ASSEMBLY INSURANCE COMMITTEE
INFORMATIONAL HEARING ON THE
CALIFORNIA FAIR PLAN. ALTHOUGH
THE FARE PLAN HAS EXISTED SINCE
THE LATE 1960 ASSOCIATION DID
NOT GARNER MUCH ATTENTION UNTIL
THE NORTHRIDGE EARTHQUAKE IN
1994 AND ONCE AGAIN FOLLOWING
THE HISTORIC WILDFIRES ALMOST
FIVE YEARS AGO. THESE
CATASTROPHES PRODUCED MAJOR
LOSSES AND HIGHLIGHTED
WEAKNESSES IN THE VOLUNTARY
INSURANCE MARKET. AFTER THE
NORTHRIDGE EARTHQUAKE. THE
LATEST LEGISLATURE RESPONDED
WITH THE CREATION OF THE
CALIFORNIA EARTHQUAKE AUTHORITY.
AND AFTER THE WILDFIRES, IT
SEEMS LIKE WE'RE STILL FEELING
THE EFFECTS. AND IMPACTS. ON ONE
END WE HAVE CONSTITUENTS UNABLE
TO SECURE PROPERTY INSURANCE.
AND ON THE OTHER. WE HAVE
INSURERS STATING THAT THE RISK
OUTWEIGHS THE REWARD. WHEN THE
VOLUNTARY MARKET ISN'T WORKING,
AS INTENDED. THE NUMBER OF FAIR
PLANNED POLICYHOLDERS GO UP AND
THE LENGTH OF TIME THESE
POLICYHOLDERS STAY IN THE FAIR
PLAN INCREASES. THE FAIR PLAN
WAS CREATED AS A TEMPORARY
SAFETY NET. NOT A LONG TERM
SOLUTION FOR OUR CONSTITUENTS. I
CONVENED THIS HEARING TODAY
BECAUSE I BELIEVE WE STILL HAVE
TOO MANY CALIFORNIANS SEEKING
REFUGE IN THE FAIR PLANT. WHY IS
THIS AND WHAT CAN WE DO? WHAT IS
WORKING WHAT ISN'T WORKING HOW
MUCH MORE CAN THE FAIR PLAN TAKE
ON? THESE ARE ALL QUESTIONS, I'D
LIKE ANSWERED TODAY. MORE
IMPORTANTLY, I WOULD LIKE TO
WALK AWAY FROM THIS HEARING WITH
INFORMATION ON WHAT MEMBERS CAN
TELL CONSTITUENTS WHEN THEY COME
TO US, ASKING FOR HELP ON WHERE
THEY CAN GET INSURANCE. AS THE
INSURER OF LAST RESORT. THE FAIR
PLAN SHOULD NOT BE THE ANSWER.
OUR CONSTITUENTS NEED PROPERTY
INSURANCE, AND INSURERS WANT TO
PROVIDE INSURANCE. SO WE HAVE TO
COME TOGETHER TO FIND A
SOLUTION. I'D LIKE TO FRAME
ISSUES AS SIMPLY AS POSSIBLE. AS
WE DIG DEEPER INTO ONE COMPONENT
OF PROPERTY INSURANCE, THE FAIR
PLAN. I'D LIKE TO WELCOME I
COULDN'T COMMITTEE MEMBERS AND
PROVIDE MY VICE CHAIR
ASSEMBLYMAN. REALLY AN
OPPORTUNITY TO MAKE A FEW
OPENING REMARKS. THANKS. THANK
YOU. WORKING CAN HEAR ME, ALL
RIGHT? GOOD AFTERNOON, EVERYONE
. THANK YOU, MADAM CHAIR.
APPRECIATE THE OPPORTUNITY TO,
UH, SPEAK AND, UM I AM NEW TO
THE COMMITTEE AND I LOOK FORWARD
TO WORKING WITH YOU ON THIS
ISSUE. I BELIEVE THIS WILL BE A
BIPARTISAN ISSUE. UM THE EFFECTS
OF THE POLICIES WERE DISCUSSING
IN THIS COMMITTEE AFFECT
CALIFORNIANS UP AND DOWN THE
STATE. WE WANT PEOPLE TO BE
INSURED, BUT WE ALSO DON'T WANT
THEM TO BE BANKRUPT IN THE
PROCESS, AND WE ALL SHARE OUR
DESIRE TO HAVE A FUNCTIONAL AND,
UM. STABLE INSURANCE MARKET AND
THAT THEY DO NOT GO AND SOLVENT
AND THAT, UM, THEY'RE NOT FORCED
OUT OF BUSINESS IN THE STATES SO
WE SHARE. I THINK A LOT OF
CONCERNS AND I HOPE THAT THIS
WILL BE PRODUCTIVE AND THE
BEGINNING OF A, UH, GOOD
RELATIONSHIP WITH THE INSURANCE
COMMISSIONER TO HOPEFULLY FIND
SOLUTIONS THAT WORK FOR ALL
CALIFORNIANS. THAT'S THAT'S HOW
I'LL BE APPROACHING THIS. I KNOW
MY COLLEAGUES WILL AS WELL AND I
APPRECIATE IT AND LOOK FORWARD
TO THE DIALOGUE THAT WE'RE ABOUT
TO ENGAGE IN. THANK YOU, MR VICE
CHAIR, PLEASE NOTE MEMBERS, WE
WILL TAKE QUESTIONS AND ANSWERS
AFTER EACH PANEL. I'D LIKE TO
BEGIN THIS HEARING WITH THE
FIRST PANEL TODAY WE HAVE THE
HONORABLE RICARDO LARA,
INSURANCE COMMISSIONER OF THE
DEPARTMENT OF INSURANCE, WHO
WILL BE HERE MOMENTARILY. AND
WITH HIM. MICHAEL MARTINEZ,
CHIEF DEPUTY COMMISSIONER AND
LEGISLATIVE DIRECTOR. SO I THINK
WE CAN START WITH MICHAEL. COME
ON UP.
APOLOGIZE AND TRYING TO SLOW
WALK IT BECAUSE THE COMMISSIONER
IS PRESENTLY IN THE BUILDING
RIGHT NOW AND HEADING UP TO AND
THERE HE IS. THERE HE IS. THANK
YOU VERY MUCH AS A STAFF MEMBER.
HMM. HOW ARE YOU? ARE WE READY?
GOD, NOW I HAVE TO FIND MY
TALKING POINTS LIKE WELL, YOU
KNOW WHAT? JUST GIVE ME THAT.
YES. I WAS TRYING TO NOT USE
PAPER. THIS IS WHAT HAPPENS. NO
ONE, OKAY? THAT'S RIGHT. I'LL
RECYCLE THEM, I PROMISE. THANK
YOU. GOOD MORNING, MADAM CHAIR
AND MR VICE CHAIR. IT'S GREAT TO
BE HERE AND THE STEAM MEMBERS OF
THE COMMITTEE. THANK YOU FOR
INVITING ME HERE TODAY. JOINED
BY MICHAEL MARTINEZ, MY CHIEF
DEPUTY COMMISSIONER AND
LEGISLATIVE DIRECTOR. AS THE
ELECTED INSURANCE COMMISSIONER
OF THE NATION'S LARGEST
INSURANCE MARKET AND FOURTH IN
THE WORLD. I HAVE TAKEN
SIGNIFICANT STEPS TO SAFEGUARD
THE AVAILABILITY OF INSURANCE
FOR CONSUMERS AND MAINTAIN A
COMPETITIVE INSURANCE MARKET
UNDER THE AUTHORITY GRANTED TO
THE INSURANCE COMMISSIONER BY
THE CALIFORNIA BORDERS IN
PASSING PROPOSITION ONE OR THREE
BACK IN 1988. OUR EXPERTS AT THE
DEPARTMENT OF INSURANCE ARE
ENTIRELY FOCUSED ON IMPROVING
THE LIVES OF CALIFORNIANS. MY
DEPARTMENT'S INVESTIGATION OF
COMPLAINTS AND OVERSIGHT OF THE
CONDUCT OF INSURANCE COMPANIES
FOLLOWING THE WILDFIRES HAS
RESULTED IN $469 MILLION
RETURNED TO CONSUMERS SINCE 2018
THESE MEMBERS ARE BENEFITS THAT
WOULD HAVE NOT HAVE BEEN
RECOVERED WITHOUT OUR ACTIONS. I
WAS ASKED BY THE COMMITTEE TO
PROVIDE AN OVERVIEW OF MY
DEPARTMENT'S ROLE IN REGULATING
THE INSURANCE INDUSTRY. AND
MOREOVER, THE CALIFORNIA FAIR
PLAN AND MY RECENT ACTIONS TO
MODERNIZE THE FAIR PLAN TO BE
MORE RESPONSIVE TO THE NEEDS OF
CALIFORNIA'S CONSUMERS AND
BUSINESSES. BUT BEFORE I GET
INTO THAT, I WANT YOU TO GIVE ME
A COUPLE OF MINUTES TO JUST LET
YOU KNOW THAT THERE'S A BIGGER
PICTURE FOR WHY WE ARE HERE
TODAY. FOR YEARS, CALIFORNIA HAS
WARNED INSURANCE COMPANIES
REPEATEDLY TO PREPARE FOR THE
IMPACT THAT CLIMATE CHANGE IS
HAVING ON RISK AND OUR ABILITY
TO AS UH, AVAILABILITY AS
INDIVIDUALS, COMMUNITIES AND THE
STATE REALLY, TO PREPARE FOR
THIS CHANGING CLIMATE. I AM
PROUD TO HAVE LAUNCHED THE
CALIFORNIA SUSTAINABLE INSURANCE
ROADMAP, WITH THE UNITED NATIONS
REPRESENTING THE FIRST TIME
CALIFORNIA AND INDEED ANY U. S
STATE HAS LAID OUT OF STRATEGIC
VISION FOR THE INSURANCE SECTOR
TO ADDRESS CLIMATE CHANGE. AS WE
COMBAT THE IMPACTS OF CLIMATE
CHANGE, THIS ROADMAP OUTLINES
THE STRATEGIES AND ACTIONS WE
WILL TAKE TO PROTECT CONSUMERS
TO CREATE A MORE SUSTAINABLE
INSURANCE MARKET WITHOUT WITHOUT
THIS COMPREHENSIVE APPROACH, THE
INSURANCE SECTOR WILL NOT
ACHIEVE SUSTAINABILITY AND OUR
COMMUNITIES WILL NOT ACHIEVE
CLIMATE RESILIENCE. I BELIEVE
HAVING A ROBUST AND COMPETITIVE
INSURANCE MARKET IS REALLY
CRITICAL TO PROTECTING
CALIFORNIANS FROM THESE
INCREASED RISK, INCLUDING OUR
CLIMATE INTENSIFIED WILDFIRES. I
BELIEVE INSURANCE COMPANIES THAT
THREATENED TO WITHDRAW FROM
WILDFIRE RISK REGIONS OF
CALIFORNIA REALLY DEFY THE
CENTRAL PURPOSE OF INSURANCE,
WHICH IS TO INCENTIVIZE HOME AND
COMMUNITY HARDENING. AH
BEHAVIORS THAT WILL ULTIMATELY
REDUCED RISK. THAT IS WHY I
PARTNERED WITH OUR GOVERNOR AND
HIS ADMINISTRATION, INCLUDING
SEVERAL OF HIS STATE EMERGENCY
PREPARED PREPAREDNESS AGENCIES
FOR THE FIRST TIME AGAIN, ENGAGE
WITH STAKEHOLDERS THOROUGHLY
OVER THREE YEARS AND USED OUR
EXTENSIVE EXPERTISE TO CREATE
THE FIRST IN THE NATION
INSURANCE PRICING REGULATION
THAT REQUIRES ALL INSURANCE
COMPANIES. TO RECOGNIZE AND
REWARD WILDFIRE MITIGATION
EFFORTS MADE BY HOMEOWNERS,
BUSINESSES AND COMMUNITIES. FOR
EXAMPLE, UNDER MY REGULATION,
INSURANCE COMPANIES ARE REQUIRED
TO REWARD POLICY. UH
POLICYHOLDERS ACTIONS LIKE
UPGRADING ROOFS AND WINDOWS,
DEFENSIBLE SPACE AND LIVING IN
FIRE WISE COMMUNITIES.
TRANSPARENCY IS ANOTHER
IMPORTANT BENEFIT OF MY
REGULATION REQUIRING INSURANCE
COMPANIES TO PROVIDE CONSUMERS
WITH THEIR PROPERTY RISK OR AND
IMPORTANTLY A RIGHT TO APPEAL
THAT SCORE. I HAVE ALSO
ADVOCATED FOR INCREASED STATE
BUDGET FUNDING TO HELP RESIDENTS
AND BUSINESSES PAY FOR
MITIGATION EFFORTS NECESSARY FOR
THEM TO RETAIN THEIR INSURANCE
COVERAGE. I BELIEVE FUNDING PRE
DISASTER MITIGATION FOR LOCAL
COMMUNITIES IS CRITICAL TO THE
FUTURE OF INSURANCE AVAILABILITY
, AND I COMMEND THE LEGISLATURE
AND THE GOVERNOR FOR THEIR
ONGOING INVESTMENTS IN GRANTS
FOR HAZARDOUS FUEL REDUCTION AND
COMMUNITY RESILIENCE AND RISK
MITIGATION. THESE PROJECTS ARE
CRITICAL IF WE ARE TO BE ABLE TO
LIVE IN, UH, UNINSURABLE WORLD,
EVERY DOLLAR OF PRE DISASTER
MITIGATION SAVES 5 TO $7 IN
AVOIDED FUTURE INSURANCE LOSSES
, THUS HELPING MAKE INSURANCE
MORE AVAILABLE AND AFFORDABLE.
IN DECEMBER, 2019. I IMPLEMENTED
A MORATORIUM LAW THAT I PROUDLY
AUTHOR WHILE I WAS IN THE
CALIFORNIA STATE SENATE THAT
PROTECTS WILDFIRE SURVIVORS BUT
PREVENTING HOMEOWNERS INSURANCE
COMPANIES FROM NON RENEWING
POLICIES FOR THOSE LIVING
ADJACENT TO OR WITHIN A DECLARED
WILDFIRE EMERGENCY FOR ONE TOTAL
YEAR, RECOGNIZING THAT IT'S
ABSOLUTELY CRITICAL TO GIVE
CONSUMERS SOME BREATHING ROOM
AFTER A WILDFIRE DISASTER. MY
ACTION HAS ALSO ALSO GIVES
INSURANCE COMPANIES A CHANCE TO
ASSESS SO NOT TO, YOU KNOW, TAKE
TO MAKE QUICK DECISIONS OR RASH
DECISIONS, ESPECIALLY DROPPING
THEIR LONG TERM LONGTIME
CUSTOMERS. TO DATE AND PROCESSES
. SINCE 2019. I HAVE PROTECTED
MORE THAN FOUR MILLION
RESIDENTIAL POLICIES FROM NON
RENEWAL BY THEIR INSURANCE
COMPANY. THIS MEASURE HAS BEEN
SUCCESSFUL IN PROTECTING
CONSUMERS. WHAT PROVIDING
STABILITY TO THE INSURANCE
MARKET? HOWEVER IT IS IMPORTANT
TO NOTE THAT THIS LAW DOES NOT
PROVIDE THE SAME ONE YEAR
MORATORIUM FOR AN ARMY NEWS TO
OUR BUSINESSES AND OUR
COMMERCIAL CORRIDORS, WHICH IS
IMPORTANT AND IMPORTANT NOTE. WE
KNOW THAT OUR BUSINESSES ARE THE
ECONOMIC BACKBONE TO OUR
COMMUNITIES ACROSS THE STATE.
AND FOR THOSE CONSUMERS THAT MAY
NOT HAVE LOST THEIR HOMES FOR
WILDFIRE. THEY MAY STILL LIVE IN
TEMPORARY HOUSING BECAUSE THEY
HAVE NO RUNNING WATER. WORKING
ELECTRICITY. AND ACCESSIBLE
INFRASTRUCTURE. THAT'S WHY WE
ALSO SPONSORED A BILL ENACTED IN
2021 TO HELP GIVE ADDITIONAL
BREATHING ROOM TO THESE
CONSUMERS AFTER A DEVASTATING
WILDFIRE AND HELP THEM GET BACK
ON THEIR FEET TO REBUILD THEIR
LIVES. THE FOCUS OF THIS HEARING
TODAY IS ON THE CALIFORNIA FAIR
PLAN, AND I WANT US TO KEEP IN
MIND THE FOLLOWING FACTS DURING
OUR DISCUSSION TODAY. CALIFORNIA
IS THE NUMBER ONE RESIDENTIAL
PROPERTY INSURANCE MARKET IN THE
NATION. WITH MORE THAN 8.7
MILLION HOMES INSURED THE VAST
MAJORITY 97% HAVE PRIVATE
INSURANCE FROM AN ADMITTED FROM
THE EMITTED MARKETPLACE WITH
FEWER THAN 3% OF POLICIES FROM
THE CALIFORNIA FAIR PLAN MORE
THAN 115 INSURANCE COMPANIES
RIGHT HOMEOWNER'S COVERAGE AND
MORE THAN 200 INSURANCE
COMPANIES, RIGHT COMMERCIAL
COVERAGE. THESE NUMBERS HAVE
REMAINED CONSISTENT SINCE I TOOK
OFFICE IN 2019. THE FAIR PLAN
AGAIN WAS ESTABLISHED BY THE
GOVERNOR AND THE STATE
LEGISLATURE MORE THAN 50 YEARS
AGO AS A CRITICAL INSURANCE
SAFETY NET IT WAS STATUTORILY
CREATED FOLLOWING THE WATTS
RIOTS IN LOS ANGELES WHEN
PROPERTY INSURERS LEFT DOWNTOWN
AND THE INNER CITY CORE DUE TO
CIVIL UNREST. CALIFORNIA IS NOT
ALONE AND GIVING CONSUMERS
ACCESS TO RESIDUAL INSURER OF
LAST RESORT MARKET, WHICH WILL
COVER COVER YOU IF NO INSURANCE
COMPANY WILL TODAY. AT LEAST 32
STATES PLUS DC, GIVE CONSUMERS
THIS OPTION. AND IT IS IMPORTANT
TO NOTE THAT THE CALIFORNIA LAW
CREATING THE FAIR PLAN SEVERAL
DECADES AGO MADE INSURANCE
COMPANIES, NOT TAXPAYERS, MADE
INSURANCE COMPANIES, NOT
TAXPAYERS RESPONSIBLE FOR
ENSURING ACCESS TO COVERAGE
UNDER THE OVERSIGHT OF THE
INSURANCE COMMISSIONER, AND I
BELIEVE THE FAIR PLAN HAS NOT
KEPT PACE WITH CALIFORNIA'S
CHANGING CONSUMER INSURANCE
NEEDS. IT MUST CONTINUE TO
PROGRESS AND PROGRESS AND
MODERNIZE TO PROTECT CONSUMERS
TODAY AND IN THE FUTURE.
