Bay Area community will have to use California FAIR plan as rate hike looms
By John Ramos
The entire city of Clayton shares a common ZIP code, 94517. And hundreds of its homeowners there share something else: They’ve all been kicked out of their insurance companies and sent to the California FAIR Plan.
The 215 homeowners have been “non-renewed” and sent to the FAIR Plan, which covers only fire loss and can cost thousands of dollars more than private insurance.
The FAIR plan was supposed to be just for those at the highest risk, but the mega fires have given its customers a lot of company.
“Today, with the number of policies we’re writing, we’re one of the largest writers of residential property insurance in the State of California. For us, specifically, within the Sustainable Insurance Strategy, the California FAIR Plan needs to have adequate rates,” said FAIR Plan president Victoria Roach, in testimony before the Little Hoover Commission. “Our rates are going to go up. No question about it.”
On Sept. 29, they submitted what those increased rates should be to the California Department of Insurance: an average hike of 35.8 percent for about four out of five policyholders. And for Clayton, it would be much higher.
FAIR customers in the 94517 ZIP Code area would pay an average increase of more than 69 percent. Joe Dajani is a realtor who has sold more than 500 homes in Clayton and feels for those who end up in the FAIR Plan.
“The FAIR Plan was so expensive to go to a few years back,” he said. “Now, all of a sudden, if we’re looking for a 69 percent increase, absolutely, it’s a concern. And it’s also going to be a concern for purchase. So, buyers may choose to purchase in other locations.”
Carmen Balber is Executive Director of Consumer Watchdog, a ratepayer advocacy group that frequently does battle with the Department of Insurance.
“A double-digit increase of this size would be a devastating blow for consumers who are already paying too much for too little coverage under the FAIR Plan,” she said. “Particularly in those places that are going to see the higher end of those rate increases.”
And, she said, to most people, the FAIR Plan may sound like a government-operated agency, but that’s not really the case. Its inner workings were recently studied by the Climate and Community Institute.
“In the case of California, we found that 100 percent of the representatives that have voting power in the governing committee of CA’s FAIR Plan were industry executives or company representatives,” said Institute Fellow Isabel Penaranda Currie. “Which just shows that these FAIR Plans are not fulfilling their mandate or are reflecting the fact that they’re public policy but instead are for, and by, private insurers, basically.”
“Usually the story is, ‘FAIR Plan, the State insurer of last resort’ and people hear ‘State insurer” and that’s all you get,” said Balber. “And so, no, I don’t think most people know that the FAIR Plan is run by the very people who screwed them over to begin with.”
Ironically, some Bay Area homeowners may actually see their rates lowered under the proposal. Insurance Commissioner Ricardo Lara will decide how much of an increase the FAIR Plan will actually get.
A few years ago, they asked for 48 percent and only got 15. Balber said insurers will request a higher number and then negotiate it down, so the rate hikes submitted are not a done deal. But she said the Insurance Commissioner will only see the data that the FAIR Plan chooses to release, with policies decided behind closed doors.
