State insurance commissioner adds Plumas residents’ insurance concerns to mounting state problem

Three of the four members of the Plumas County Board of Supervisors discuss issues with California Insurance Commissioner Ricardo Lara, right. Board Chairperson Kevin Goss, center, invited the commissioner to Plumas County. Also shown are Jeff Engel and Lori Simpson. Photo by Victoria Metcalf

Just weeks before the first anniversary of the deadly Nov. 8 Camp Fire, Plumas County residents learned a few answers about what could be done as they face uncertainty and possible financial disaster because insurance policies are canceled and/or rates increased sharply.

During an invitation only meeting Tuesday, Oct. 15, in the Mineral Building at the fairgrounds in Quincy, all eyes were on California Insurance Commissioner Ricardo Lara.

Homeowners, real estate representatives, local insurers, a business owner and various public officials met to discuss what relief might be in sight.

This isn’t just a Northern California situation, Lara told his audience; it’s a California issue.

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What attendees at the meeting with Lara and his staff learned is that the Department of Insurance has rules and regulations to follow. The department can’t make changes to its mission without legislative approval. And that approval comes in the form of senate and assembly bills that are passed.

What the group learned is that Lara is more than willing to listen to concerns. And he’s working with the public toward finding solutions he in turn can take to state senators and representatives.

As a former state senator, Lara knows what it takes to not only gather information, but also how to present it to the state for support.

Plumas visit

“I invited a lot of people that contacted me and people who testified before the board of supervisors,” said Supervisor Lori Simpson as she called the gathering to order.

Supervisor and Chairperson of the board, Kevin Goss said that he reached out to Ricardo Lara’s office about a month-and-a-half ago and invited him to meet with residents of Plumas County.

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“We keep hearing about issues,” Lara told his audience. “So I’m actually bringing the department to you all.”

Lara said that his office staff, along with Phil Irwin of the California FAIR Plan insurance program, are gathering stories and putting together a strategy at ground level.

Lara encouraged not only those in the audience but members of the public to call his office with their questions and concerns. “Build a relationship with us,” he said. “Please call our office and we’ll make ourselves available.”

In fact, Lara took pride in saying that unlike many information numbers the public can call, the “response time is 2 minutes.” Or even less.

Lara said since the insurance crisis hit, the calls to his office has increased 600 percent. In one county that he and his staff recently visited, 90 percent of the residents didn’t know to call his office with questions, concerns and complaints.

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The process

One of Lara’s responsibilities is to make sure the state has a strong insurance market. His office is also charged with the responsibility of approving rate increases by insurance companies.

What this means is that each major company — those that cover smaller companies — try to convince him that their proposed increase is justified. The problem with this is that there is no grace period for consumers. The ink is barely dry on one rate increase approval before the same companies are requesting the next year’s rate increases. And this needs to change, Lara said.

The issues

“California has suffered four years of devastating wildfires, including the deadliest and most expensive in our state’s history (Camp Fire: 86 died; estimated cost $82.2 billion),” according to facts from Lara’s department and a story in the Redding Record Searchlight.

Availability and affordability are the two top concerns in what’s become an insurance crisis throughout California. “You can’t have one conversation without the other,” Lara said.

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Homeowners and business owners go through the shock of receiving a notice that their insurance is being canceled. Then there’s the anxiety of trying to find an insurance company that can get them a new policy.

As a local example, the owner of Bucks Lake Lodge, Rebecca Guereque, said she lost her insurance several months ago. She can’t find another carrier and foreclosure is pending if she can’t replace the policy. Banks and lending institutions require insurance for all properties with a mortgage. Irwin invited her to contact his office.

And then there’s the sticker shock of how much that new policy will cost.

Valerie Flanigan, co-owner of Flanigan-Leavitt Insurance Agency, said she was able to get a policy for a recently purchased $1.1 million property. The price tag on that policy is $25,000 a year.

And there are similar stories throughout Plumas County — from Hamilton Branch to Twain.

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One of the major problems is that too many devastating wildfires hit California in just a few years and major insurers are seeking ways to protect themselves.

What they’ve done, according to Lara is turn to an algorithmic model. This process doesn’t inspect individual properties for risk and safety — that’s old school, Lara explained.

New school relies on group approaches from satellite imagery. Under this process it seems to make no difference if a homeowner spends time and money following all advice on making the residence fireproof and yet the neighbor doesn’t.

Satellite imagery isn’t fair, Lara said. “It doesn’t tell us what’s happening,” on the ground, he said.

CalFire, too, assigns generalized insurance numbers to areas, not individual properties.

And there’s the added impact of whether a given community has a fire department, a volunteer fire department or a paid department.

Short of the USFS there are no paid firefighters in most of Plumas County. And the USFS will pull up to a structure fire in a rural area to protect the forest, but they don’t fight structure fires.

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“I’ve been told I don’t understand,” said Sheriff Greg Hagwood at the meeting. He has asked local USFS representatives why that is a federal policy. He remains puzzled and concerned that federal firefighters are not trained and authorized to do more when it comes to structure protection.

CalFire has a small staff in Plumas County, but it has no stations. That issue was hammered home by two Feather River Canyon residents. They have lost their fire coverage because there isn’t a fire station in the entire canyon, among other reasons. Why can’t CalFire build one closer than the one near Jarbo Gap? And why can’t they respond from there? Were among the questions they asked of Lara.

Lara said meetings and serious discussions with the state and federal agencies need to take place and soon.