THEREFORE I HAVE TAKEN SEVERAL
ACTIONS TO MODERNIZE THE FAIR
PLAN TO MEET THE CHANGING NEEDS
FOR CONSUMERS AND BUSINESSES. AS
SUCH ORDERING THE FAIR PLAN TO
INCREASE ITS COVERAGE LIMITS FOR
RESIDENTS AND BUSINESSES FOR THE
FIRST TIME IN MORE THAN TWO
DECADES, IMPLEMENTING A NEW
STATE LAW ALLOWING THE FAIR PLAN
TO COVER AGRICULTURAL
BUSINESSES. REQUIRING THE FAIR
PLAN TO OFFER GREATER COVERAGE
OPTIONS TO RESIDENTS, INCLUDING
A TRADITIONAL HOMEOWNER'S POLICY
. IN ADDITION TO ITS CURRENT
LIMITED PERIL POLICY AND LAST
YEAR, HOLDING THE DEPARTMENT'S
FIRST EVER INVESTIGATORY HEARING
ON THE FAIR PLAN WE HEARD FROM
CALIFORNIA'S ACROSS OUR STATE
WHO ARE COUNTING ON THE FAIR
PLAN. TO BE THERE IN THE LONG
RUN, INCLUDING HOMEOWNERS
ASSOCIATIONS, RECREATIONAL YOUTH
CAMPS AND OUR AGRICULTURAL
BUSINESSES. THE FAIR PLAN WILL
TELL YOU THAT IT FACES MAJOR
CHALLENGES, AND I BELIEVE IT
MUST RISE TO MEET THESE
CHALLENGES. GIVEN THAT WE ARE AT
A TIME WITH GROWING PERIL LINKED
TO CLIMATE CHANGE AND WILDFIRES
. THE FAIR PLANS MISSION STILL
RINGS TRUE TO THIS DAY. I AM
COMMITTED TO ENSURING THAT THE
FAIR PLAN MEETS ITS MISSION OF
ENSURING ACCESS AND AVAILABILITY
TO INSURANCE FOR THOSE
CALIFORNIANS WHO DO NOT KNOW WHO
NEED IT IN A TRANSPARENT WAY. MY
DEPARTMENT HAS IDENTIFIED AREAS
WHERE THE FAIR PLAN CAN AND MUST
DO BETTER AND MY INVESTIGATORY
HEARINGS LAST JULY I IDENTIFIED
THREE MAIN AREAS FOR
IMPROVEMENT. THE FAIR PLANT ONE.
THE FAIR PLAN NEEDS TO PROVIDE
INSURANCE TO HOMEOWNERS AND
BUSINESSES UNABLE TO OBTAIN
COVERAGE IN THE INSURANCE
MARKET. TO THE FAIR PLAN NEEDS
TO OFFER MORE COVERAGE AND
HIGHER POLICY LIMITS TO
CALIFORNIA HOMEOWNERS AND
BUSINESSES. THE FAIR PLAN. THIRD
THE FAIR PLAN NEEDS TO EXPAND
ITS OWN PERSONAL AND RESOURCES
TO MEET CONSUMERS NEEDS AND MAKE
STRUCTURAL AND OPERATIONAL
CHANGES TO ACHIEVE THESE GOALS.
I DO WANT TO ACKNOWLEDGE THE
CONTINUED SUPPORT THAT I
RECEIVED FROM MEMBERS OF THE
ASSEMBLY AND THE SENATE
INSURANCE COMMITTEES FOR MY WORK
IN ADDRESSING THE ISSUES OF
POLICY LIMITS THAT ARE PRESENTLY
TOO LOW FOR SOME OF OUR
HOMEOWNERS, HOMEOWNERS
ASSOCIATIONS AND OTHER
BUSINESSES. THIS IS A TOP
PRIORITY FOR ME AND MY
DEPARTMENT AND WE ARE DOING OUR
DUE DILIGENCE RIGHT NOW. SO
THANK YOU FOR STANDING WITH ME
ON THIS ISSUE. THE LEGISLATION
THAT CREATED THE FAIR PLAN MORE
THAN 50 YEARS AGO, PROVIDES
STRONG OVERSIGHT BY THE
INSURANCE COMMISSIONER. MY GOAL
CONTINUES TO BE ACTIONABLE
SOLUTIONS TO HELP CALIFORNIANS
WITH THE STATUTORY ORALLY
GRANTED AUTHORITY. I HAVE USED
THIS OVERSIGHT TO CONDUCT A
MARKET CONDUCT EXAMS FOR THE
FAIR PLANS, UNDERWRITING
STANDARDS, PRACTICES AND
PROCEDURES. INCLUDING COMPETING
, COMPLETING A MARKET CONDUCT
EXAM OF THE FAIR PLANTS HANDLING
OF SMOKE, DAMAGE CLAIMS AND
INVESTIGATION OF FAIR THE FAIR
PLAN AND NOT PROVIDING FIRE
SUPPRESSION DISCOUNTS TO
POLICYHOLDERS. THAT SHOULD HAVE
BEEN SINCE THE DEPARTMENT
APPROVED THOSE DISCOUNTS BACK IN
2011. CONDUCTED AN OPERATIONAL
AND FINANCIAL SURVEILLANCE EXAM
OF THE FAIR PLAN. STRATEGIC
DIRECTION GOVERNANCE, OVERSIGHT
, OPERATIONAL CHALLENGES AND
FINANCIAL CONTROLS IN PLACE. I
EXAMINED THE APPROPRIATE
INCREASE OF COVERAGE LIMITS FOR
PERSONAL DWELLINGS AND
COMMERCIAL PROPERTIES COVERED BY
THE FAIR PLAN AND RESPOND AGAIN
RESPONDED TO CONSUMER COMPLAINTS
REGARDING THE FAIR PLANTS DAY TO
DAY OPERATIONS, SUCH AS DELAYS
IN PAYMENT OF POLICYHOLDER
CLAIMS, RESPONSE TO CONSUMER
COMPLAINTS AND DROPPED CONSUMER
CALLS. MANY COMING FROM YOUR
VERY OWN CONSTITUENTS. MY
DEPARTMENT STAFF HAS IDENTIFIED
A SERIES OF ACTION STEPS THAT
THE FAIR PLAN SHOULD TAKE TO
MEET ITS MISSIONS AND MODERNIZED
TO MEET TODAY'S NEEDS AND PERILS
AS THE INSURER OF LAST RESORT.
THESE INCLUDE BEST PRACTICES FOR
CONSUMER SERVICES, GOVERNANCE,
CAPITAL MANAGEMENT, FINANCIAL
OVERSIGHT, UNDERWRITING AND
RATING AND CLAIMS PROCESSES,
AMONG OTHERS. HOWEVER MY
OVERSIGHT DOES NOT EXTEND INTO
OVERSEEING THE FAIR PLANTS DAY
TO DAY OPERATIONS. THEIR
RESPONSIBILITY OVER THE DAILY
OPERATIONS OF THE FAIR PLAN LIES
WITHIN ITS GOVERNING COMMITTEE
OF ADMITTED INSURANCE COMPANIES
. THE LEGISLATURE AND THE
GOVERNOR INTENDED THAT THE
INSURANCE COMMISSIONER AND THE
END OF THE INSURANCE INDUSTRY
HAVE DEFINED YET DISTINCT ROLES.
IN THE OVERSIGHT OF THE FAIR
PLAN. I LOVE TO LEADERS OF THE
FAIR PLAN CONSISTING OF THE
ADMITTED INSURANCE MARKET, TO
EXERCISE THEIR AUTHORITY AND TO
WORK WITH ME TO ADDRESS THESE
ONGOING ISSUES. AGAIN THE
HISTORY OF THE FAIR PLAN REALLY
REFLECTS AN ABILITY TO GROW IN
ORDER TO MEET THE CHANGING
DEMAND OVER CONSUMERS AND
BUSINESSES THAT DEPEND ON ITS ON
ITS LAST RESORT FOR INSURANCE.
THAT'S HOW THE FAIR PLAN HAS
EXPANDED OVER TIME FROM ITS
INITIAL OFFERING OF ONLY
PROPERTY INSURANCE POLICIES TO
HOMEOWNERS TO INCLUDE POLICIES
FOR BUSINESSES. BUSINESS OWNERS
AND NOW OUR FARMS, WINERIES AND
OTHER AGRICULTURAL BUSINESSES.
SOMETIMES THAT MOTIVATION TO
EVOLVE HAS COME FROM THE
INSURANCE COMMISSIONER, THE
LEGISLATURE AND OR THE GOVERNOR
, AND SOMETIMES THE MOTIVATIONS
COME FROM THE FAIR PLAN ITSELF.
ON A LARGER SCALE. I CONTINUE TO
WORK WITH THE INSURANCE INDUSTRY
TO HOLD THEM ACCOUNTABLE AND TO
WORK TO ENSURE OUR COMPETITIVE
VOLUNTARY INSURANCE MARKET IN
OUR STATE, AS YOU KNOW, MANY
RURAL RESIDENTS IN OUR STATES
ARE RETIREES ON FIXED INCOMES,
WORKING PEOPLE, WORKING FAMILIES
AND THOSE PUSHED OUT OF THE
URBAN CORE WHEN PEOPLE CANNOT
OBTAIN AFFORDABLE INSURANCE. AND
HAVE NO INCENTIVE TO HARDEN
THEIR HOMES AND COMMUNITIES. IT
CAN LEAD TO A DOWNWARD SPIRAL OF
INCREASING COMMUNITY WILDFIRE
RISK FEELING HOME FALLING HOME
VALUES, PROPERTY TAX ROLLS AND
LESS REVENUE FOR BASIC SERVICES
, LIKE EMERGENCY RESPONSE AND
SCHOOL FACILITIES FOR OUR
CHILDREN. I DON'T HAVE TO REPEAT
THIS. YOU ALL KNOW THIS ALREADY
? YOU'RE SEEING THIS HAPPEN IN
SOME OF YOUR COMMUNITIES? NO ONE
PERSON SHOULD BEAR THE COST. WE
ARE ALL IN THIS TOGETHER TO
STRENGTHEN THE INSURANCE MARKET
FOR ALL AND NOT JUST A SELECT
FOR YOU. WE HAVE TO MAKE
INSURANCE WE HAVE WE HAVE TO
MAKE ENSURE MAKE SURE THAT ALL
CALIFORNIANS HAVE THE SAME
ACCESS TO INSURANCE ESPECIALLY
ARE MOST VULNERABLE. UM FROM OUR
COMMUNITY, AND ALTHOUGH UNDER
PROP ONE OF THREE INSURANCE
COMPANIES ALONE DECIDE WHETHER
TO OFFER INSURANCE IN AREAS OF
HIGH WILDFIRE RISK EXPOSURE, MY
DEPARTMENT AND I CONTINUE TO
NEGOTIATE WITH INSURANCE
COMPANIES SO THAT THEY CAN
CONTINUE TO WRITE IN PARTS OF
THE STATE THAT ARE OF HIGHER
RISK FOR WILDFIRES OR CONTINUE
TO WRITE IN A PARTICULAR
BUSINESS SECTOR WHERE THERE IS
CONTINUED NEED. IN SOME, I'D
LIKE TO SAY MOTHER. NATURE IS
OUR BEST ADVOCATE WE HAVE ON
CLIMATE CHANGE AND AS ONE LOOKS
AT WILDFIRES, HEATWAVES, RECENT
ATMOSPHERIC RIVER FLOODINGS. UH
AND MORE TO COME ON THAT, BY THE
WAY, ONE CANNOT DENY THE REALITY
THAT WE ARE FACING OR NEED FOR
IMMEDIATE ACTION, FURTHER RISK
REDUCTION AND CLOSING PROTECTION
GAPS BETWEEN INSURED AND
UNINSURED LOSSES FOR VULNERABLE
INDIVIDUALS AND COMMUNITIES ARE
VITAL FOR STRENGTHENING
CALIFORNIA'S CLIMATE RESILIENCY.
TODAY AND TOMORROW. AND TO TRULY
PROTECT OUR COMMUNITIES FROM
CLIMATE CHANGE. WE HAVE TO PUT
EQUITY AT THE CENTER OF OUR
AGENDA. CLOSING THE PROTECTION
GAP IS CRITICAL. SO IT IS NOT
JUST THE WEALTHY THAT CAN
RECOVER OR REBUILD AFTER AN
UPCOMING STORM WHILE FIRE AND
HEAT WAVES BUT ACTUALLY,
EVERYONE, SO THANK YOU AGAIN FOR
THE OPPORTUNITY TO TESTIFY AND
IT'S A GREAT PLEASURE TO BE BACK
IN THE BUILDING, WHICH I HAVEN'T
BEEN IN SO MANY YEARS. THANK
YOU. INSURANCE COMMISSIONER. WE
APPRECIATE YOU BEING HERE WITH
US TODAY. UM, SO NOW WE'RE GOING
TO OPEN UP TO QUESTIONS AND
ANSWERS. ASSEMBLYMAN GRAYSON.
SER.
HOW IS THE FARE PLAN FUNDED? HOW
ARE RATES SET AND HOW OUR LIMITS
DETERMINED AND THAT WOULD
INCLUDE BOTH FOR HOMEOWNERS AND
COMMERCIAL. THANK YOU. ALL
RIGHT. THANK YOU, MR GRAYSON.
MICHAEL MARTINEZ, CHIEF DEPUTY
COMMISSIONER AND LEGISLATIVE
DIRECTOR. AND, UH, APPRECIATE
THAT QUESTION. THANK YOU. AND SO
OVERALL, THE FAIR PLAN DECADES
AGO WHEN IT WAS STATUTORY
STATUTE ORALLY CREATED BY THE
GOVERNOR AND STATE LEGISLATURE
IT AH WAS CREDITED SEVERAL
DECADES AGO. AS PART OF A
COLLECTIVE OF ALL THE ADMITTED
INSURANCE CARRIERS THAT IF THEY
PROVIDED, ONE WOULD SAY IOTA ONE
POLICY THAT THEY WOULD BE
COMPELLED UNDER EXISTING STATE
LAW TO BE A PART OF THE
CALIFORNIA FAIR PLAN, AND SO IF
AND WHEN THERE WAS A NEED FOR
FUNDING OR AN ASSESSMENT THAT
THE ADMITTED CARRIERS WOULD BE
THERE TO BACK UP THE FAIR PLAN.
THE FAIR PLAN IS NOT A
GOVERNMENTAL ENTITY. IS HE GOING
TO COLLECTION OF THE STATES
ADMITTED CARRIERS THAT ARE IN
TURN REGULATED BY THE INSURANCE
COMMISSIONER UNDER THE
PROPOSITION ONE? OH THREE PRIOR
APPROVAL SYSTEM. PASSED BY
VOTERS SEVERAL DECADES AGO, AND
SO THAT IS, AS GENERALLY
REGARDED THE FAIR PLAN. THE FAIR
PLAN IS ALSO HAS A STATUTORILY
CREATED GOVERNING COMMITTEE
CONSISTING OF MAJOR ADMITTED
CARRIERS IN WHICH THEY ALL HAVE
A VOTE THE AMERICAN CARRIERS TO
AND TURN OVERSEE THE OPERATIONS
AND GOVERNANCE OF THE FAIR PLAN
. THE RATE SETTING UNDER
PROPOSITION ONE OF THREE PASSED
BY VOTERS IN 1988 SEVERAL
DECADES AGO. IT GAVE THE
INSURANCE COMMISSIONER THE
AUTHORITY TO REGULATE RATES. AND
WHAT THAT MEANS IS THAT IN
CALIFORNIA INSURANCE COMPANIES
THAT WANT TO CHARGE A CERTAIN
RATE OR HIGHER RATE, THEY WOULD
HAVE TO COME TO THE DEPARTMENT
IN ORDER TO SEEK PRIOR APPROVAL
APPROVAL FROM THE COMMISSIONER
FROM THE DEPARTMENT OF INSURANCE
, AND WE HAVE A TEAM IN EXT TEAM
OF EXPERTS ACTUARIAL AND AN
ANALYTICAL EXPERTS THAT THAT
TAKE THE TIME TO LOOK AND A LOOK
AT THESE RATES. FILINGS UH UM
PROVIDED TO THE DEPARTMENT AND
THERE'S A TREMENDOUS AMOUNT OF
BACK AND FORTH IN THE SAND. SO
UH, AGAIN, IF AN INSURANCE
COMPANY WHETHER HOMEOWNERS
INSURANCE COMPANY OR A
COMMERCIAL INSURER WANTS TO
CHARGE AGAIN, A CERTAIN RATE
THEY WOULD HAVE TO COME TO THE
DEPARTMENT TO SAY, HEY, THIS IS
THIS IS BASED ON AN INSURANCE
COMPANIES AND THE INSURANCE
COMPANY, BY THE WAY, IS THE ONE
THAT NEEDS TO COME TO THE
DEPARTMENT AND SEEK THE RATE
THAT THEY BELIEVE THEY NEED, AND
THAT'S THE BACK AND FORTH THAT
GOES BETWEEN THE DEPARTMENT TEAM
OF EXPERTS WITH THE INSURANCE
COMPANY TO AGAIN ACTUARIAL AND
THE ANALYTICAL. IN ORDER TO
DETERMINE A RATE THAT IS NOT
EXCESSIVE, NOT DISCRIMINATORY.
AND, UM. AND SOMETHING THAT
COULD PASS MUSTER OF PROPOSITION
ONE OF THREE AND SO WE HAVE DONE
A YEOMAN'S EFFORT TO GET FILINGS
IN AND OUT AS SOON AS WE CAN.
UNDER COMMISSIONER LOTTA'S
LEADERSHIP, WE HAVE WE I MEAN,
HE AND I PERSONALLY HAVE BEEN
MEETING WITH INSURERS TO TRIAGE
A LOT OF HIGH PRIORITY FILINGS
IN ORDER TO GET THEM OUT BECAUSE
AT THE END AT THE START OF THE
DAY AND THE END OF THE DAY. THAT
IS THE COMMISSIONER'S ROLE AND
RESPONSIBILITY. IN ADDITION TO,
OF COURSE TANTAMOUNT IS CONSUMER
PROTECTION IS ALSO TO ENSURE A
ROBUST AND COMPETITIVE
MARKETPLACE. AND SO HE WE HAVE
WORKED NIGHT AND DAY TO BE ABLE
TO TURN AROUND A SERIES OF MANY
, MANY FILINGS BECAUSE UNDER
UNDER THE PRIOR APPROVAL SYSTEM
TO GET THEM BACK OUT THE DOOR
AND SO THAT'S SOMETHING THAT AS
RATE RATES ARE SET UNDER THE
COMMISSIONER OF THE DEPARTMENT,
WE CONTINUE TO BE TO BE A
DEVOTED TO THAT EFFORT.
HOPEFULLY THEN THANK YOU VERY
MUCH. THANK YOU, UH, DEPUTY
COMMISSIONER, I THINK OF SOME
WOMEN ISRAELI HAS A QUESTION.
THANK YOU, MADAM CHAIR. UH GOOD
AFTERNOON, COMMISSIONER. HOW ARE
YOU? HOW ARE YOU? THANK YOU FOR
BEING HERE. UM AND I JUST, YOU
KNOW, WANT TO START BY SAYING
IT'S I'M GLAD, REALLY GLAD
YOU'RE HERE, AND I CAN JUST TELL
YOU WE ARE GENUINELY INTERESTED
IN WORKING WITH YOU AND YOUR
TEAM TO SOLVE THIS ISSUE. WE DO
SEE THAT THERE ARE SIGNIFICANT
CHALLENGES FACING UM, THE
INSURANCE MARKET AND WE'RE HERE
TO HELP YOU WORK THAT OUT, SO MY
QUESTIONS ARE MORE AIMED AT
IDENTIFYING THE ISSUES. SO YOU
KNOW, BEFORE YOU FIX THE
PROBLEM, YOU HAVE TO ACKNOWLEDGE
IT FIRST. SO IT'S THE FIRST
STEP. AND UH, SO ONE TODAY WE'RE
FOCUSED ON THE FAIR PLAN. AND
I'M GLAD YOU ACKNOWLEDGE THAT
THE FAIR PLAN IS AN INSURANCE OF
LAST RESORT. IT'S MEANT TO BE
THE EXCEPTION AND NOT THE RULE.
