SACRAMENTO, CA, June 21, 2018 - The Assembly Insurance Committee this week.passed legislation requiring an insurer to renew homeowners' insurance policies after a declaration of emergency and to submit wildfire loss data to the Department of Insurance.
SB 824 (Lara, Dem-Bell Gardens) requires specified findings regarding the increasing risk of catastrophic wildfires due to climate change and the need for CDI to collect more data.
The bill also prohibits an insurer from canceling or refusing to renew a homeowners’ insurance policy for one year from the date of a declaration of a state of emergency, based solely on the fact the property is in a county where a state of emergency has been declared.
In addition, SB 824 provides that an insurer does not have to renew a policy if the renewal threatens the financial solvency of the insurer and the insurer reports that solvency issue to the CDI. The legislation requires insurers with written premium of $10 million or more to report to CDI every 2 years residential property experience data for policies written in California.
The author accepted amendments to prohibit the cancellation or nonrenewal of a homeowner's policy for a home within the fire perimeter or in a zip code adjacent to the fire perimeter. Amendments also strike "threaten the financial solvency of the insurer" as an exemption to the requirement to renew homeowners' policies in the fire zone and replace it with language providing an exemption to mandatory renewal if the renewal of all of an insurer's policies in the fire zone would have a material, adverse impact on the insurer's reasonable rate of return. In addition, new language specifies that the premium threshold used to determine whether an insurer must respond to the data call is increased from $10 million to $12 million in 2025 and will increase by 20% every 5 years thereafter.
The bill is supported by CDI, Consumer Attorneys of California, and the League of California.
All the major property and casualty insurer trade associations – the American Insurance Association, National Association of Mutual Insurance Companies, Pacific Association of Domestic Insurance Companies, and Personal Insurance Federation of California – oppose the bill unless it is amended. Most importantly, SB 824 significantly limits insurers from managing their risk appropriately, by reducing their ability to consider loss history to evaluate and reunderwrite homeowners policies. Insurers cannot simply ignore significant events. And where one insurer may be over-exposed to a risk or rate inadequate in a certain area, thus necessitating nonrenewals, other insurers are available to build new relationships with new policyholders.
Senator Ricardo Lara stated in the hearing that he is willing to meet with the insurance industry on resolution of applicability to residential and / or commercial property. Senator Lara said he is leaning toward limiting the bill to residential property.