Another issue is getting back to the rate increases. Lara said that while rural residents are experiencing rate increases and cancellations, urban ratepayers can experience 30 percent decreases.

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In Lara’s opinion there needs to be a balancing act between rural and urban ratepayers to even out policy costs.

“Our authority is very limited as to what we can do,” Lara said. He is gathering information so he can ask the legislature to allow his department to do more to help ratepayers and yet help protect insurance companies.

One insurer, Merced Property and Casualty, was forced out of business recently, Lara said. It’s good that more haven’t experienced that calamity, Lara explained, because when that happens claims go unpaid.

“Current law does not allow the insurance commissioner to require insurers to cover specific areas,” according to information from Lara’s department.

Another concern that Lara has and one he wants to see change is the relationship insurance companies have with their policyholders. Until now insurance companies left it up to customers to determine if and when they wanted additional coverage, or if they had sufficient coverage should a disaster strike.

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Lara wants insurance companies to do the legwork in approaching policyholders about sufficient coverage. He wants to put the onus on the insurance company. “Many think they’re fully covered but it’s not sufficient,” Lara said.

There also needs to be more transparency on rates and coverage, Lara said.

Lara began addressing transparency of underwriting rules in Aug. 2018. This essentially lets policyholders know if they’re being treated fairly by their insurance providers.

Last year, Lara’s office issued a legal opinion that under the insurance reform law Proposition 103, insurers’ underwriting rules that are submitted for a rate increase application must be made available for public inspection.

Prop. 103 isn’t a new law, it was passed by voters in 1988 with the intent that it would lower insurance rates and make the public more involved in the process.

What’s being done

Lara has sent out letters requesting residential property insurance companies “to consider the unique situation and the emotional and financial distress of their policyholders who suffered a total loss in the devastating 2017 (and the 2018) wildfires.”

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Lara asked that they voluntarily agree to extend their additional expenses coverage period to no less than 36 months following a wildfire.

Lara explained to those at the Plumas County meeting that there is so much to do after someone loses a home to wildfire. And some companies weren’t even providing for added expenses following the Camp Fire. Individuals needed time and money to provide for themselves and their families while the process of considering whether to rebuild and the rebuilding took place, he explained.

Lara said that his letter to insurance companies received two responses that he was aware of. Farmers and CSAA (an AAA insurer) replied. These two major companies did respond affirmatively, he said.

But a Hamilton Branch homeowner, both a career firefighter with the USFS and a longtime AAA policyholder, said they canceled his policy.

Reading between the lines, on one hand CSAA was willing to go along with Lara’s request for more time, yet when it came to actual policies for other homeowners, they weren’t looking at individual homes.

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Back to Lara’s concern that the standard 24 months was not enough time for wildfire victims to do all that is necessary to rebuild (debris removal, planning, permits, finding a contractor and construction), progress has been made.

The passage of Senate Bill 894 and Assembly Bills 1772 and 1800, do increase the 24-month mandatory ALE (additional living expense) coverage period to a minimum of 36 months “if a policyholder (is) acting in good faith and with reasonable diligence encounters delays in the reconstruction process of their home.”

The drawback is that this legislation applies only to claims after Sept. 21, 2018.  Those suffering fire destruction in 2017 wildfires, such as in the Tubbs Fire in Santa Rosa and others, were not included.

Just two days before Lara’s Plumas County meeting, Gov. Gavin Newsom signed a bill that would require insurance companies to give at least 75 days advance notice that a policy was being canceled. Before that it was 45 days. However, the new law doesn’t help those receiving cancellation notices now. The new law doesn’t go into effect until July 1, 2020.

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This assembly bill also provides incentives for insurers to sell and renew polices in the most dangerous fire prone area through credits provided by the state’s FAIR plan.

It also increased the limit on claims payments made by California Insurance Guarantee Association to $1 million to cover insurers that go insolvent.

FAIR plan

The state’s FAIR plan and Lloyd’s of London were, until recently, two providers that homeowners could turn to for insurance. Both specialize in hard-to-cover properties. But more recently, Lloyds began rejecting Californians who sought their policies.

For many, that leaves the state’s FAIR plan.

It’s not a comprehensive plan, said Phil Irwin, public relations representative for the California FAIR Plan. Consumers must buy a wrap around plan and pay administrative fees. “We’re working on ways we can fix it,” Irwin told his Plumas County audience.

Irwin too encouraged people to contact his office with questions and concerns. That number is (213) 487-0111.

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Facts about California Department of Insurance

The California Department of Insurance (CDI) does not set insurance rates. Its responsibility is to approve or reject rate change requests by insurance companies.

For a rate increase, companies must demonstrate risk of loss.

“Current law does not allow the insurance commissioner to require insurers to cover specific areas,” according to a fact sheet presented by CDI Commissioner Ricardo Lara.

“The Department of Insurance regulates and reviews rates for all insurers licensed to sell in California,” according to Lara.

There are basically two options available to those who cannot find homeowners’ insurance. There’s the state’s FAIR Plan.

This is available to homeowners as a last option of coverage. The maximum limit written by this plan on a residential property is $1.5 million. And it requires a supplemental policy.

The FAIR plan also offers coverage to commercial properties.

The second option is known as surplus lines. “If none of the above options work for you, you may try obtaining coverage in the ‘surplus lines’ market,” according to Lara.

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Surplus lines are not backed by the California Insurance Guarantee Association. Their rates aren’t subject to review by CDI, Lara explained.

Agents or brokers are familiar with surplus lines, Lara explained, and that’s the best way for consumers to learn more about this avenue.