AND SO IF WE HAVE A LOT OF
PEOPLE RUNNING TO THE FAIR PLAN
, WHICH WE'VE HAD LOOKS LIKE
OVER 100,000 PEOPLE THE LAST FEW
YEARS GO INTO THE FAIR PLAN. TO
ME. IT MEANS SOMETHING'S NOT
WORKING IN THE ADMITTED MARKET,
RIGHT, SO THERE'S A REASON THAT
PEOPLE ARE GOING TO THE FAIR
PLAN. THEY DON'T WANT TO BE
THERE, RIGHT. THEY'D RATHER GET
A ADMITTED PRODUCT AND ONE OF
THE ISSUES YOU IDENTIFIED AS YOU
SAID THAT AND THE INSURANCE
COMPANIES IN YOUR ASSESSMENT
FAILED TO PLAN FOR CLIMATE
CHANGE RISK, I THINK IS WHERE
YOUR STATEMENTS AND I THINK
REALLY WHAT WE'RE LEADING,
ALLUDING TO HIS WILDFIRE
COVERAGE. I MEAN, WILDFIRES HAVE
REALLY DEVASTATED THE STATE IN
THE LAST FEW YEARS. I'M LOOKING
AT A CHART HERE THEY INSURANCE
COMPANIES PAID OUT $20 BILLION
IN 2017 AND 2018. IT'S A LOT OF
MONEY IT WIPED OUT 26 YEARS OF
PROFIT FOR THOSE COMPANIES. SO
IT'S A HUGE LOSS. I THINK WE
SHOULD ACKNOWLEDGE THAT THE
INDUSTRY HAS TAKEN A HUGE HIT.
AND THEY UM, THEY THEY HAVE TO.
THEY HAVE TO BE ABLE TO BE IN
BUSINESS. SO ONE OF THE
QUESTIONS I HAD FOR YOU IF WE
ARE INTERESTED IN MODELING FOR
CLIMATE CHANGE AND PROPERLY
ASSESSING, AND CALCULATING RISK
, IS YOUR DEPARTMENT OPEN TO
ALLOWING THEM TO USE
CATASTROPHIC RISK MODELING
MOVING FORWARD, AND I'LL NOTE
THAT. IT APPEARS TO THAT. WE'RE
THE ONLY STATE THAT DOESN'T USE
THAT FORM OF MODELING AND IT
MIGHT BE THE BEST WAY TO ASSESS
. UH FUTURE RISK. THANK YOU.
REMEMBER THAT'S A THAT'S A GREAT
QUESTION. AND, UH AND I AGREE
WITH YOUR ASSESSMENT, AND THIS
IS WHY IT'S, UH, THE IMPORTANT
BALANCE ACT THAT WE'RE PLAYING
AT THE DEPARTMENT OF INSURANCE,
WHICH IS SECURING THAT WE HAVE A
STRONG INSURANCE MARKET TO PAY
OUR CLAIMS, RIGHT? AND SO WE
WANT WE WANT INSURANCE COMPANIES
TO BE SUCCESSFUL, BUT WE ALSO
WANT TO HAVE THE STRONG CONSUMER
PROTECTIONS SO THAT PEOPLE WON
NOT ONLY GET THEIR CLAIMS, BUT
THEY GET THEM AT THE EXPECTED
TIME, AND THAT THEY ALSO AREN'T
WAITING TO BE ABLE TO REBUILD.
RIGHT AND SO THESE ARE THIS IS
THE CONSTANT AND YANG THAT
HAPPENS WITHIN OUR DEPARTMENT.
THE ISSUES WITH CATASTROPHIC
FAKE MODELING, ESPECIALLY WHEN
IT COMES TO WILDFIRE. THE
TECHNOLOGY STILL IS TOO NEW TO
REALLY DICTATE HOW A FIRE IS
GOING TO HAVE A WILDFIRE IS
GOING TO REALLY REACT AS WE KNOW
IN AND THEY'RE BECOMING MUCH
MORE VORACIOUS THEIR SKIPPING
THROUGH FREEWAYS, RIVERS AND SO
IT'S. TECHNICALLY DIFFICULT
RIGHT NOW TO BE ABLE TO
UNDERSTAND WHAT KIND OF
ALGORITHMS ARE USING, ESPECIALLY
IF THOSE ALGORITHMS ARE NOT
NECESSARILY BEING SHARED WITH
THE DEPARTMENT. WE ARE ALSO
TRYING TO FIGURE OUT IF THESE
ALGORITHMS IF THESE CATASTROPHIC
MODELS ARE GONNA ALSO BE USED TO
DISCRIMINATE, WHO GETS INSURANCE
AND WHO DOESN'T AND SO PLAYING,
UH, MY DEPARTMENT AND I ARE NOT
COMFORTABLE YET REALLY ALLOWING
INSURANCE COMPANIES TO USE ONE
TO ADD ONE MORE TONE TO THE
RIGHT FILING. THAT'S GOING TO
CONTRIBUTE TO THE COST ABOUT A
VERY COSTLY PRODUCTS, ESPECIALLY
FOR FOLKS LIVING IN THE WELL
THEN URBAN INTERFACE, BUT IT'S
SOMETHING THAT WE'RE TRYING TO
TACKLE AT THE NATIONAL
ASSOCIATION OF INSURANCE
COMMISSIONERS, WHERE WE'VE
CREATED A CENTER FOR
CATASTROPHIC MODELING TO HELP
DEPARTMENTS REALLY UNDERSTAND.
WHAT IS THE TECHNOLOGY THAT'S
OUT THERE. WHAT ARE THE
ALGORITHMS THAT ARE BEING USED
AND HOW CAN THEY BE INCORPORATED
IN THE FUTURE? UH IN A RATE
FIRING PROCESS RIGHT NOW, GIVEN
THE CONSUMER PROTECTIONS THAT WE
HAVE IN THE FACT THAT INSURANCE
CONTINUES TO BE, UH, NOT SO
AFFORDABLE FOR FOLKS LIVING IN
THE WORLD. WE I'M NOT
COMFORTABLE. YOU DON'T LIKE
ALLOWING INSURANCE COMPANIES TO
USE THIS CATASTROPHIC MODELS
WHEN IT COMES TO WILDFIRES,
BECAUSE, QUITE FRANKLY, IT'S
STILL VERY NEW, AND THEY'RE VERY
UNPREDICTABLE. CHANGE IN THE
WEATHER A CHANGE IN IN WHEN CAN
SEND THE ENTIRE DIRECTION OF THE
FIRE SOMEWHERE ELSE, AND THEN
AGAIN. TRYING TO SAFEGUARD
CONSUMERS FROM LOSING THEIR
COVERAGE. BECAUSE NOW THEY'RE
ALL OF A SUDDEN IN, UH,
SUPPOSEDLY HIGH WILDFIRE RISK
AREA THAT, BY THE WAY, HAVE
NEVER HAD FIRES BEFORE OR
NOWHERE NEAR A FIRE. AND SO THIS
IS THE CONSTANT, UM, STRUGGLE
THAT WE HAVE WITH THESE MODELS.
SORRY TO GIVE YOU A LONG ANSWER.
I'M TRYING NOT TO BE WHAT I USED
TO BE WHEN I WAS UP ON YOUR MAN
, BUT I'M TRYING TO EXPLAIN TO
YOU THAT IT'S SOMETHING THAT
WE'RE LOOKING AT, BUT WE'RE NOT
PREPARED TO DO AT THIS MOMENT.
JUST GIVEN THAT IT'S SO
UNCERTAIN HOW THESE MODELS ARE
BEING USED, AND MANY OF THOSE WE
DON'T HAVE ACCESS INFORMATION TO
BYE. UM I APPRECIATE THAT. AND I
HEAR YOUR CONCERNS AND WE LOVE
TO WORK WITH YOU TO ADDRESS EACH
OF THOSE. UM I WILL NOTE. I
DON'T KNOW THAT THE WAY WE'RE
DOING IT NOW IS NECESSARILY THE
BEST WAY EITHER, BECAUSE RIGHT
NOW, BY LAW, THEY'RE REQUIRED TO
USE THE AVERAGE HISTORIC LOSSES
FOR THE LAST 20 YEARS. SO YES,
IT'S NOT ALWAYS THE BEST
INDICATOR OF THE FUTURE. AND SO
, UM, IF YOUR DEPARTMENT GOT
ACCESS TO THESE ALGORITHMS AND
COULD REVIEW THEM AND BE
CONFIDENT IN THEIR SCIENTIFIC
RELIABILITY IS THAT SOMETHING
THAT WOULD GIVE YOU MORE
CONFIDENCE TO EXPORT? I'LL JUST
NOTE THAT, UM, CALIFORNIA'S THE
ONLY STATE THAT DOESN'T USE IT
EVERY OTHER STATE DOES USE THIS
MODELING AND THE INSURANCE
INDUSTRY. I MEAN, THEY WANT TO
STAY IN BUSINESS, TOO. RIGHT SO
THEY WANT TO USE ACCURATE
MODELING. THEY DON'T WANT TO GO
BANKRUPT AND THEY INDICATE THIS
WOULD BE A BETTER WAY TO DO IT.
UM SO IF WE COULD OVERCOME THOSE
CONCERNS, IS THAT SOMETHING THAT
YOU'D BE OPEN TO CONSIDERING?
YOU KNOW, YOU'RE ABSOLUTELY
RIGHT ABOUT THE FACT THAT WE'RE
USING OLD HISTORIC DATA TO
DETERMINE WHAT THESE RATES ARE
OR WHERE THE WHERE WE ARE AT
MORE MORE MOST RISK FOR
WILDFIRE. AND WITH THE CHANGING
CLIMATE, THOSE THOSE HISTORICAL
DATA POINTS MAY NOT EVEN BE
ADEQUATE ANYMORE. AND SO THIS IS
WHY WE ARE PARTNERING WITH OTHER
STATES. JUST AS YOU SAY, YOU
KNOW WHERE THEY ONLY SAY THAT
DOESN'T ALLOW HIM WORK.
CALIFORNIA HOUSEHOLD IS THE ONLY
STATE THAT HAS SOME OF THE MOST
STRONGEST CONSUMER PROTECTIONS
AND THROUGH PROP ONE. OH, THREE
GIVES US A VERY CLEAR PROCESS,
SO WE'RE GOING TO HAVE TO LOOK
AT THE ENTIRE WAY OF HOW WE
DETERMINE WHERE THESE WELL FILE
URBAN INTERFACE AREAS ARE JUST
AS WE'RE ABOUT TO FIGURE OUT ON
FLOODING AS WELL, RIGHT. THESE
FLOOD MAPS ARE OLD, AND SO WE
NEED TO UPDATE OUR OWN DATA
BEFORE WE START AND THAT'S THE
OTHER. THE OTHER THING THAT I
FORGOT TO MENTION ABOUT. UM
THESE THESE CATASTROPHIC MODELS
IS THAT IF THEY'RE USING
ANTIQUATED DATA THAT NO LONGER
REALLY REFLECTS, UM, THE
CERTAINTY OF WHERE THESE PERILS
ARE HAPPENING. THAT ALSO PUTS
CONSUMERS I BELIEVE IN A
DISADVANTAGE BECAUSE AGAIN,
THEY'RE ALREADY PAYING REALLY
HIGH PREMIUMS FOR LIVING IN
THESE COMMUNITIES HAVE TO BE
VERY CAREFUL AND ABSOLUTELY
UNCOMMITTED. I'LL TELL YOU NOW
PUBLICLY COMMITTED TO GIVING THE
INSURANCE COMPANIES THE TOOLS
THEY NEED. BUT IT CANNOT BE
ANOTHER TACK ON THE COST FOR
CONSUMERS WHO ALREADY CANNOT
AFFORD THEIR INSURANCE COVERAGE
. THE CONCERN I HAVE
COMMISSIONERS, I UNDERSTAND THE
DESIRE TO KEEP COSTS LOW. I
MEAN, CALIFORNIA IS ALREADY
UNAFFORDABLE IN MANY ASPECTS.
IT'S A VERY EXPENSIVE STATE, SO
I GET THAT. BUT MY CONCERN IS
THAT BY NOT ALLOWING THE
ADMITTED MARKET TO, UH ADJUST
THEIR RATES TO REFLECT THE RISK.
IT'S PUSHING MORE PEOPLE INTO
THE FAIR PLAN. IT'S DRIVING UP
COSTS IN THE FAIR PLAN, AND
ULTIMATELY, THE FAIR PLAN. UM IS
NOT SOLVENT, IF, IN FACT, A HUGE
EVENT WERE TO HIT WHAT I
CONSIDER THE HIGHEST RISK, UH,
INSURANCE ARE IN THE FAIR PLAN.
I MEAN, PEOPLE THAT CAN'T GET
INSURANCE TO THE HIGH RISK POOL.
SO, UM, IF BIG EVENT WERE TO HIT
THE FAIR PLAN. IT'S GONNA HAVE
TO REQUIRE AN ASSESSMENT ON THE
INSURANCE AND THAT'S ULTIMATELY
GONNA RAISE RATES ON THE
BACKGROUND. SO EITHER WAY, YOU
KNOW IT'S GONNA GO UP. IT'S JUST
A MATTER OF DO WE DO IT IN A
GRADUAL AND MEASURED WAY, OR IS
IT GOING TO BE A BIG HIT, AND
I'LL JUST I'LL JUST END WITH
THIS MADAM CHAIR. I JUST WANT TO
GIVE YOU AN EXAMPLE. AND, UM I'M
NOT SAYING YOU KNOW, I HAVE ALL
THE SOLUTIONS TODAY. I'M JUST
ADVISED IDENTIFYING THE ISSUES
AND WE WANT TO WORK WITH YOU IN
THIS AND I REALLY BELIEVE THAT
FATE OF THE INSURANCE MARKET IS
IN YOUR HANDS, SO WE YOU'RE AN
IMPORTANT GUY. YOU'RE AN
IMPORTANT GUY, AND WE WANT TO.
WE WANT TO HELP YOU AND WORK
WITH YOU. BUT I JUST WANT TO
GIVE YOU THIS. THIS THIS EXAMPLE
THAT WAS BROUGHT TO MY OFFICE IS
ATTENTION. WHERE IN A HOU A FOR
CONDOS THEY WERE PAYING ABOUT
$40,000 A YEAR FOR FULL
COVERAGE. AND THEN THE NEXT
YEAR, THEY GOT A QUOTE FOR $2.5
MILLION. AND THEY ULTIMATELY
WENT WITH PARTIAL COVERAGE THAT
THEY AREN'T EVEN FULLY COVERED.
AND IT'S STILL COST A MILLION
DOLLARS AND THE EFFECT OF THAT
WAS EVERYONE'S H O. A ASSESSMENT
WENT UP BY $500 A MONTH. CAN YOU
IMAGINE THAT? YOU HAVE A
MORTGAGE? YOU HAVE THESE
EXPENSES AND THEN THE H O A
INCREASES YOUR MONTHLY DUES BY
500 THAT COULD DRIVE SOME
PEOPLE, UM HOMELESS, RIGHT?
ABSOLUTELY SO NOW IMAGINE IF WE
WERE ALLOWED CATASTROPHIC MODEL
THAT YET WE STILL CAN'T. WE
DON'T HAVE THE DATA FOR THAT.
NOW CAPTURES THIS. THIS
HOMEOWNER. THIS THIS COMPLEX
IT'S ONLY GOING TO INCREASE
AGAIN TO THE TO THEIR POLICIES.
SO WE'RE ON THE H O. S WOULD
LOVE TO COME BACK, AND WE ARE
CURRENTLY DOING A FULL
ASSESSMENT. I HAVE A WHOLE TEAM
SPECIALIZED IN WORKING ON HIV
POLICIES BECAUSE WE KNOW THIS IS
THE NEXT ISSUE THAT WE'RE WE
HAVE TO TACKLE, AND
UNFORTUNATELY THAT STORY REPEATS
ITSELF OVER AND OVER THROUGHOUT
THE ENTIRE STATE. UM THE OTHER
THING, TOO, WHEN WE TALK ABOUT
RATE SETTING AND TAKING ACCOUNT
, UH, FOR THE RATES IS THE FACT
THAT ALSO INSURANCE COMPANIES
WEREN'T TAKING ACCOUNT FOR THE
ACTUAL MITIGATION THAT CONSUMERS
WERE DOING. SO YOU'RE RIGHT. THE
RATE THAT THEY WERE UPSETTING
THAT WASN'T APPROPRIATE TO THE
ACTUAL RISK BECAUSE MANY OF
THESE FOLKS HAVE BROUGHT DOWN
THEIR INDIVIDUAL RISK BY DOING
THE HOMEWORK NAME AND DOING THE
DEFENSIBLE SPACE. BUT THAT
WASN'T TAKEN INTO ACCOUNT IN THE
RATE SETTING EITHER, AND SO WHY
WE NEED TO HAVE AND WE'RE MORE
THAN HAPPY TO HAVE THIS
CONVERSATION WITH YOUR STAFF
ABOUT HOW WE COULD BRING SOME
MORE TRANSPARENCY AROUND THE
RATE SETTING PROCESS, BUT ALSO,
ADDITIONALLY HAVE THEM TAKE INTO
ACCOUNT AND WHY MY REGULATION
NOW AGAIN, THE FIRST OF ITS KIND
THAT'S GONNA MANDATE INSURANCE
COMPANIES GIVE PEOPLE DISCOUNTS
FOR THE HOME HARDING THAT
THEY'VE DONE AND ACTUALLY GIVE
THEM THE FINAL RISK OR WHICH, BY
THE WAY, THEY WILL JUST GIVE YOU
A RISK OR BACK IN THE DAY. THEY
WOULDN'T TELL YOU HOW THEY GOT
IT. IF THEY CAN APPEAL IT, THEY
WOULDN'T TELL YOU WHY THEIR
NEIGHBOR GOT COVERAGE AND THEY
DID, AND THEY LIVE IN THE SAME
COMMUNITY. AND SO NOW THERE WERE
GOING TO HAVE AS THE RATES ARE
COMING BACK IN JULY. I BELIEVE
WE HAVE TO RESUBMIT. WE'RE GOING
TO BE STARTING TO GET THE DATA
OF ONE HOW THEY'RE GOING TO
START GIVING THESE DISCOUNTS.
BECAUSE WE WANT TO INCENTIVIZE
PEOPLE AT THE END OF THE DAY.
WHAT I CAN DO WITHIN MY TOOLS IS
HELP INSURANCE COMPANIES AND
COMMUNITIES BRING DOWN THE RISK
FOR EVERYBODY. YOU BRING DOWN
THE RISK. YOU KEEP INSURERS
WRITING IN THE COMMUNITY, YOU
GET MORE INSURANCE WRITING. YOU
CREATE THE MARKET MECHANISM
WHERE EVERYBODY'S COMPETING FOR
PEOPLE'S BUSINESS, AND THAT'S
WHAT WE WANT TO DO. BUT WE CAN'T
DO THAT WITHOUT BRINGING DOWN
THE RISK FOR EVERYONE. AND SO
THAT'S WHAT WE'RE WORKING ON.
