the Department of Insurance announce their plans, here’s what we’ve been told you can do if your insurance company decides to dump you.
Call your insurance broker and ask if there’s anything they can do to reinstate your insurance (such as additional work on your roof or garden or additional fire protection measures). The answer will probably be NO.
You should then ask your broker to apply for you to get Fair Plan insurance (“last resort insurance”). Fair Plan cannot refuse to insure you but they only insure against fire, windstorm, hail, and some other natural catastrophes -- so you also need to get a CPL (Comprehensive Liability) or a DIC (Difference in Conditions) policy for everything else. Your broker should also be able to handle this through your current insurance company. If you also want earthquake insurance, that is an additional separate policy.
All in all, you will probably be paying more money for less coverage. It’s certainly not ideal. But your only other option is to go without insurance and that is a very risky proposition.
Concurrently, we all need to continue to apply pressure to our elected officials to effect change and encourage some kind of restructuring with the insurance companies so that we can properly insure our homes at an affordable rate.
If you have specific questions or issues for the California Department of Insurance, you are encouraged to reach out to the CDI’s Rob Obedoza at rob.obedoza@insurance.ca.gov and he will try to help you or direct you to another resource. You may also call the California of Department of Insurance at 1-800-927-4357.
For additional reading about the current insurance crisis, below are links to several pieces from the Los Angeles Times. You may or may not be able to read these pieces depending on whether you have a subscription to the Times but they are informative.
