California Eases FAIR Plan Access

By Matt Brady

NU Online News Service, Oct. 14, 11:12 a.m.EDT?California homeowners will be able to self-certifythat they are unable to obtain homeowners coverage through theprivate market and gain access to the state insurer of last resortunder changes ordered by the state's Insurance Commissioner JohnGaramendi.[@@]

Prior to the new order, homeowners had to provide three writtennotices declining coverage to be accepted into the insurer of lastresort, known as the Fair Access to Insurance Requirements, or FAIRPlan.

Commissioner Garamendi said he took the action to help alleviatewhat he saw as an emerging trend of homeowners whose houses are inpotential wildfire areas being non-renewed by their insurers. "Theindustry is looking at its risk in the brush zones and is takingsteps to restrict their underwriting," he said.

That trend has yet to make a significant appearance, however,according to Mike Harris, a spokesman for the FAIR Plan.

Participation in the insurer of last resort "has not growndramatically at all" since the most recent wave of wildfires inSouthern California, Mr. Harris said, noting that the number ofhomeowners in the plan has increased by roughly one percent.

Commissioner Garamendi noted that some companies?typicallysmaller companies?have begun to non-renew in areas that have beenhit by wildfires, or have the potential to be. The commissioneralso said his department has seen some evidence these smallercompanies may be redlining areas of the state they deem to beexposed to wild fires based on satellite photos, and he offeredthose companies a warning.

"I do not and will not tolerate the blanket redlining of largeparts of California, through whatever methodology they mightuse."

Jerry Davies, president of the Sacramento-based PersonalInsurance Federation of California, said that large companies arenot participating in the non-renewal trend. "No, they are notnon-renewing at all," he said. "They are writing."

Mr. Davies also suggested a reason why smaller companies, whomhe noted he does not represent, might be non-renewing after thewildfires. Some insurers, he said, may have realized their exposurewas concentrated in certain areas and "may find that they arebecoming financially unsound," he said.

Moving forward, Mr. Garamendi said that the Department ofInsurance has begun working with the Independent Insurance agentsand Brokers of America to spread word of the eased FAIR Plan accessto agents in the state. "If they are unable to place any of theircustomers in the normal market," he said, "they will know the FAIRplan is there as a backstop."