BUT THIS IS A LONGER
CONVERSATION, AND I APPRECIATE
THANK YOU FOR THOSE COMMENTS,
AND ABSOLUTELY WE WANT TO LOWER
RISK, BUT WE'RE NEVER GONNA
ELIMINATE IT. SO WITH THAT I
HAVE OTHER QUESTIONS. I'LL
RESERVE BUT THANK YOU CHAIR FOR
ALLOWING ME TO ASK THOSE. YOU'RE
WELCOME. YOU'RE WELCOME. I
BELIEVE SOME WOMEN. FUNG HAS A
QUESTION. THANK YOU, MAN. HERE,
UM. IF I COULD ASK KIND OF A
BROADER 30,000 FT LEVEL QUESTION
. HOW DO HOME INSURANCE RATES
AND THE LEVEL OF COVERAGE IN
CALIFORNIA COMPARED TO OTHER
STATES? I'M SURE YOU'RE YOU'RE
TALKING WITH YOUR FELLOW
COLLEAGUES AND OTHER STATES. HOW
DOES THAT COMPARE? THAT'S A
MASSIVE QUESTION. UM I DON'T
HAVE SPECIFIC FIGURES ON OTHER
STATES. AGAIN TELL YOU BECAUSE
OF PROP ONE OF THREE IN
CALIFORNIA. WE HAVE A VERY
DELIBERATE PROCESS AND WHERE WE
REALLY PUT THE CONSUMER FIRST IN
TERMS OF MAKING SURE THAT THE
RATES ARE FAIR AND NOT
DISCRIMINATORY, AND THAT THEY'RE
ACTUALLY SOUND. AND SO WE HAVE,
UH, HOLE KADRE OF INSURANCE
EXPERTS ACTUALLY IS IN LEGAL AND
ATTORNEYS THAT LOOK AT THAT. SO
WHEN AN INSURANCE COMPANY PUTS
IN THE FILE, AS AS AS MIKE WAS
SAYING, WE GO THROUGH THE ENTIRE
PROCESS. UM I DON'T KNOW WHERE
WE AT WHERE WERE WE? I CAN
CERTAINLY GET THAT DATA FOR YOU
BECAUSE I DON'T KNOW WHAT OTHER
OTHER STATES I CAN TELL YOU. AND
SOMETHING WILL BE VERY PROUD OF
IS THAT WE HAVE SOME OF THE
STRONGEST CONSUMER PROTECTIONS
FOR CONSUMERS INSURANCE
CONSUMERS IN CALIFORNIA. UH
APPRECIATE IT. IF YOU GET ME I'M
JUST IF YOU'RE IF YOUR DEPUTY OR
SOMEONE YOUR STAFF TO PROVIDE
THAT WOULD CERTAINLY WOULD KIND
OF KIND OF FLESH OUT KIND OF A
HOLISTIC. UM, UM YOU KNOW,
PERSPECTIVE FOR US, UM I KNOW
THE FAIR PLAN IS AS AS AS
REFERENCE IS THE INSURER OF LAST
RESORT. UM YOU KNOW IF IT WAS
TREATED LIKE ANY OTHER LICENSE
INSURER, I MEAN, WHAT? WHAT
WOULD YOU CONSIDER AND WHAT
WOULD THE DEPARTMENT INSURANCE
DO? I MEAN, IN YOUR LIST OF
SOLUTIONS, I MEAN, WHAT? WHAT DO
YOU PRIORITIZE IN TERMS OF
TRYING TO GET THE FAIR PLAN TO
BE, UM YOU KNOW, A SOLVENT AND
FISCALLY SOUND? ABSOLUTELY NO,
THANK YOU. AND AGAIN, UH, IT'S
REALLY ONLY 3% OF THE MARKET
ENTIRE MARKET THAT'S IN THE FAIR
PLAN. 97% OF CALIFORNIANS HAVE
ACCESS OR CHRONIC COVERED BY AN
ADMITTED ENSURE, UM AND SO THE
NUMBER ONE THING THAT I HEARD
AFTER THE WILDFIRES AND GOING UP
AND DOWN THE SIERRA SAN DIEGO
YOU NAME IT, SAMMARTINO. WAS THE
FACT THAT THE FAIR PLAN WENT OUT
AN INSURANCE AND INSURANCE
COMPANY SENT YOU TO THE FAIR
PLAN, WHICH IS RUN BY THE
INSURANCE COMPANIES. THEY
WEREN'T BEING THEY WERE. THEY
COULDN'T GET A COMPREHENSIVE
POLICY JUST AS THEY WOULD IN THE
ADMITTED MARKET. AND SO WHAT
WOULD HAPPEN IS YOU KNOW MR LARA
IS GOING TO GET SENT TO THE FAIR
PLAN. THEY'RE ONLY GOING TO BE
VERY LIMITED IN YOUR COVERAGE.
BUT THE INSURANCE COMPANY WILL
CUT. YOU'RE GONNA HAVE TO BUY
ALL THIS WRAPAROUND INSURANCE TO
FULLY COVER YOUR PROPERTY. AND
EVERY TIME YOU GO INTO ANOTHER
CONTRACT WITH THE INSURANCE
COMPANY, GUESS WHAT? THAT'S
ANOTHER HIGH RATE HIKE ON ON THE
COST OF YOUR INSURANCE. AND SO
THE FIRST THING THAT WE SAID IS
, LET'S MAKE SURE THAT THE FAIR
PLAN IF YOU'RE GOING TO GET SENT
BY THE INSURANCE COMPANIES.
THAT'S RUN THAT RUN THE FAIR
PLAN. UM LET'S MAKE SURE THAT
THERE IS A FOUR COVERAGE OPTION
FOR YOU SO THAT YOU CAN. YOU CAN
NOT HAVE TO GET ALL THIS
WRAPAROUND INSURANCE AND GIVE
THEM SOME REPRIEVE. IF THEY'RE
GONNA YOU'RE GONNA SEND THEM. WE
ARE ALL IN AGREEMENT HERE THAT
WE DON'T WANT FOLKS TO STAY ON
THE FAIR PLAN. WE CAN ALL AGREE
ON THAT. BUT IF THERE'S NO OTHER
OPTION, THE FAIR PLAN HAS TO
MEET THE KNEES JUST AS THEY DID
BACK. DURING THE WATTS RIOTS IN
L. A SO WE NEED APPROPRIATE
COVERAGE LIMITS WE NEED, UM
REASONABLE, CONSUMER. UM, UM UH,
OH, MY GOD. I'M BLANKING. DON'T
GET OLD PROTECTIONS CONSUMER THE
COVERAGE LIMITS. WE NEED A, UH,
COMPREHENSIVE POLICY OPTION FOR
THEM AND, UM, CONSUMER RELATIONS
. I MEAN, YOU KNOW, BACK IN THE
DAY PEOPLE HAD TO. THEY COULDN'T
PAY BOTH CREDIT CARD, FOR
EXAMPLE, RIGHT? AND SO ALL THESE
THINGS AS YOU CAN IMAGINE, AND I
WISH I COULD TAKE YOU BACK IN
TIME TO JUST HEAR CONSTITUENTS.
COMPLETELY LOST THEIR HOME.
THEY'RE SENT TO THE FAIR PLAN,
AND THEY'RE JUST TRYING TO
FIGURE OUT CAN I GET SOMEBODY TO
CALL ME BACK? HOW CAN I AND SO I
KNOW TO BE FAIR ABOUT THE FAIR
PLAN. THEY WORKED ON THEY WORKED
ON THE CUSTOMER SERVICE CUSTOMER
SERVICE. UM INSIDE, BUT I WANT
THEM TO STOP FIGHTING ME IN
COURT AND WORK WITH US. TO
ACTUALLY MEET THE NEEDS OF THE
CONSUMERS AND THEN WORK ON
BRINGING DOWN THE CAST SO THAT
THEY COULD BE FREE. PEOPLE CAN
GET OUT OF THE FAIR PLANNING
GOING TO THE ADMITTED MARKET.
BUT AT THE MEANTIME, THAT'S THE
REALITY FOLKS. PEOPLE CAN'T
AFFORD THEIR COVERAGE AND
CLIMATE CHANGES AGAIN AS
DECEMBER WAS SAYING, FORCING US
AND FORCING THE FAIR PLAN TO
MODERNIZE. JUST AS WE DID WITH
WINERIES WITH FARMS THAT WE
MOVED QUICKLY TO MAKE SURE THAT
THEY WERE ARE ALSO ELIGIBLE FOR
THE FAIR PLAN BECAUSE THEY WERE
OPERATING SOMEWHAT WITHOUT
INSURANCE. WE HAVE TO FIGURE
THIS OUT ABOUT SUMMER CAMPS AND
ALL THESE THINGS THAT ARE
HAPPENING IN IN IN THE WELL THEN
URBAN AREAS, WHETHER ALSO HAVING
A HARD TIME AND SO THIS IS NOT A
YOU KNOW THE CHANGES THAT WE'RE
PROPOSING ARE CRITICAL FOR THE
FAIR PLAN, BUT WE ALSO WANT TO
STRATEGIZE WITH THEM TO FIGURE
OUT HOW WE GET PEOPLE BACK IN
THE MID MARKET, WHICH IS WHERE
WE WANT THEM WITH THE CONSUMER
PROTECTIONS WITH THE REGULATORY
AUTHORITY THAT WE HAVE TO BE
ABLE TO MAKE SURE THAT PEOPLE
ARE TAKING CARE OF AND THAT WE
HAVE A STRONG AND VIBRANT
INSURANCE MARKET WAS SOMEONE
REPRESENTS CURRENT HILLARY
COUNTIES. CERTAINLY APPRECIATE
THAT THE AG LAND AND CERTAINLY
THE, UH THE SOLUTIONS YOU PUT
FORWARD AND TRYING TO EXPAND
COVERAGE. UM I THINK THAT ARE
LARGER CONCERN. I'M SURE I WON'T
SPEAK FOR OTHER MEMBERS IS THAT
I THINK WHILE ONLY 3% NOW YOU
KNOW THAT THE TREND IS MORE AND
MORE WILL PROBABLY BE PUT ONTO
THE FAIR PLAN, OR WE'LL BE
FORCED TO ENTER, OR, UH, TAKE ON
THE FAIR PLAN BECAUSE OF THE
DYNAMICS IN THE IN IN IN THE
MARKET RIGHT NOW, AND SO I THINK
THAT FOR US, AS AS A COMMITTEE
CERTAINLY WOULD APPRECIATE YOU
CONTINUE TO WORK WITH WITH THE
INSURANCE. UM INDUSTRY THAT THE
FIX SOME OF THE REGULATIONS, I
THINK THAT THAT CURRENTLY, UM
NEED TO BE KIND OF LOOKED AT
WHETHER IT WOULD BE CATASTROPHIC
MODELING OR REINSURANCE TO
STABILIZE THE MARKET INCREASE
AVAILABILITY, WHICH I THINK IS
SOMETHING THAT I THINK WE ALL
KIND OF SHARE. UH FOR HOMEOWNERS
, H OAS BUSINESSES ALIKE
THROUGHOUT THE STATE. I WILL
JUST ASK ONE LAST QUESTION IN
TERMS OF UM, TO TRANSITION TO
SOMETHING SPECIFIC TO CAL. FIRE
HAS. HAVE YOU OR YOUR DEPARTMENT
BEEN IN CONTACT WITH CAL FIRE IN
REGARDS TO THE UPDATES. TO THE
FIRE. SEVERITY UH, ZONE MAPS. UM
AND HOW WILL THAT AFFECT?
ABSOLUTELY SURE. WE WORK WITH
CAL FIRE HAND IN GLOVE AND WITH
ALL THE EMERGENCY PREPAREDNESS
AGENCIES, ESPECIALLY ON THE
UPCOMING WILDFIRE RISK MAPS AND
THE IMPACT THAT THAT'S ACTUALLY
GOING TO HAVE POTENTIALLY ON
RATES AGAIN, BECAUSE GUESS THOSE
MAPS ARE NOW GOING TO BE LARGER.
AH AND PEOPLE ARE GONNA BE MORE
EXPOSED. SO WHAT DOES THAT MEAN
FOR CONSUMERS? WHAT DOES THAT
MEAN FOR BUSINESSES FOR A
POLICIES? SO WE ARE. WE ARE
HAVING THOSE DISCUSSIONS WITH
THEM TO MAKE SURE THAT THOSE
MAPS ARE INDEED TRULY INDICATIVE
OF WHAT IS HAPPENING AND THAT WE
DON'T DISPROPORTIONATELY IMPACT
FOLKS THAT MAY NOT HAVE TO BE
INCLUDED IN THESE WELL FROM US,
BUT WE HAVE TO UPDATE THEM
BECAUSE THAT'S THE REALITY. AND
I GUESS THAT TO FOLLOW UP JUST
REAL QUICKLY. WHAT WOULD YOU
WOULD YOU RECOMMEND IT
RECOMMENDATION OR ADVICE? SPEED
TO COMMUNITIES AFFECTED BY THESE
NEW MAPS? SHOULD THEY BE WORKING
WITH WITH YOUR OFFICE WITH CAL
FIRE WITH BOTH THEIR
PARTICULARLY THERE AND YOU CAN
SEND INFORMATION OFFLINE IF
THERE'S A PARTICULAR PERSON. AND
YOU'RE AND YOU'RE ABSOLUTELY
DEPARTMENT TELL CONSUMERS TO
CALL US IMMEDIATELY. WE HAVE AND
YOU ALL BE YOUR DISTRICT STAFF
WILL BE HEARING FROM IF YOU
HAVEN'T ALREADY FROM OUR TEAM,
I'VE DOUBLED THE AMOUNT OF
OUTREACH FOLKS EVERY WE HAVE
TEAMS DISPATCHED TO EVERY PART
OF THE STATE AND EVERY ONE OF
YOUR ASSEMBLY DISTRICTS. TO MAKE
SURE THAT WE'RE HAVING THOSE
CONVERSATIONS. A LOT OF THESE
IDEAS THAT CAME ABOUT ACTUALLY
CAME FROM US GOING OUT INTO THE
COMMUNITY LISTENING TO
HOMEOWNERS THAT HAVE LOST THEIR
HOMES AND WHO WERE YOU KNOW, AT
THEIR WIT'S END, TRYING TO
FIGURE OUT WHAT TO DO. HOW DO WE
REBUILD AND SO A LOT OF THESE
IDEAS? I WOULD SAY 100% OF THE
IDEAS CAME UP CAME ABOUT FROM
THESE MEETINGS. THANK YOU FOR
THE COMMISSIONER. THANK YOU.
OKAY WE HAVE TIME FOR ONE MORE
QUESTION FOR THIS PORTION OF THE
HEARING, ASSEMBLYWOMAN SZABO.
THANK YOU SO MUCH, UM. SORRY UM
, SO THANK YOU SO MUCH FOR BEING
HERE AND FOR THE WORK THAT
YOU'VE BEEN DOING, AND I KNOW
WE'VE BEEN IN TOUCH ABOUT IT.
IT'S A HUGE ISSUE IN MY
DISTRICT, AS YOU KNOW, AND I
KNOW THAT YOU ALL HAVE BEEN
WORKING FOR YEARS, AND SOME OF
THAT WORK IS NOW COMING TO
FRUITION. I'M VERY INTERESTED TO
SEE HOW IT ROLLS OUT AND HOW IT
WORKS. UM AND THE H O A ISSUE IS
JUST PERSONALLY A HUGE ISSUE. UM
R H O A WAS KICKED OFF OUR FIRE
INSURANCE HAD TO GO ON A
CATASTROPHIC PLAN HAD MULTIPLE
$1000 ASSESSMENTS AND OUR OAS
WERE RAISED OVER $200 A MONTH ON
TOP OF ALL OF THAT. WE HAVE LOTS
OF SENIORS ON FIXED INCOMES, AND
I DO NOT KNOW HOW THEY'RE DOING
IT. UM SO YOU KNOW THIS. I
APPRECIATE THE WORK THAT YOU'RE
DOING TO LOOK INTO NOAH'S. I
THINK THERE'S ALSO A BILL.
THAT'S LOOKING AT RAISING THE
CAP AROUND A CHOICE SO THAT THEY
CAN ACCESS THE FAIR PLAN. UM
MORE OFTEN. UM I WONDERED. YOU
KNOW, I'VE BEEN TALKING WITH A
LOT OF FOLKS ABOUT THIS ISSUE. I
KNOW THAT YOU HAVE THE NEW
REGULATION THAT'S GOING TO BE,
UM, LOOKING AT, YOU KNOW. PEOPLE
BEING ABLE TO LOWER THEIR RATES
BECAUSE THEY INCREASED,
DEFENSIBLE SPACE AND HOME
HARDENING. ANECDOTALLY I'VE
HEARD FROM SOMEONE WHO'S DONE
EVERYTHING THEY WERE ASKED TO DO
, AND THEN STILL DIDN'T GET A
LOWER RATE. AND SO I'M WONDERING
HOW IS HOW DOES THE ENFORCEMENT
HAPPENED AROUND THIS? WHAT'S
THE, UM, APPEAL PROCESS? HOW ARE
PEOPLE ABLE TO HOW CAN WE TRACK
WHETHER OR NOT THAT'S ACTUALLY
HAPPENING? THANK YOU. REMEMBER
FOR THAT QUESTION. THE WE ARE WE
HAVE THE REGULATION HASN'T GONE
INTO, UH INTO PLACE HERE BECAUSE
WE WERE ASKING FOR THE INSURANCE
COMPANIES TO RESUBMIT THE RATE
FILINGS. SO THEY'RE GOING TO
COME TO US TO EXPLAIN TO US HOW
THEY'RE DOING THAT THESE
DISCOUNTS. UM AND SO I THINK THE
DEADLINE IS JULY, APRIL, APRIL,
APRIL, APRIL, THERE YOU GO APRIL
, SO WE'RE GONNA WE'RE GONNA
THEY'RE GONNA BE SUBMITTING
THOSE, AND THEN WE'RE GONNA BE
WORKING WITH HIM WITH OUR
DEPARTMENT TO MAKE SURE THAT
THEY'RE ENFORCEABLE THAT THEY'RE
ACTUALLY WHAT IS INTENDED FROM
THE REGULATION. SO THAT PROCESS
IS JUST HAPPENING. UH THE
REGULATION WAS APPROVED IN
OCTOBER, SO WE'RE TRYING TO MOVE
AS QUICKLY AS POSSIBLE TO GET
THE INSURANCE COMPANIES TO
RESUBMIT THEIR FILES WITH THE
UPDATED DISCOUNTS. THANK YOU. OF
COURSE. ALL RIGHT. I WANT TO
THANK YOU. INSURANCE
COMMISSIONER LOTTA FOR BEING
HERE. UM, WE DID GIVE HIM THE
OPTION TO ZOOM AND HE SAID NO. I
WANT TO BE HERE IN PERSON. SO
THANK YOU FOR FLYING UP AND
THANK YOU, CHIEF DEPUTY
COMMISSIONER MARTINEZ FOR BEING
HERE. WE APPRECIATE IT. THANK
YOU. THANK YOU. OKAY OUR NEXT
PANEL IS THE CALIFORNIA FAIR
PANEL. WE HAVE VICTORIA ROACH,
PRESIDENT OF THE FAIR PLAN, AND
ARMAND FELICIANO, GENERAL
COUNSEL WITH PUBLIC POLICY
ADVOCATES.
GOOD AFTERNOON. MADAM CHAIR
MEMBERS. THE COMMITTEE ARMAND
FELICIANO REPRESENTATIVE FAIR
PLAN. I WANT TO THANK THE
COMMITTEE FOR HOLDING THIS
INFORMATIONAL HEARING. IT IS
DEFINITELY TIMELY. UH THE
PURPOSE OF THE FAIR PLANET DAYS
TO TRY AND COVER SOME OF THE
BACKGROUND. THE ROLE OF THE FAIR
PLAN. THE EVOLVING WORLD OF FAIR
PLAN. UH AND REALLY, TO CONNECT
THE DOTS, RIGHT? THIS IS NOT A
SILO ISSUE. THE COMMISSIONER WAS
RIGHT. IT'S THERE'S LARGER
PICTURES INVOLVED, AND WE HOPE
TO CONNECT US THAT FOR YOU
TODAY. UH IT DOES ITS CROSS
CUTTING ISSUES. YOU HAVE HOUSING
ISSUES INVOLVED HERE. FARMING
YOU NAME IT CANNABIS, SO I THINK
THERE'S ALL IMPLICATIONS FOR ALL
OF THAT. AND I THINK FOR TODAY,
MAN WANTS TO LAY OUT SORT OF
IMPLICATIONS. SO YOU HAVE BETTER
INFORMATION IN FRONT OF YOU AS
YOU DECIDED HOW TO HANDLE THIS
PUBLIC POLICY CHALLENGES. SO
WITH THAT FAIR PLAN IS PREPARED
TO COLLABORATE WITH ALL
STAKEHOLDERS, CONSUMERS
REGULATOR AND THE LEGISLATURE.
UM WITH THAT. I WANNA INTRODUCE
THE FAIR PLAN PRESIDENT VICTORIA
ROACH. THANK YOU, ARMAND. THANK
YOU, MADAM CHAIR MEMBERS OF THE
COMMITTEE. UM SO, AS ARMAND SAYS
, OUR GOAL HERE TODAY IS TO
PREVENT YOU WITH SOME
INFORMATION AND FACTS BECAUSE
THE ISSUES IN FRONT OF US ARE
VERY COMPLEX. AND THEY ARE ALL
RELATED, AND AS WE GO THROUGH
THEM, IT'S IMPORTANT TO KEEP IN
MIND. UM WHAT OUR ACTIONS WHAT
EFFECT OUR ACTIONS HAVE NOT ONLY
ON THE FAIR PLAN. UM AND THE
PEOPLE WHO ARE INSURED BY THE
FAIR PLAN, BUT ON CONSTITUENTS
ACROSS THE STATE WHO MAY BE
AFFECTED BY THE ACTIONS WERE
TAKING SO I'M NOT SURE WHO'S
RUNNING THE SLIDES. OH SORRY.
THANK YOU. OKAY CAN YOU GO TO
THE NEXT SLIDE, PLEASE? THANKS
SORRY. UM SO JUST TO GIVE YOU
SOME BACKGROUND INFORMATION. UM
YOU KNOW, WE'VE TALKED ABOUT THE
FAIR PLAN WAS ESTABLISHED BY THE
LEGISLATURE IN THE 19 SIXTIES
AND DIRECT RESPONSE TO THE WATTS
RIOTS. IT WAS LATER EXPANDED TO
COVER THE BRUSH FIRE PERIL. AND
THAT IN CERTAIN DESIGNATED BRUSH
AREAS AND SUBSEQUENTLY EXPANDED
TO COVER ALL HIGH RISK POLICIES
IN THE STATE. UM SO. THERE'S TWO
POINTS I KIND OF I WANT TO COVER
HERE. ONE IS THAT WE WERE
ESTABLISHED BY THE LEGISLATURE.
THE LEGISLATURE WAS VERY CLEAR
THAT WE WERE DESIGNED AS AN
INSURER OF LAST RESORT TO COVER
BASIC PROPERTY AND COVERAGE. FOR
CONSUMERS WHO COULDN'T GET
INSURANCE IN THE NORMAL MARKET.
SO TWO COMPONENTS OF THAT ONE
BASIC PROPERTY INSURANCE, BASIC
PROPERTY INSURANCE BY
DEFINITION. ONLY COVER SPECIFIC
PERILS, SUCH AS FIRE. IT IS NOT
INTENDED TO BE A COMPREHENSIVE
HOMEOWNER'S POLICY. THE
LEGISLATURE ESTABLISHES THAT
WAY, AND THE STATUTE IS VERY
CLEAR THAT THAT'S ALL WE ARE TO
OFFER. PARTIALLY BECAUSE WE
SHOULDN'T BE IN COMPETITION WITH
THE DIRECT MARKET, RIGHT? THAT'S
NOT THAT'S NOT OUR ROLE. THE
SECOND PIECE IS WE ARE ENSURE OF
LAST RESORT. SO IF YOU LOOK ON
THE RIGHT HAND OF THE SLIDE, IT
CAN SHOW YOU THE WAY WERE SET
OUT IN STATUTES. IS THAT FIRST
CONSUMER SHOULD GO TO THE
ADMITTED MARKET OR THE VOLUNTARY
MARKET. THOSE ARE PEOPLE WHO
WRITE INSURANCE AND STATE OF
CALIFORNIA, REGULATED BY THE
CALIFORNIA DEPARTMENT OF
INSURANCE AND ARE LICENSED TO DO
BUSINESS HERE. THERE'S 118 OF
THOSE INSURERS IN THE STATE. IF
THEY CAN'T FIND INSURANCE THERE
. THE NEXT LINE OF DEFENSE IS
THE SURPLUS LINES, SURPLUS LINES
ARE LESS REGULATED, THEY
CONCENTRATE AND HIGH RISK POOLS.
IF THEY CAN'T FIGHT INSURANCE
AND SURPLUS LINES, THEN THEY'RE
SUPPOSED TO COME TO THE
CALIFORNIA FAIR PLAN. SO THOSE
THAT'S HOW WE'RE SET UP IN THE
STATUTE, AND THAT'S WHAT WE TRY
TO FOLLOW. UM, NEXT SLIDE. SO
THE CALIFORNIA FAIR PLAN IS AN
ASSOCIATION AND WE ARE BACKED BY
THE VOLUNTARY MARKET. IN THE
STATE OF CALIFORNIA. WE ARE NOT
A STATE AGENCY. UM THERE IS NO
STATE OR TAX PAYER FUNDING THAT
GOES INTO THE FAIR PLAN. WE
BRING IN PREMIUMS AND FROM THOSE
PREMIUMS WERE SUPPOSED TO BE
PAYING OUR LOSSES. THAT'S KIND
OF HOW WE'RE SET UP, RIGHT? UM
WE ARE NOT FOR PROFIT, SO
THERE'S NO PROFIT MARGIN IN ANY
OF OUR RATE MAKING WE, UM WE
DON'T ADD THAT IN. WE'RE NOT FOR
PROFIT ORGANIZATION. UM ANOTHER
KEY FACTOR. WE ARE NOT SUBJECT
TO PROP 103. SO BECAUSE PROP ONE
OF THREE, UM HANDLES THE
INSURANCE INDUSTRY, AND THERE'S
ACTUALLY A SEPARATE INSURANCE
CODE THAT ESTABLISHED THE
CALIFORNIA FAIR PLAN WERE NOT
SUBJECT TO THE REGULATIONS OF
PROP 103. THE UM WE ALSO COVER
PROPERTIES REGARDLESS OF
WILDFIRE EXPOSURE, AND WE'LL
TALK A LITTLE BIT MORE ABOUT
THIS, BUT AS A ENSURING THE
VOLUNTARY MARKET, I CAN PICK AND
CHOOSE, RIGHT. I CAN SAY OF U
FIVE. I'M GOING TO TAKE TWO OF
YOU, AND THAT'S ENOUGH EXPOSURE
FOR ME IN THAT AREA. THE OTHER
THREE OF YOU NEED TO GO
SOMEWHERE ELSE, AND I CAN TAKE
TWO OVER HERE SO I CAN LIMIT MY
HIGH RISK POOL. WE TAKE
EVERYBODY RIGHT? IF EVERYBODY'S
IN A HIGH RISK AREA, WE TAKE
THEM ALL REGARDLESS OF THEIR
WILDFIRE EXPOSURE. HIGHER RISK
MEANS HIGHER RATES RIGHT BECAUSE
WE ONLY ENSURE THE HIGH RISK
POOL. UM, SO IF WE GO TO THE
NEXT SLIDE WE CAN LOOK AT KIND
OF WHERE WE ARE TODAY. SO THIS
IS THE LAST FOUR YEARS AND OUR
GROWTH RIGHT? WE HAVE MORE THAN
DOUBLED IN THE NUMBER OF
POLICIES IN THE LAST FOUR YEARS.
AND DURING THAT SAME TIME FRAME.
WE HAVE GROWN OVER FOUR TIMES IN
OUR EXPOSURE. SO IN 20, WE ENDED
2018. WE HAD ABOUT $50 BILLION
OF EXPOSURE ACROSS THE STATE. IF
WE ENDED 22 UP UPWARDS OF $200
BILLION OF EXPOSURE IN THE
STATE. SO. SMALLER PART OF THE
MARKET, BUT BIG IMPLICATIONS IN
TERMS OF WHAT OUR EXPOSURE IS
AND WHAT COULD HAPPEN. UM WE ARE
CURRENTLY UNDER CAPITALIZED.
ALRIGHT IF WE, YOU KNOW, KNOCK
THEM WOULD WRITE IF WE HAD A
LARGE FIRE TODAY. WE WOULD NOT
HAVE THE MONEY ON HAND TO PAY.
OUR LOSSES WERE JUST NOT SET UP
THAT WAY. WE DON'T KEEP A
SURPLUS LIKE A REGULAR INSURANCE
COMPANY AND WE ARE
UNDERCAPITALIZED. TO COVER THOSE
LOSSES, WHICH MEANS THAT MONEY
HAS TO COME FROM SOMEWHERE RIGHT
AWAY WERE ESTABLISHED BY THE
STATUTE IS IF WE DON'T HAVE
MONEY TO COVER OUR LOSSES. WE GO
TO THE VOLUNTARY MARKET AND WE
SEND THEM A BILL. AND BASED ON
THEIR MARKET SHARE IN THE
HOMEOWNERS MARKET, THEY PAY PART
OF THAT BILL. RIGHT? SO WE'RE
GONNA TALK A LITTLE BIT MORE
ABOUT WHAT THAT MEANS AND HOW IT
WORKS, BUT PART OF WHAT WE'RE
GOING TO TALK ABOUT TODAY. IS
THE FACT THAT WE'RE
UNDERCAPITALIZED. AND WHY ARE WE
BECAUSE WE ARE REQUIRED BY
STATUTE TO HAVE ACTUALLY SOUND
RATES. IN SIMPLE TERMS. THAT
MEANS WHEN I GO TO THE
DEPARTMENT OF INSURANCE AND SAY,
HERE'S HOW MUCH I NEED TO CHARGE
I HAVE TO INCLUDE ALL OF MY
EXPENSES. AND THEN MY PROJECTED
LOSSES. SO WE TALKED A LITTLE
BIT ABOUT CAT MODELING BEFORE
RIGHT, CAT MODELING SAYS TODAY
THE WAY I DO IT, I LOOK BACK
OVER THE LAST 20 YEARS. 20 YEARS
AGO, CLIMATE CHANGE WAS NOT WHAT
IT IS TODAY IN THE WILD FIRES
AREN'T WHAT THEY ARE TODAY. BUT
I LOOK BACK 20 YEARS AND SAY
THAT SO MANY LOSSES I HAD, SO
THAT'S WHAT WE'RE GOING TO USE
OUR RIGHT MODELING. IN OUR RATE
FILING. CAT MODELING ALLOWS ME
TO LOOK FORWARD. RIGHT AND
THERE'S A LOT OF PEOPLE USE
CATASTROPHE MODELING, AND
THERE'S A LOT OF UM, SCIENCE
BEHIND IT. NOT NOTHING IS A TRUE
SCIENCE, RIGHT? JUST LIKE
EARTHQUAKES. WE CAN'T PREDICT
THEM. BUT THERE'S A LOT OF
SCIENCE THAT GOES INTO THOSE
CATASTROPHE MODELING. THE
BIGGEST ISSUE FOR US AND YOU'LL
HEAR IT THROUGHOUT THIS
PRESENTATION IS WE DO NOT GET TO
INCLUDE ALL OF OUR EXPENSES. SO
OUR SINGLE BIGGEST EXPENSE AS AN
ORGANIZATION IS REINSURANCE. SO
WE BUY INSURANCE TO SHARE THE
RISK. RIGHT? WE GO OUT AND WE
BUY INSURANCE, SO WE PAY SO MUCH
OF THE LOSSES AND THEN WE HAVE
INSURANCE TO HELP US PAY THE
REST OF THEM. RIGHT RIGHT. THE
WE ARE AUTHORIZED BY STATUTE TO
PURCHASE REINSURANCE. WE ARE
REQUIRED BY STATUTE TO HAVE
ACTUALLY SOUND RATES, WHICH
MEANS I HAVE TO INCLUDE ALL OF
MY EXPENSES IN THAT RATE, MAKING
WE ARE NOT ALLOWED OR PERMITTED
TO INCLUDE IT IN OUR RATE
MAKING, WHICH MEANS I'M
UNDERCAPITALIZED BECAUSE I'M NOT
CHARGING THE RATES I NEED TO
CHARGE FOR THAT HIGH RISK POOL.
NEXT SLIDE. THE CONSUMER MARKET
. THAT INSURANCE MARKET
CONTINUES. CHANGE THERE'S NO
QUESTION ABOUT THAT, RIGHT AND
WE'RE MAKING A LOT OF CHANGES
INTERNALLY AND EXTERNALLY TO
ADDRESS THOSE CHANGES. SO IN THE
LAST THREE YEARS, UM WE HAVE
CHANGED. OUR COVERAGE IS TO
OFFER EXTENDED DWELLING COVERAGE
. WE'VE INCREASED OUR LIMITS AND
ON DWELLING COVERAGE. WE'VE
INCREASED OUR LIMITS AND
COMMERCIAL. WE'VE IMPLEMENTED
ONLINE CREDIT CARD PAYMENTS. UM,
WE'VE EXTENDED, UH COVERAGE TO
FARMERS AND WINERIES. UM WE
FILED WITH THE DEPARTMENT TO, UM
, OFFER THE HOME HARDENING
DISCOUNTS THEY WERE TALKING
ABOUT, UM WE'RE LOOKING TO
LAUNCH A MONTHLY PAY OPTION BY
THE END OF THE YEAR TO MAKE IT
EASIER FOR CONSUMERS TO PAY
THEIR PREMIUMS. AT THE SAME TIME
INTERNALLY WE'RE LOOKING AT, YOU
KNOW THINGS TO MODERNIZE. IN THE
LAST THREE YEARS WE'VE GONE FROM
50 EMPLOYEES TO 200 EMPLOYEES.
AND WE'RE IN THE PROCESS OF
UPGRADING AND CHANGING OUR I T
SYSTEMS TO SUPPORT THE NEEDS
THAT WE CAN, UH, MAKE OUR
CHANGES QUICKER AND GET THEM OUT
TO THE CONSUMERS. NEXT SLIDE.
UM, AS WE LOOK FORWARD. UM THERE
ARE ADDITIONAL ISSUES ON THE
TABLE ISSUES THAT ARE VERY, VERY
RELEVANT AND DON'T HAVE EASY
ANSWERS TO RIGHT ONE IS THAT C
D. I DID ORDER US TO SELL
HOMEOWNER'S POLICIES. THAT IS IN
CONFLICT. WE BELIEVE WITH THE
STATUTE THAT SAYS WE ARE ONLY TO
OFFER BASIC PROPERTY INSURANCE.
OH ALSO, IT PUTS US IN DIRECT
COMPETITION. WITH THE VOLUNTARY
MARKET, WHICH ALSO BY STATUTE,
WE ARE NOT PERMITTED TO BE.
THERE ARE TWO NEW ISSUES ON THE
TABLE AND YOU'VE SEEN YOU'VE
SEEN THE LETTERS AND THE
INFORMATION COMING OUT. ONE IS,
UM THE H O S. WE UNDERSTAND ARE
HAVING A HARD TIME FINDING
COVERAGE. NO QUESTION ABOUT THAT
RIGHT AND WE NEED TO FIND
SOLUTIONS TO THAT. THE SOLUTION
ON THE TABLE IS FOR US TO CHANGE
OUR LIMITS. AND OFFERED $20
MILLION PER STRUCTURE. SO WE'RE
CURRENTLY AT $8.4 MILLION PER
LOCATION. THIS MEANS THAT IF I
WAS TO CHANGE OUR STRUCTURE OR
LIMITS, AND WE WERE TO OFFER $20
MILLION PER STRUCTURE, AND THERE
WAS A HOMEOWNERS ASSOCIATION
WITH 5 $20 MILLION BUILDINGS, I
AM NOW GOING FROM 8.4 MILLION
$200 MILLION WORTH OF COVERAGE.
IN AN UNDERCAPITALIZED SITUATION
. FIRSTLY, SECONDLY, WE HAVE
DONE EXTENSIVE RESEARCH ON THIS
SINCE THE ISSUE WAS RAISED TO
TRY TO FIGURE OUT WHAT WOULD IT
TAKE FOR US TO BE ABLE TO OFFER
THIS COVERAGE? WE WORKED WITH
OUR REINSURANCE BROKERS. THEY'VE
GONE OUT AND TALKED TO OUR
REINSURERS. THE REINSURERS ARE
NOT COMFORTABLE. WITH THOSE
KINDS OF LIMITS. AS IT IS TODAY.
IF I WAS TO OFFER THAT KIND OF
LIMIT. IT WOULD BE CARVED OUT OF
OUR REINSURANCE. WHICH MEANS
THAT IF WE'RE ENSURING $100
MILLION OR $200 MILLION
HOMEOWNERS ASSOCIATION AND THAT
BURNS IN A FIRE. WE'RE NOT GOING
TO BE ABLE TO PAY THOSE LOSSES
WERE GOING TO BE SENDING BILLS
OUT TO THE VOLUNTARY MARKET TO
PAY THOSE LOSSES. IT'S JUST IT'S
JUST THE WAY IT WORKS BECAUSE WE
CAN'T GET REINSURANCE ON THOSE
RISKS. RIGHT THERE'S ALSO A, UM
, A BILL ON THE TABLE THAT WOULD
AMEND OUR STATUTE. TO REQUIRE US
TO COVER CANNABIS, INCLUDING
CANNABIS FARMS. RAY INSURERS
AREN'T REAL HAPPY ABOUT THAT,
EITHER. THE THOUGHT OF CANNABIS
FARMS AND WILDFIRE AREAS.
THEY'RE NOT REAL COMFORTABLE
WITH, SO THEY'VE ALSO TOLD US
WE'D HAVE TO LOOK FOR OTHER
SOLUTIONS FOR CANNABIS FARMS.
UM, SO AS WE'RE LOOKING AT
THESE, UM ISSUES AND AGAIN REAL
ISSUES. WE HAVE TO FIGURE OUT
HOW TO MAKE SURE THAT THE FAIR
PLAN DOESN'T BECOME THE INSURER
FIRST RESORT, BUT WE STAY AS THE
INSURER OF LAST RESORT AND WE
STAY IN A CAPITALIZED POSITION
THAT ALLOWS US TO PAY OUR LOSSES
SO THAT WE DON'T HAVE TO GO OUT
TO THE VOLUNTARY MARKET FOR THAT
MONEY. NEXT SLIDE. SO WHAT DOES
THAT LOOK LIKE? RIGHT, SO. WHAT
WOULD HAPPEN IS WITH THESE
CHANGES AS WE BECOME MORE AND
MORE INVOLVED TO A ENSURE OF
FIRST RESORT. A COUPLE OF THINGS
HAPPEN, RIGHT? WE GO OUT AND WE
ASSESS THE VOLUNTARY MARKET
RIGHT AND THE ASSESSMENT COULD
HAPPEN. WHETHER OR NOT WE DO
THESE THINGS. IT'S JUST HOW BIG
IT IS AND HOW QUICKLY IT
HAPPENS. UM BECAUSE WE'RE
UNDERFUNDED TODAY IF WE HAD A
MAJOR CATASTROPHE WE WOULD HAVE
TO GO OUT AND ASSESS THE MARKET.
RIGHT AND WE'RE NOT TALKING
ABOUT MILLIONS OF DOLLARS. WE'RE
TALKING ABOUT BILLIONS OF
DOLLARS WITH A B. AND EVERY
INSURER IN THE STATE OF
CALIFORNIA WHO WRITES PROPERTY
INSURANCE. 118 MEMBER COMPANIES
WOULD GET A BILL AND THEY WOULD
IN TURN HAVE TO PAY THAT MONEY.
RIGHT SO WHAT COULD HAPPEN THEN
IS YOU COULD HAVE COMPANIES. WHO
CAN'T AFFORD TO PAY THAT MONEY
OR IT, THEY BECOME INSOLVENT. OR
THEY JUST DECIDE THE RISK IS TOO
MUCH. AND THEY STOPPED OFFERING
INSURANCE. SO NOW WE'VE GOT
FEWER CHOICES FOR INSURANCE.
BECAUSE UH, COMPANIES AREN'T
WRITING AND WE'RE ALREADY SEEING
SOME OF THE EFFECTS OF THAT
RIGHT AND THE H O S. THAT'S PART
OF THE ISSUE. NOBODY'S OFFERING
THAT COVERAGE IN THE VOLUNTARY
MARKET ANYMORE, AND THEY CAN'T
GET IT. SO THEY HAVE NOWHERE
ELSE TO GO. SO WE'RE ALREADY
SEEING SOME OF THAT HAPPENED NOW
IT WOULD JUST GET WORSE AS WE
CONTINUE ON THIS PATH. UM THE
OTHER PIECE AND, UM, IS THAT
THOSE INSURANCE COMPANIES ARE
GOING TO PAY. EVENTUALLY THAT
MONEY IS GOING TO TRICKLE DOWN
TO EVERY CONSTITUENT IN THE
STATE OF CALIFORNIA, WHETHER
THEY LIVE IN THE WILD FIRE AREA
, OR THEY LIVE IN SUBURBS OR
INNER CITIES, THEY'RE GOING TO
HAVE TO HELP SUBSIDIZE THOSE
WILDFIRE RISKS THAT THE
CALIFORNIA FAIR PLAN IS. IS
COVERING BECAUSE SOMEBODY'S GOT
TO PAY THE MONEY, AND THAT'S
KIND OF. UNFORTUNATELY THE
BOTTOM LINE IS WE HAVE TO FIGURE
OUT WHO'S GOING TO PAY THAT. SO
IF WE GO TO THE NEXT SLIDE UM,
I'LL GIVE YOU A LITTLE MORE
BACKGROUND ON REINSURANCE. SO ON
THE LEFT HAND SIDE IS WHAT WE
WOULD LIKE THE TOWER TO LOOK
LIKE. IT DOESN'T EXACTLY LOOK
LIKE THIS TODAY, BUT UM, THE WAY
THIS WOULD WORK IS THE FAIR PLAN
WOULD HAVE MONEY TO COVER LOSSES
IF WE HAD ACTUALLY SOUND RATES,
WHICH WOULD INCLUDE THE NET COST
OF REINSURANCE. WE WOULD HAVE
ENOUGH MONEY THAT IF WE HAD A
MAJOR CATASTROPHE COME THROUGH.
WE WOULD BE ABLE TO PAY THE
LOSSES. UNTIL IT HITS A LEVEL.
THE REINSURANCE KICKS IN. WE
WOULD NOT GO OUT TO THE
VOLUNTARY MARKET UNTIL WE
EXHAUSTED WHAT WE HAD, AND WITH
THE REINSURANCE OFFERS, AND THEN
WE WOULD GO OUT TO THE CUP TO
THE VOLUNTARY MARKET. ON THE
RIGHT HAND SIDE. WHAT YOU'RE
SEEING IS AS WE START IF WERE
EXPANDED. TO OFFER INSURANCE
WHERE THERE IS NO REINSURANCE
AVAILABLE. THE FAIR PLAN WILL
COVER WHAT WE CAN COVER, AND
THEN THE BILLS ARE GOING TO
START GOING OUT AND ASSESSMENT
FORM TO THE VOLUNTARY MARKET
BECAUSE THERE'S NO BUFFER WITH
REINSURANCE, AND THAT IS A REAL
ISSUE FOR US. UM AS WE MOVE
FORWARD, AND WE LOOK AT KIND OF
WHAT ARE THE OPTIONS AND HOW DO
WE SOLVE THESE ISSUES IS AGAIN
WE'RE BACK TO WHO'S GOING TO PAY
RIGHT? AT SOME POINT. IT'S GOING
TO GO TO THE VOLUNTARY MARKET,
BUT WE WANT TO GO TO THEM
DIRECTLY OR DO WE WANT TO TRY TO
KEEP THESE BUFFERS BETWEEN UM,
WHEN THE LOSSES ARE HAPPENING
BETWEEN US, AND WHEN THE
VOLUNTARY MARKET HAS TO START
KICKING IN MONEY OKAY. NEXT PAGE
. UM SO I'M GONNA TURN OVER TO
ARMAND FOR A MINUTE. TALK A
LITTLE BIT ABOUT THE HISTORY OF
THE LEGISLATION HERE, SO THE
HISTORY OF THE ASSESSMENT IS
NOTHING NEW IN THE MID 19
NINETIES. THE FAIR PLAN DID
ASSESS THE MARKET $260 MILLION.
SO WITH THE LEGISLATURE DID WAS
PASS ALONG. IT MEANS A B 17 54.
I'M NOT GONNA READ THE ENTIRE
COURT. BUT IT'S PRETTY CLEAR
THEN THAT THEY DIDN'T WANT ALL
CONSUMERS PAYING FOR THE LOSSES
OF THE FAIR PLAN. SO UNDER 17
54. IT SAYS THAT THE FAIR
PLANTERS HAVE ADEQUATE RATES.
PLAN ENGLISH TALK ALL THE
EXPENSES SHOULD BE INCLUDED,
INCLUDING REINSURANCE SO THAT
THEY CAN COVER THIS HIGH RISK
POOLS. AND SO THAT'S A LOT OF
DAY. NOT IT'S NOT BEEN CHANGED,
SO I THINK IT'S A VERY IMPORTANT
CONTEXT. AS WE LOOK AT THIS
TODAY. WHAT IT LOOKS LIKE.
WHAT'S CHANGED TODAY IS WE'RE
NOT TALKING $260 MILLION ANYMORE
. VICTORIA WILL PROCEED AND KIND
OF PAINT THE PICTURE FOR YOU
WHAT THAT LOOKS LIKE, BUT IT IS
GOOD POTENTIALLY BE IN THE
BILLIONS. AND AT THAT POINT WE
HAVE TO THINK ABOUT THE FRAGILE
IN THE INSURANCE INDUSTRY
MARKET, RIGHT? I THINK WE'RE ALL
SEEING THAT TODAY. AND SO WHAT?
THE LAWS REMAINS TODAY.
CURRENTLY, THE FAILED AND DOES
NOT HAVE ADEQUATE RATES TO COVER
THIS RISK. THANKS HERMAN. OKAY
SO NEXT SLIDE, THIS SLIDE IS
REALLY TO DEPICT WHERE OUR
CONCENTRATION OF RISK IS AND
WHAT IT LOOKS LIKE, BECAUSE YOU
KNOW THESE NUMBERS ARE REALLY
BIG NUMBERS. UNFORTUNATELY, THE
AREAS ARE REALLY SMALL AREAS
THAT WE'RE TALKING ABOUT. SO
THESE ARE THE FIVE HIGHEST
CONCENTRATION OF RISK IN
NORTHERN CALIFORNIA AND THE FIVE
HIGHEST CONCENTRATION OF RISK
AND SOUTHERN CALIFORNIA NOT
NECESSARILY A 10, HIGHEST IN THE
STATE. BUT JUST TO DIVIDE THE
STATE IN HALF AND SHOW YOU WHERE
WE'RE WHAT WE'RE LOOKING AT.
EACH OF THESE AREAS REPRESENTS A
SEVEN MILE QUARTER CIRCLE. SO IF
YOU LOOK AT A QUARTER CIRCLE,
AND YOU LOOK FROM THE CENTER
POINT TO THE EDGE, IT'S SEVEN
MILES. IT'S NOT A BIG AREA,
RIGHT IF YOU LOOK AT THE AREA
AND RED, THAT'S LAKE ARROWHEAD,
THAT IS OUR HIGHEST
CONCENTRATION OF RISK. WE HAVE
ALMOST $8 BILLION OF EXPOSURE IN
LAKE ARROWHEAD. WE COVER ABOUT
50% OF THE MARKET IN LAKE
ARROWHEAD. WHICH MEANS THAT. YOU
KNOW, GOD FORBID WE HAD A
DEVASTATING FIRE IN LAKE
ARROWHEAD. FIRST OF ALL, EVEN
WITH REINSURANCE. THERE'S NO WAY
HAVE ENOUGH FREE INSURANCE TO
COVER THAT. I'D BE SENDING OUT A
BILL OF ABOUT $6 BILLION. THE
INDUSTRY WHO IS ALREADY AT THAT
POINT TRYING TO MANAGE THEIR OWN
LOSSES. IN THAT AREA, AND NOW
THEY'RE GOING TO GET AN
ASSESSMENT FROM THE FAIR PLAN
FOR $6 BILLION YOU KNOW,
HOPEFULLY A VERY UNLIKELY
SCENARIO. BUT WHEN YOU LOOK AT
THE REAL FIRE PARADISE RIGHT.
AND YOU TAKE THAT SAME FIRE
SHAPE THAT HAPPENED IN PARADISE
AND I MOVE IT ABOUT 40 MILES
SOUTH BETWEEN UB CITY AND GRASS
VALLEY. WITH MY CONCENTRATION OF
RISK IN THAT AREA TODAY, IF THAT
SAME FIRE BURNED EXACTLY THE
SAME SHAPE IN THAT AREA. I'M AN
OVER $5 BILLION OF EXPOSURE. WE
WE CAN'T BUY THAT MUCH
REINSURANCE. WE DON'T HAVE THAT
KIND OF CAPITAL ON HAND. IT
FALLS TO THE MARKET AND THAT'S
THE WAY WE'RE STRUCTURED. RIGHT
WE JUST NEED TO KNOW AS WE
CONTINUE TO TRY TO EXPAND WHAT
WE'RE COVERING, IT BECOMES MORE
AND MORE OF AN ISSUE. SO IF WE
LOOK AT THE NEXT SLIDE WE TRY TO
KIND OF PUT THE BIG PICTURE ON
HERE, RIGHT? SO WE SEE THE FAIR
PLAN AS THE BRIDGE RIGHT WERE
THE SUPPORT FOR THE PEOPLE WHO
CAN'T GET INSURANCE IN THE
PRIVATE MARKET, AND YOU CAN SEE
WE ARE AT $220 BILLION OF
EXPOSURE RIGHT NOW ACROSS THE
STATE. THE BRIDGE IS ALREADY
CRACKING. RIGHT WE DON'T HAVE
ACTUARIALLY SOUND RATES. WE
CAN'T GET THE NET COST OF
REINSURANCE. IN OUR RATE MAKING
APPROVED EVEN THOUGH IT'S IN
STATUTE THAT WE CAN PURCHASE IT,
AND THE STATUTE REQUIRES TO BE
ACTUALLY SOUND. WE CAN'T INCLUDE
THAT EXPENSE. OUR RATES ARE
ALREADY WE'RE ALREADY UNDER
CAPITALIZED THERE. WE HAVE
REINSURANCE. UM WHICH IS GOOD
FOR US AND GOOD FOR THE INDUSTRY
. BUT WE'RE LOOKING AT EXPANDING
BEYOND WHERE WE CAN GET
REINSURANCE. WHAT HAPPENS IS AS
WE START LAYERING ON TOP OF
THIS, AND THE BRIDGE COLLAPSES
FALLS ON THE VOLUNTARY MARKET.
AND IT WENT, IT FALLS ON THE
VOLUNTARY MARKET. IT GETS PUSHED
OUT. AGAIN ALL THE CONSTITUENTS
IN THE STATE, NOT THE ONES WHO
ARE LIVING IN THE WILD FIRE
AREAS, BUT THE ONES WHO ARE
LIVING IN THE SUBURBS AND IN THE
INNER CITIES, THOSE WHO ARE
PAYING ALREADY FOR THEIR
INSURANCE. NOW THEY'RE GOING TO
SUBSIDIZE THESE PEOPLE WHO CAN'T
GET INSURANCE AND WHO ARE COMING
TO THE CALIFORNIA FAIR PLAN. WE
RECOGNIZE THERE'S NOT AN EASY
ANSWER, AND THIS IS A BALANCING
ACT RIGHT AGAIN. OUR GOAL HERE
TODAY IS KIND OF LAY OUT THE
FACTS. AND GIVE YOU THE
INFORMATION YOU NEED AS YOU GO
BACK AND TALK ABOUT WHAT ARE THE
SOLUTIONS AND WHERE DO WE NEED
TO FIND THEM? IF WE GO TO THE
LAST SLIDE UM, THESE ARE YOU
KNOW, SOME LOW HANGING FRUIT IF
YOU WILL, RIGHT? NO EASY
ANSWERS, BUT IF WE HAD ACTUARIAL
, ACTUALLY SOUND RATES, WHICH
WOULD INCLUDE THE NET COST OF
REINSURANCE. WE WOULDN'T BE ABLE
TO PAY OUR LOSSES. AT A LEVEL
THAT WOULD MITIGATE SOME OF THAT
RISK TO THE VOLUNTARY MARKET OF
US GOING TO THE VOLUNTARY MARKET
AND ASKING THEM FOR MONEY. RIGHT
IF WE COULD INCLUDE UH,
CATASTROPHE MODELING AND OUR
RATE MAKING PROCESS. OUR RATES
AGAIN WOULD BE MORE ADEQUATE AND
MORE REASONABLE FOR THE HIGH
RISK MARKET THAT WE ENSURE, AND
LASTLY, IF WE CAN LOOK FOR WAYS
TO STREAMLINE THE RATE FILING
PROCESS, IT IS COMPLEX. THERE'S
A LOT TO IT, BUT WHEN YOU'RE
LOOKING AT 18 24 MONTHS TO GET A
RATE FILING THROUGH YOU CAN'T
OPERATE LIKE THAT WHEN YOU'RE
UNDERCAPITALIZED ALREADY. SO
THAT'S SOME OF THE KIND OF THE
LOW HANGING FRUIT WE CAN, UH,
LOOK AT, BUT ACROSS THE BOARD. I
WANT YOU TO. I WANT EVERYBODY
UNDERSTAND. WE ARE COMMITTED TO
OUR MISSION, RIGHT? WE'RE
COMMITTED TO BEING THE INSURER
OF LAST RESORT. WE'RE COMMITTED
TO PROVIDING INSURANCE FOR
PEOPLE WHO CANNOT GET INSURANCE
IN THE NORMAL MARKET. UM WE ARE
COMMITTED TO WORKING WITH THE CD
WITH THE LEGISLATORS WITH THE
STAKEHOLDERS TO FIND SOLUTIONS
TO THESE PROBLEMS. WE JUST WANT
TO DO IT IN A FISCALLY
RESPONSIBLE WAY FOR THE
CALIFORNIA FAIR PLAN FOR OUR
POLICYHOLDERS. AND POLICYHOLDERS
OUTSIDE OF THE CALIFORNIA FAIR
PLANT. THANK YOU. THANK YOU,
MISS ROACH. I'M GOING TO OPEN IT
UP FOR QUESTIONS, AND I'M GOING
TO GO FIRST. UM COULD YOU TALK A
LITTLE BIT ABOUT HOW YOU
DETERMINE THE AMOUNT YOU REQUEST
WHEN YOU'RE REQUESTING RATES? A
RATE INCREASE. YEAH. SO, UM I AM
NOT AN ACTUARY, OKAY? WHAT WE DO
IS WE LOOK AT ALL OF OUR LOSSES.
WE LOOK AT ALL OF OUR EXPOSURE
THAT WE HAVE. AND WE LOOK AT ALL
OF OUR EXPENSES AND WE MODEL IT
BASICALLY. COME UP WITH WHAT IS
THE APPROPRIATE RATING? AND WE
DO IT REALLY THE SAME WAY ANY
INSURANCE COMPANY THAT THERE'S
NOTHING DIFFERENT ABOUT THE WAY
WE LOOK AT OUR RACE? THAN THE
WAY THE OTHER THE PRIVATE MARKET
DOES OTHER THAN LIKE I SAID, WE
HAVE DIFFERENT STATUTES IN TERMS
OF WHAT WE SHOULD BE ABLE TO.
OKAY AND THEN, UM, WHEN WAS THE
LAST TIME YOU FILED FOR RATE
INCREASED FROM CD? AYE. AND HOW
HOW MUCH DID YOU REQUEST AND WAS
IT APPROVED? APPROVED RATE
FILING. I BELIEVE. I GUESS TO ME
. I DON'T KNOW EXACTLY. THAT'S
FINE. I BELIEVE WE REQUESTED
35.6, AND WE GOT 50. AND THEN WE
HAVE A CURRENT GREAT VIOLIN.
OKAY? OKAY. DO WE HAVE ANY OTHER
QUESTIONS? THANK YOU. UM,
ASSEMBLYMAN WOULD THANK YOU, UM
. THE $220 BILLION IS AN
EXPOSURE IN 2023. THAT'S THAT'S
YOUR EXPOSURE. THAT'S NOT THE
VALUE OF THE PROPERTY. PEOPLE
OAN. OR IS IT? IT'S HOW MUCH
PEOPLE ARE INSURED FOR ALL OF
OUR LIMITS FOR THOSE 272,000
POLICIES. IF YOU TAKE THE LIMIT
OF INSURANCE AT ALL OF THEM,
HAVEN'T ADD THEM TOGETHER. IT'S
$220 BILLION THAT WE KNOW THAT
THOSE THESE ARE NOT
COMPREHENSIVE POLICIES, SO THE
VALUE OF THE PROPERTY DO YOU SEE
WHERE I'M GOING? DO WE HAVE ANY
ESTIMATE OF WHAT THAT'S LIKE? WE
DON'T. THAT'S AN EXCELLENT
QUESTION, SO WE DO KNOW A LOT OF
HER CUSTOMERS. ANECDOTALLY GO
OUT AND BUY DIFFERENCES IN
CONDITIONS POLICIES IN THE
MARKET. WE DON'T HAVE. WE DON'T
TRACK THAT SO WE DON'T KNOW HOW
MUCH UM HOW MUCH THEY BOUGHT.
ALL WE KNOW IS THAT THE BROKER
WHO'S SELLING US SELLING THEM
THE POLICY WITH THE CONSUMER HAS
DECIDED THIS IS HOW MUCH THEY
NEED FOR DWELLING COVERAGE.
THAT'S WHAT WE KNOW. HMM HOW
MUCH? UM HOW MUCH OF YOUR
EXPOSURE IS WILDFIRE RELATED UM,
ABOUT 55. AND THE OTHER IS LIKE
FLOOD, OR IT'S JUST AN URBAN
AREAS SO IT COULD BE HOMES THAT
HAVE A LOT OF LOSSES THAT ARE
COMING TO US. IT COULD BE HOMES
THAT ARE NOT IN, UH, THE
INSURABLE CONDITION THAT OTHER
COMPANIES WILL TAKE. UM WE DON'T
REALLY KNOW WHY THEY COME TO US
. WE JUST KNOW THAT THEY'RE NOT
IN DESIGNATED WILDFIRE AREAS AND
THEN KIND OF MY FINAL COUPLE
QUESTIONS HERE. HOW MUCH PERCENT
BY PERCENTAGE GROWTH. HAVE YOU
SEEN IN A NUMBER OF POLICIES
YOU'VE ISSUED IN THE LAST TWO
YEARS ABOUT 12% YEAR OVER YEAR?
THAT'S A PRETTY PRETTY BIG JUMP.
IT IS A PRETTY BIG JUMP. AND YOU
KNOW, I'M SEEING MORE AND MORE.
I'D LOVE TO KNOW WHAT I'D LOVE
TO SEE IS A MAP OR OR SOME DATA
POINTS. I'D LIKE TO KNOW. HOW
MUCH OF YOU KNOW WHERE THE WHERE
THE OVERALL POLICIES ARE ROUGHLY
PERCENTAGE WISE THROUGHOUT THE
STATE. SO SO I REPRESENT THE
NORTH COAST. WE HAD PRETTY
CATASTROPHIC LOSSES AND THE
TUBBS FIRE. UM WE'VE ALSO HAD
OTHER FIRE LOSSES AS WELL. AND
WE HAVE MORE AND MORE PEOPLE WHO
NEVER HAD LOSS. HOW ARE CANCELED
ENTIRE ZIP CODES BEING CANCELED?
UM, ACTUALLY, I HEARD RECENTLY
OF SOMEONE IN AN AREA WHERE CAL
FIRE HAD ACTUALLY GONE IN AND
DONE ONE OF THOSE PROJECTS THAT
WE TALKED ABOUT YEARS AGO, GONE
IN AND DONE THAT WORK, SO IT'S
MITIGATED FROM A RISK
PERSPECTIVE BY CAL FIRE. YET
COMPANIES STILL CANCELED
POLICIES IN THOSE AREAS. UM ALSO
HEARING THE PEOPLE HAVE TO
CANCEL POLICIES ARE ALSO HAVING
THINGS LIKE BOAT POLICIES
CANCELED, WHICH YOU DON'T COVER
BOATS IN THE BACKGROUND. WE DO
NOT USE IF YOU HAVE A FAIR PLAN
AND YOU PUT LOST ROAD. YOU NOW
LOST YOUR BOAT COVERAGE BECAUSE
YOU LIVE IN A HIGH FIRE AREA.
SO, UM, I AND IT IS IRONIC, I
GUESS IF YOU'RE IF YOU'RE HAVING
LOSSES, YOU'RE GOING TO HAVE TO
GO BACK TO THE ADMITTED CARRIERS
TO HELP MAKE UP FOR THAT. BUT
THE CANCELATIONS ARE
CONTRIBUTING TO THE PROBLEM, SO
I'M GUESSING IT'S A SMALLER
PRICE FOR THEM TO PAY. THEN IT
IS TO PAY THE LOSSES WHICH MAY
OR THAN IT IS TO ACTUALLY ENSURE
THESE PROPERTIES OR THEY'D BE
ENSURING THAT. YES EXCEPT FOR
THEIR MANAGING THEIR EXPOSURES
AND THOSE AREAS. SO UM, MAYBE ON
AN INDIVIDUAL CASE BASIS UNTIL
WE GET TO AN ASSESSMENT, SO I
GUESS IT'S A IT'S YOU KNOW, 61
HALF A DOZEN THE OTHER RIGHT? I
DON'T THINK THERE MANAGING THAT
EXPOSURE, BASED ON YOU KNOW? NOT
WRITING HERE, KNOWING THAT THEY
COULD GET A HUGE ASSESSMENT
HERE. IT'S A IT'S AN ISSUE FOR
THEM, RIGHT. I'M THEY NEED THE
RATES IN ORDER TO OFFER YOU
KNOW, THAT'S WHAT THEY SAY
ANYWAY AROUND, YOU KNOW, NOT
GOING TO SPEAK FOR THE PRIVATE
MARKET, BUT UM THEY THEY NEED.
WE NEED TO DO SOMETHING TO HAVE
THEM WRITING IN THOSE AREAS.
THINK THAT'S WHAT YOU'RE SAYING
TO RIGHT? YEAH YEAH, I'M WITH
YOU. I'M WITH YOU THERE SO UM,
WE CAN GET YOU MORE INFORMATION
, MORE DETAILED INFORMATION BY
COUNTY OR VISIT CODE IN TERMS OF
WHAT WE'RE WRITING IN DIFFERENT
AREAS. WE CAN GET THAT FOR YOU.
THAT WOULD BE HELPFUL. I GUESS I
GUESS PEOPLE MIGHT AND THE
REASON I PEOPLE ARE BEING PUSHED
INTO THE FAIR PLAN BECAUSE
THEY'RE LOSING COVERAGE LOSING
COVERAGE WHERE THEY'VE DONE HOME
, HARDENING WELFARE MITIGATION
AND LIKE I SAID, IN AN AREA
WHERE CAL FIRE HAS GONE IN AND
DONE WORK. AND THAT'S CAMPFIRES
WORK SAYING THIS IS, YOU KNOW,
WE'VE DONE WILDFIRE MITIGATION
HERE. AND YET THERE'S STILL
LOSING COVERAGE. SO THAT'S A
THAT'S A HUGELY CONCERNED IF
IT'S GOOD ENOUGH FOR CAL FIRE,
WHY ISN'T IT GOOD ENOUGH FOR THE
CARRIERS? THANK YOU, MADAM
CHAIR. OKAY, SOME OF THEM,
DAVIES.
THIS IN MY ORANGE COUNTY AREA.
SO I'M.
DEAL. CAN'T AFFORD TO LEAVE. AND
I APPRECIATE IT. I TALKED TO
THERE, YOU KNOW. AND THE OTHER
ONE WHO SAID IF WE'RE GETTING
12% IS THERE A POINT WHERE THE
MORE YOU HAVE AND IF WE DON'T
HAVE FIRES AND THINGS LIKE THAT?
SO JUST LIKE EVERY INSURANCE
COMPANY IF YOU DON'T HAVE LOST
AS YOU'RE DOING YOUR DOING YOUR
RATE MAKING. THERE'S ALWAYS A
RIGHT. SO I CAN TELL YOU RIGHT
NOW WE HAVE A SPENDING FILINGS.
DEPENDING WITH THEM. SO IT'S THE
LONGER THE LONGER WE GO WITHOUT
WILDFIRE. GOT A COUPLE OF GOOD
YEARS, WHICH HAS HELPED THEM AND
WITHOUT THOSE KINDS OF LOSSES
GET UP ABSOLUTELY GETS MIXED IN
WITH YOUR RAPING RACE, MAKING
AND YOU'RE RIGHT START COMING
DOWN. ANOTHER. YEAH OKAY. THANK
YOU. ANOTHER POINT. I WANT YOU
SAID THAT 55% OF THESE POLICIES
ARE FROM FAR FIRES. FOREST FIRES
COMPARED TO THE OTHER 45 IS MORE
URBAN AND SO FORTH. WHAT ABOUT
SPLITTING UP THESE TWO? BECAUSE
THEY ARE COMPLETELY DIFFERENT.
YOU MAY HAVE SOME ISSUES WITH
HOMES IN URBAN AREAS. BUT YOU'RE
NOT SAYING THAT YOU CAN'T LIVE
HERE IF YOU DON'T HAVE THIS
INSURANCE. ESPECIALLY WITH A
CHOICE. YOU DON'T HAVE A CHOICE.
THAT IS A LAW. YOU HAVE TO HAVE
INSURANCE WHEN YOU HAVE THE
RIGHT TO LEGAL DOCUMENT, BUT
THOSE THAT DON'T SO IT'S JUST
I'M JUST TRYING TO FIGURE IF
THERE'S A WAY OF SEPARATING, YOU
KNOW, OBVIOUSLY, WE NEED A LOT
OF SOLUTIONS. UH YOU KNOW THE
DISCONNECT, OBVIOUSLY, WITH CAL
FIRE IN WHAT THEY'RE DOING AND
SAYING, YOU KNOW, THIS IS THIS
WILL HELP. THIS WILL WORK JUST
LIKE WHEN WE GIVE REBATES IN
THAT. BUT THEN INSURANCE
COMPANIES SAYING NO, THAT
DOESN'T WORK. TO ME, I THINK
RIGHT NOW THAT'S PROBABLY WHEN
THE NUMBER ONE THINGS WE NEED TO
DO IS GET EVERYONE IN THE ROOM
AND SAY, LISTEN, WE'VE GOT TO
FIX THIS. PEOPLE CANNOT BE
LEAVING. WE DON'T EVEN HAVE
HOUSING FOR PEOPLE COMING IN.
WE'RE GOING TO TAKE PEOPLE OUT
OF THEIR HOUSING AND THEN TRY TO
FIND SOMETHING. SO I THINK
THERE'S A LOT OF DIFFERENT
THINGS. BUT I DON'T THINK THAT
THE COMMUNICATION IS GOING WHERE
IT NEEDS TO BE SO THANKS SITTING
IN A ROOM WITH THE, UH, WITH
INSURERS SITTING IN THE ROOM
WITH CAL FIRE IN FIGURING OUT
WHAT WHAT'S GOING TO WORK. SO
WHEN WE SAY HERE'S YOUR
CHECKLIST, IF YOU DO THIS, YOU
CAN BE INSURED, AND THEY KNOW
THAT IT'S WORTH IT. AND PERHAPS
THE STATE CAN GO AHEAD AND
ACTUALLY HELP WITH FUNDING ON
SOMETHING LIKE THIS, JUST LIKE
WHEN THEY DO GIVE REBATES WHEN
IT COMES TO WATER, YOU KNOW,
DOING ARTIFICIAL GROUP. YOU
KNOW, LAWNS, THINGS LIKE THIS.
WE HAVE MONEY, AND WE JUST NEED
TO MAKE SURE INSTEAD OF MAYBE
CONSTANTLY STARTING NEW PROGRAMS
THAT WE TAKE SOME OF THE MONEY
WE HAVE HERE IN THE BUDGET. AND
PUT IT ONTO THINGS THAT OUR
EXISTING PROBLEMS WITH STARTING
PUTTING MONEY TO PLACES THAT
DON'T HAVE PROBLEMS IS NOW SO
THANK YOU SO MUCH. THANK YOU.
AND THE ONLY THING I'LL COMMENT
ON THAT IS THAT JUST TO MAKE
SURE I WAS CLEAR WHEN I TALKED
ABOUT THE RATE MAKING RIGHT, UM
IT'S RAPE MAKING FOR THE ENTIRE
STATE. BUT IT IS THE WHAT THE
PEOPLE THAT ARE IN THE WILDFIRE
AREAS ARE BEING CHARGED A
DIFFERENT RATE THAN THE PEOPLE
THAT ARE. THEY'RE TRYING BEING
CHARGED A HIGHER RATE THAN THE
PEOPLE WHO ARE IN THE URBAN
AREAS JUST BECAUSE OF THE RISK
RIGHT? AND WE'RE TRYING TO MOVE
TOWARDS MORE SOPHISTICATED
RATING THAT ALLOWS US TO RATE
THAT WILDFIRE RISK AND GIVE SOME
OF THE AT LEAST SOME OF THE
DISCOUNTS OR THE CONSIDERATIONS
FOR SOME OF THE IMPROVEMENTS.
THE PROPERTY OWNERS HAVE MADE
BOTH IN COMMERCIAL AND
IMPERSONAL LINES. SO YEAH, THANK
YOU. SOME OF THEM PROFOUND. DO
YOU HAVE A QUESTION? UH I JUST
WANTED TO KIND OF DRILL DOWN ON
WHAT YOU TOLD ASSEMBLYMEMBER'S
WHAT SO YOU, UH, IN TERMS OF
PROJECTED GROWTH OVER TIME. YOU
SAID THAT IN YOUR EYES, YOU SAW
A 12% INCREASE IN POLICIES LAST
YEAR. IT WAS THAT SPECIFICALLY
IN THE WILDFIRE SPACE IS 55% OF
YOUR OF YOUR PROPERTIES IS HIS
WILDFIRE OR IS THAT 12% OVERALL
12% OVERALL? UM, WE'RE SEEING,
UM. WE'RE SEEING MORE GROWTH IN
THE WHAT WE CONSIDER MODERATE
WILDFIRE AREAS, SO WE HAVE A
PRETTY HEAVY REPRESENTATION
ALREADY IN THE HIGHEST WELFARE.
I MEAN, THERE'S ONLY SO MANY
HOMES AND WELL AND BUSINESSES IN
THAT AREA, SO WE HAVE A PRETTY
HIGH CONCENTRATION IN THOSE
AREAS ALREADY, BUT WE'RE SEEING
IT IN THE MODERATE THE MODERATE
AND LOW WILDFIRE. HARRY IS NOT
NECESSARY. WE'RE SEEING SOME IN
THE URBAN AREAS TO, UM, BUT
WE'RE SEEING MORE IN THAT
MODERATE AREA. AND DO YOU EXPECT
THAT 12% TREND TO CONTINUE OR TO
GROW? I MEAN, IT'S NOT LINEAR,
BUT BUT I MEAN, ASSUMING
PLANNING WISE, WE HAVE PLANNED
FOR ANOTHER 12% THIS YEAR, JUST
BECAUSE IN THE LAST TWO YEARS
THAT'S WHAT WE'VE SEEN. AND WE,
UM DON'T SEE ANY CHANGES IN THE
MARKET RIGHT NOW. THAT WOULD
TELL US THAT'S GOING TO BE
DIFFERENT THIS YEAR THAN IT HAS
IN THE LAST TWO YEARS. SO WE'VE
PLANNED FOR ABOUT 11 TO 12%
GROWTH THIS YEAR. ALSO OKAY, AND
MY LAST QUESTION, UH, YOU KIND
OF ALLUDED, IT ALLUDED TO IT
WHEN SPEAKING WITH US. NUMBER
WOULD BUT WINK. CAL FIRE DOESN'T
MITIGATION. IF THERE'S AN H O A
THAT IT'S MITIGATING IF THERE'S
NEW CONSTRUCTION, THAT, OF
COURSE, IS PROBABLY GOING TO
HAVE HIGHER HARDENING. IT'S HARD
AND MORE FOR WILDFIRES VERSUS AN
OLDER STRUCTURE. SHOULD THOSE
THINGS BE FACTORED IN TO THE
CALCULATION OF THINGS? I KNOW
RIGHT NOW IT ISN'T BUT SHOULD IT
BE? IT ABSOLUTELY SHOULD BE. SO
WE DO OFFER A DISCOUNT FOR FIRE
WISE. IF THEY HAVE BEEN
DESIGNATED AS A FIRE WISE
COMMUNITY COMMUNITY, THEY GET A
DISCOUNT FOR THAT WE HAVE
ALREADY FILED WITH THE
DEPARTMENT FOR HOME HARDENING
DISCOUNTS, SO WE'RE WAITING FOR
APPROVAL ON THAT, HOPEFULLY AND
WE CAN GET THAT OUT TO THE
CONSUMER SO WE CAN OFFER FOR
HOME HARDENING. AND PART OF OUR
FILING THAT'S IN IN PLAY RIGHT
NOW OFFERS US A NEW WILDFIRE
RISK SCORING, WHICH ACTUALLY
TAKES INTO ACCOUNT PROPERTY
SPECIFIC CHARACTERISTICS. SO IF
I'M YOU KNOW, HAVE BUILDINGS
THAT ARE ALREADY WITH FIRE
RESISTANT MATERIALS. IF I'VE
DONE SOME OF THE, UM DEFENSIBLE
SPACE ISSUES THAT'S ALREADY
GOING TO BE FACTORED INTO THEIR
RATES SO ABSOLUTELY EVERYTHING
THAT CONSUMER CAN DO TO MITIGATE
THAT RISK, WE BELIEVE SHOULD BE
A FACTOR AS WE GO INTO THE RATE
MAKING PROCESS. THANK YOU VERY
MUCH. OKAY UM, THANK YOU, MRS
ROACH. AND UH, MR FELICIANO, WE
APPRECIATE YOU BEING HERE TODAY
. WE'RE GOING TO MOVE ON TO THE
NEXT PANEL. WHICH IS CLINTON
BROWN WITH THE SURPLUS LINE
ASSOCIATION OF CALIFORNIA, WHO
WILL DISCUSS THE SURPLUS LINES
MARKET AND HOW IT WORKS WITH THE
FAIR PLAN.
GOOD AFTERNOON. MY NAME IS
CLINTON BROWN AND I AM THE VICE
PRESIDENT OF PUBLIC AFFAIRS FOR
THE SURPLUS LINE ASSOCIATION OF
CALIFORNIA. I WOULD LIKE TO
THANK THE CHAIR, THE VICE CHAIR
AND THE MEMBERS OF THIS
COMMITTEE FOR THIS OPPORTUNITY
TO BRIEF YOU TODAY REGARDING THE
STATE OF THE INSURANCE MARKET
AND THE SURPLUS LINE INDUSTRY'S
ROLE IN THAT MARKET. FIRST I
WOULD LIKE TO PROVIDE SOME BRIEF
BACKGROUND ON WHO WE ARE AND
WHAT WE DO. THE SURPLUS LINE
ASSOCIATION WAS CREATED IN 1937
, AND IT WAS APPOINTED IN 1994
AS THE CALIFORNIA DEPARTMENT OF
INSURANCES SURPLUS LINES
ADVISORY ORGANIZATION. IN THIS
ROLE. WE REVIEW EVERY SURPLUS
LINES POLICY FILED IN THE STATE
OF CALIFORNIA TO ENSURE
COMPLIANCE WITH ALL PERTINENT
LAWS AND REGULATIONS. IN 2022.
APPROXIMATELY 7000 CALIFORNIA
LICENSE SURPLUS LAND BROKERS
PLACED 913,113 POLICIES TOTALLY
MORE THAN $16.3 BILLION IN
PREMIUMS. IT IS IMPORTANT TO
NOTE UPFRONT. THAT STATE LAW
REQUIRES OUR MEMBERS TO PERFORM
A DILIGENT SEARCH FOR AN
ADMITTED CARRIER THAT WILL COVER
A RISK BEFORE PLACING THAT
POLICY IN THE SURPLUS LINES
MARKET EXCEPT IN CASES WHERE THE
COMMISSIONER HAS PREDETERMINED
THAT THE RISK IS UNAVAILABLE IN
THE ADMITTED MARKET. THE CODE.
CALIFORNIA INSURANCE CODE
CONSIDERS THREE DECLINATION FROM
MEDICARE EARS TO BE PRIMA FACIE
EVIDENCE THAT A DILIGENT SEARCH
HAS TAKEN PLACE IN SOME
INSTANCES. AND MIDDLE INSURERS
WILL MAKE A BUSINESS DECISION
NOT TO COVER A PARTICULAR RISK
OR CLASS OF RISKS. THESE ARE
USUALLY IN CASES OF DISTRESSED
NEW COMPLEX OR HIGH CAPACITY
RISKS. THERE ARE MANY REASONS
WHY AN ADMITTED CARRIER MAY
REDUCE INSURED CONCENTRATION. IT
MAY FIND IT IS TOO CONCENTRATED
IN A PARTICULAR AREA OR THE RISK
PROFILE MIGHT HAVE CHANGED DUE
TO FORCES BEYOND HIS CONTROL,
SUCH AS CLIMATE CHANGE OR
GOVERNMENT ACTION. IN THESE
CASES, CONSUMERS NEED OPTIONS,
OR THEY WILL BE LEFT WITHOUT THE
INSURANCE COVERAGE THEY NEED.
PER STATE STATUTE WANTED
ADMITTED CARRIER CANNOT BE FOUND
TO COVER A RISK. CONSUMERS AND
THEIR AGENTS HAVE THE OPTION TO
TURN TO THE SURPLUS LINES
MARKET. IF NEITHER AND ADMITTED
CARRIER NOR A SURPLUS LINE, I'M
SURE WILL COVER A PROPERTY RISK
. THE CONSUMER MAY TURN TO THE
FAIR PLAN AS THE INSURER OF LAST
RESORT. THE OVERWHELMING
MAJORITY OF RISKS THAT GO INTO
THE SURPLUS LINES MARKET ARE
COMMERCIAL RISKS. VERY LITTLE
PERSONAL LINES. BUSINESS GOES
INTO THE SURPLUS LANCE MARKET.
OVER THE LAST FIVE CALENDAR
YEARS, HOMEOWNERS INSURANCE IS
MADE UP ONLY 1.65% TO 3.4% OF
TOTAL SURPLUS LINES. PREMIUMS IN
CALIFORNIA. ALTHOUGH WE DO NOT
HAVE DATA ON THE VALUE OF HOMES
INSURED IN THE SURPLUS LINES
MARKETPLACE IT IS OUR SENSE FROM
THE GEOGRAPHIC LOCATIONS WITH
THE HIGHEST CONCENTRATION OF
SURPLUS LINES HOMEOWNER'S
POLICIES THAT MOST SUCH HOMES
ARE HIGH END DWELLINGS WITH
OWNERS WHO NEED MORE COVERAGE
THAN THE FAIR PLANE CAN PROVIDE.
IN THESE CASES, THE SURPLUS
LINES INDUSTRY IS FILLING A ROLE
THAT IS NO LONGER BEING SERVED
BY THE ADMITTED MARKET, WHICH IS
EXACTLY THE ROLE OF THE STATE OF
CALIFORNIA HAS A VISION FOR OUR
INDUSTRY. OUR PURPOSE IS NOT TO
SUPPLANT THE ADMITTED MARKET.
RATHER WE ARE HERE TO PROVIDE
OPTIONS TO CONSUMERS WHO MIGHT
OTHERWISE NOT BE ABLE TO OBTAIN
THE LEVEL OF INSURANCE THEY WANT
DURING THE MARKET DISLOCATION
LIKE THE ONE WE ARE SEEING NOW.
BUT FROM TIME TO TIME SURPLUS
LINE INSURERS LIKE MEDICARE EARS
WILL MAKE A BUSINESS DECISION TO
PULL BACK ON A PARTICULAR
COVERAGE. IF THEY CANNOT
UNDERWRITE THE RISK, AND WE HAVE
BEEN SEEING THAT HAPPEN IN THE
HOMEOWNERS MARKET. WHEN IN
MEDICARE EARS BEGAN PULLING BACK
ON HOMER'S COVERAGE IN THE MID
20 TEN'S THE NUMBER OF
CALIFORNIA HOMEOWNERS POLICIES
PLACED BY SURPLUS LINES CARRIERS
SURGED HIM MORE THAN 60,000.
WHILE THE NUMBER OF HOMEOWNERS
POLICIES GOING INTO THE SURPLUS
LINES MARKET INCREASED FOR
SEVERAL YEARS STARTING AROUND
2015. WE HAVE BEGUN TO SEE THOSE
NUMBERS DECLINED CONSIDERABLY IN
RECENT YEARS, EVEN AS PREMIUMS
HAVE INCREASED TO MEET THE
GROWING RISK POSED BY WILDFIRES.
AS YOU KNOW, THE ONGOING
CHALLENGES PRESENTED BY CLIMATE
CHANGE HAVE LED TO MORE FIRES
WITH INCREASED SEVERITY, WHICH
MEANS GREATER POTENTIAL FOR
LOSSES. ONE OF THE RESULTS OF
THAT INCREASED RISK HAS BEEN A
DECLINE IN APPETITE BY BOTH
ADMITTED AND SURPLUS LAND
INSURERS FOR ISSUING HOMEOWNER'S
POLICIES IN VULNERABLE AREAS
SUCH AS WILDLAND URBAN INTERFACE
ZONES. OUR DATA FROM THE LAST
FEW YEARS SHOWS A SIGNIFICANT
DROP IN THE NUMBER OF HOMEOWNERS
POLICIES THAT HAVE BEEN PLACED
BY CALIFORNIA LICENSED SURPLUS
LAND BROKERS WITH TOTAL DROPPING
BY APPROXIMATELY 5000 TO 6000
FILINGS PER YEAR FOR THE NEXT
THREE YEARS THAN INCHING BACK UP
FROM 25,020 21 TO JUST UNDER
30,020 22. IN SHORT TENS OF
THOUSANDS OF HOMEOWNERS POLICIES
THAT HAD PREVIOUSLY BEEN PLACED
IN THE SURPLUS LANDS MARKETPLACE
EITHER WENT BACK TO THE ADMITTED
MARKET OR INTO THE FAIR PLAN. OR
LAPSED WITHOUT REPLACEMENT. WHEN
FEWER ADMITTED OR SURPLUS LINE
INSURERS ARE ISSUING HOMEOWNER'S
POLICY IS THE INEVITABLE RESULT
IS THAT DEMAND FOR FAIR PLAN
POLICIES WILL INCREASE. THAT
APPEARS TO BE PRECISELY WHAT
WE'RE SEEING IN THE MARKETPLACE.
TODAY THE FAIR PLAN IS BEING
INUNDATED BY CONSUMERS DEMAND
FOR HOMEOWNERS POLICIES THAT ARE
NO LONGER BEING WRITTEN IN THE
ADMITTED MARKET OR SURPLUS
LINES. MARKETPLACE AT THIS TIME,
I WOULD BE GLAD TO TAKE ANY
QUESTIONS YOU MIGHT HAVE. THANK
YOU AGAIN FOR THIS OPPORTUNITY
TO TESTIFY HERE TODAY ABOUT OUR
INDUSTRY'S ROLE IN ENSURING A
HEALTHY, FAIR AND COMPETITIVE
INSURANCE MARKET FOR CALIFORNIA
CONSUMERS. THANK YOU, MR BROWN.
OPEN UP TO QUESTIONS MEMBERS. DO
YOU HAVE ANY QUESTIONS? NO OKAY
. THANK YOU SO MUCH FOR BEING
HERE TODAY. WE GREATLY
APPRECIATE IT. OKAY THE NEXT
PANEL WILL HEAR THE ENSURE
PERSPECTIVES WITH US. WE HAVE
MARK, SAID QIAN, VICE PRESIDENT
OF THE AMERICAN PROPERTY
CASUALTY INSURANCE ASSOCIATION.
AND SARAH TAYLOR, VICE PRESIDENT
WITH THE PERSONAL INSURANCE
FEDERATION OF CALIFORNIA.
WELCOME, GENTLEMEN. THANK YOU
AND GOOD AFTERNOON CHAIR AND
MEMBERS MARK SECOND VICE
PRESIDENT, AMERICAN PROPERTY
CASUALTY INSURANCE ASSOCIATION,
WHICH IS A NATIONAL TRADE
REPRESENTING COMPANIES. THE
RIGHT HOMEOWNERS, AUTO
COMMERCIAL WORKERS COMP ALL
LINES OF PROPERTY CASUALLY. I
WANT TO THANK THE STAFF FOR
THEIR VERY THOROUGH BRIEFING
DOCUMENT. I HEAR IT'S GONE UP
VIRAL, SO I'M EXCITED ABOUT
THAT. UH I WOULD LIKE TO THANK
THE COMMISSIONER AND MS MARTINEZ
FOR COMING AND THE OTHER
PRESENTERS WHO ARE GOING TO JOIN
WITH US TO WORK TOGETHER. I KNOW
YOU'VE HEARD A LOT ABOUT
REINSURANCE TODAY. AND IT SEEMS
TO BE A COMMON THEME. IT'S
BECAUSE IT IS SUCH AN ISSUE. AS
YOU KNOW, REINSURANCE IS
INSURANCE THAT INSURANCE
COMPANIES BY IN FACT, ACTUALLY
REINSURANCE COMPANIES BY
REINSURANCE TO, UM IT'S A WAY OF
SPREADING THE RISK AND A LOT OF
THIS DOES HAVE DONE GLOBALLY AND
BECAUSE IT'S DONE GLOBALLY, WHAT
YOU'LL FIND IS THAT THE GLOBAL
ECONOMY AND GLOBALLY EVENTS HAVE
A HUGE IMPACT RIGHT NOW.
REINSURANCE IS THAT A
HISTORICALLY HIGH LEVEL IT'S
NEVER BEEN THIS HIGH BEFORE. THE
OTHER ISSUE THAT INSURANCE
COMPANIES ARE FACING QUITE
DRAMATICALLY AS INFLATION. WE
ALL SEE INFLATION. WE'VE ALL
FACED IT, BUT MANY OF THE ITEMS
AND PRODUCTS THAT INSURANCE
COMPANIES YOU NEED TO REBUILD
HOMES TO REPLACE CARS, SOMEONE
AND SO FORTH. THAT WAS RATES ARE
MUCH MUCH HIGHER THAN THE
CONSUMER PRICE INDEX. SO WHEN
YOU HAVE THE FACT THAT IN
ADDITION, CALIFORNIA DOES NOT
ALLOW INSURERS IT'S THE ONLY
STATE IN THE NATION DOESN'T
ALLOW INSURERS TO INCLUDE THE
COST OF REINSURANCE AND THEIR
RATES. SO WHEN YOU PUT ALL THIS
TOGETHER AND THEN ADD
CALIFORNIA'S RELATIVELY COMPLEX
RATE MAKING SYSTEM, WHICH HAS
BEEN TALKED ABOUT A LOT HERE HAS
BEEN RELATIVELY SLOW AND NOT
QUICK TO DEAL WITH THESE TYPES
OF CHANGES. YOU DO SEE ISSUES IN
THE MARKET. INSURERS WANT TO
WRITE INSURANCE. THIS CALIFORNIA
IS THE FOURTH LARGEST ECONOMY IN
THE WORLD. WE DO WANT TO BE
HERE. BUT YOU CAN'T WRITE
POLICIES OF THE COST OF
PROVIDING AND PAYING FOR THE
CLAIMS THAT YOU NEED TO PAY FOR
IS MORE THAN THE RATE THAT YOU
CAN GET, AND THAT'S THE PROBLEM
WE'RE FACING HERE. WE DO KNOW
THAT THERE ARE ISSUES IN THE
WORLD. WE'RE HEARING A LOT OF
THIS. YOU'RE HERE. A LOT OF IT
IS THIS I HEARD A BUILDER TALKED
TO ME THE OTHER DAY. SAYING THAT
YOU KNOW HE WOULD BE MUCH
HAPPIER TO PAY 100% MORE. THEY
ADMITTED MARKET THAT HAVING TO
GO OUT TO SURPLUS LINES MARKET
WHICH MAY COST HIM MORE THAN
1616 100% MORE THAN WHAT HE'S
PAYING FOR LESSER POLICIES.
REINSURANCE HAS A HUGE IMPACT ON
NOT ONLY THE PRICE BUT ALSO THE
TERMS AND CONDITIONS. ONE OF THE
TERMS AND CONDITIONS THAT IS
FAIRLY SIGNIFICANT AS A
REINSURER MAY LIMIT THE NUMBER
OF POLICIES THAT CAN BE WRITTEN
IN A PARTICULAR WILDFIRE AREA OR
HAVE WILDFIRE RISK. SO SO WHAT
MAY HAPPEN? THE COMMISSIONER
TALKED ABOUT HIS MORATORIUM. SO
THINK ABOUT IT FOR MILLION HOMES
HAVE BEEN TAKEN OUT AND HAVE
BEEN LOCKED UP. SO WHAT HAPPENS
WITH THE OTHER HOMES THAT ARE IN
THIS AREA IF IT INSURER BY
EITHER REQUIREMENTS, WHETHER
REINSURER OR BECAUSE THEY NEED
TO REDUCE THEIR APPETITE FOR
RISK HAS TO NON RENEWED HOMES.
THERE AREN'T A LOT OF HOMES LEFT
TO DO THAT. SO SOMETIMES YOU SEE
SITUATIONS LIKE SOME OF THE
MEMBER WOULD IS SEEING WHETHER
MAYBE MITIGATION BUT BECAUSE OF
THE NUMBER OF HOMES THAT ARE
LOCKED UP IN THE MORATORIUM,
THERE MAY NOT BE THE FLEXIBILITY
WITHIN THE COMPANY. TO DO THAT.
THE OTHER THING WE HAVE TO
REMEMBER IS THE MORATORIUM IS
BASED ON ZIP CODE. IT'S NOT ON
PEOPLE WHO ARE ACTUALLY AFFECTED
BY THE WILDFIRE. THERE'S A WHOLE
SET OF LAWS DIFFERENT THAN
EFFECT AND PROVIDE COVERAGE AND
PROTECTION FOR THOSE WHO THESE
ARE PEOPLE WHO ARE JASON. SOME
OF THESE, IT GOES PARTICULARLY
HAVE LARGE FIRES THAT HAVE LARGE
GEOGRAPHIC AREAS. YOU MAY HAVE
HOMES THAT ARE 50 60 MILES AWAY
FROM WHERE THE FIRE WAS, BUT ARE
STILL GETTING THIS TYPE OF
PROTECTION. AGAIN IT'S A TOOL
THAT LIMITS THE INSURERS ABILITY
TO DEAL WITH THEIR BOOK OF
BUSINESS. WE TALK A LOT ABOUT
MITIGATION MITIGATION IS KEY. WE
DO KNOW THAT A LOT OF THESE H
OAS COMMUNITIES WERE BUILT
BEFORE THE WILDFIRE CODES CAME
IN, AND THAT'S A HUGE ISSUE AND
THEY'RE TOUGH TO MITIGATE GOING
BACK. WE ALSO TALKED ABOUT THE
FACT THAT THERE IS BOTH HOME
HARDENING, WHICH IS IMPORTANT.
BUT AS THE STATE FIRE MARSHAL'S
SAID AN IMMEDIATE COUPLE OF
YEARS AGO WHERE SHE HAD AN AHA
MOMENT, SHE SAID, I REALIZED
THAT COMMUNITY MITIGATION IS
ACTUALLY MORE IMPORTANT THAN
INDIVIDUAL MUNICH ATION. YOU CAN
DO ALL THE MITIGATION TO YOUR
HOUSE. BUT IF YOUR NEIGHBOR
DOESN'T DO IT, IT MAY NOT
MATTER. SO WE NEED TO THINK OF
THIS. MORE BROADLY, MITIGATION
IS THE ANSWER TO DOING RISK RISK
RISK REDUCTION IS THE WAY TO
REDUCE COST. THANK YOU. OKAY
GOOD HAPPENING THIS ON THERE WE
GO. GET A LITTLE CLOSER. RISING
COMMERCIAL. CAN YOU HEAR ME?
GOOD AFTERNOON, MADAM CHAIR
MEMBERS, SAIRIN TAYLOR ON BEHALF
OF THE PERSONAL INSURANCE
FEDERATION OF CALIFORNIA AND THE
NATIONAL ASSOCIATION OF MUTUAL
INSURANCE COMPANIES GREATLY
APPRECIATE THE OPPORTUNITY TO
SHARE A PERSPECTIVE. MARK AND I
WERE SORT OF TALKING IN THE BACK
THAT SO MUCH OF WHAT WE'RE GOING
TO SAY GOT COVERED, AND MAYBE WE
SHOULD JETTISON OUR TALKING
POINTS HERE AND JUST GET TO
CONVERSATION. BUT I FEEL THAT
STILL, YOU KNOW I'LL BE SOMEWHAT
REPETITIVE, BUT IT'S STILL BEARS
SOME ADDITIONAL COVERAGE. AND WE
DID PROVIDE THE COMMITTEE WITH A
DETAILED COMMENT LETTER THAT YOU
MAY WISH TO REVIEW. I'LL TRY TO
SUMMARIZE THAT HERE. BUT IN
SHORT, REALLY WHAT IT SAYS IT'S
A CHALLENGING TIME FOR EVERYONE
RIGHT OF THE 20 MOST DESTRUCTIVE
WILDFIRES IN CALIFORNIA'S
RECORDED HISTORY. 13 HAVE
OCCURRED SINCE 2017 DESTROYING
NEARLY 40,000 STRUCTURES, TAKING
100 48 LIVES AND CHARRING
MILLIONS OF ACRES. IN PARTICULAR
THE 2017 AND 2018 WILDFIRE
SEASONS, WHERE THE MOST COSTLY
IN CALIFORNIA HISTORY AND, AS
WAS ALLUDED TO EARLIER INSURERS
LOST OVER $20 BILLION, WHICH
WIPED OUT TWO TIMES THEIR
COMBINED UNDERWRITING PROFITS
FOR THE PRIOR 26 YEARS. SO
SEVERAL FACTORS HAVE LED TO THIS
INCREASE IN SEVERE WILDFIRE
EVENTS OVER THE PAST FEW YEARS.
CLIMATE CHANGE, ALONG WITH
POPULATION SHIFTS TOWARDS THE
WILDLAND URBAN INTERFACE HAVE
INTENSIFIED THE IMPACTS OF
WILDFIRES. FORTUNATELY MORE
FOCUS IS BEING PLACED ON WAYS
PEOPLE CAN PREVENT OR MITIGATE
DAMAGE TO THEIR HOMES. AND WE'VE
SEEN SIGNIFICANT NEW FUNDING IN
RECENT STATE BUDGETS TO INCREASE
WILDFIRE RESILIENCE. I KNOW MANY
OF YOU PLAYED A ROLE IN GETTING
THAT MONEY. SO UH, IN ADDITION,
COMMISSIONER LARA TEAM IS
WORKING DILIGENTLY TO STABILIZE
THE HOMEOWNER'S INSURANCE
MARKET. ESPECIALLY WITH RESPECT
TO WILDFIRE. THE C D. I HAS BEEN
APPROVING HOMEOWNERS RATE
FILINGS THAT INCENTIVIZED
INSURERS TO RECOGNIZE THE VALUE
OF MITIGATION EFFORTS TAKEN BY
HOMEOWNERS AND COMMUNITIES.
HOWEVER WHILE THE PROGRESS IS
GOOD, IT HASN'T BEEN ENOUGH AND
WE ALL RECOGNIZE THERE ARE TOO
MANY PEOPLE STRUGGLING TO FIND
THE COVERAGE THEY NEED. SO THE
QUESTION IS, WHAT SHOULD WE DO?
AND FROM OUR PERSPECTIVE,
THERE'S SOME CHALLENGES
ASSOCIATED WITH THE CURRENT
RULES. WE'VE TALKED ABOUT IT A
LOT, BUT THESE RULES WERE
DEVELOPED 35 YEARS AGO LONG
BEFORE THE ADVENT OF CLIMATE
CHANGE IMPACTS THEIR OF
TECHNOLOGY THAT BROUGHT US
SMARTPHONES. SMART CARS, SMART
CLIMATE MODELS. UM, I THINK WE
WOULD YOU KNOW, RESPECTFULLY
DISAGREE WITH THE INSURANCE
COMMISSIONER, SAYING THAT THIS
TECHNOLOGY IS NOT UNDERSTOOD. IT
HAS BEEN AROUND FOR A LONG TIME
. UM YOU KNOW, THE LEGISLATURE
HAS MADE TREMENDOUS POLICY
DECISIONS BASED ON CLIMATE
MODELS, RIGHT? WE'RE PHASING OUT
FOSSIL FUELS GETTING RID OF GAS
STOVES, UM, PLANNING, CLIMATE
INFRASTRUCTURE AND RESILIENT
BONDS AND FUNDING PROJECTS. ALL
BASED ON THE DATA AND TECHNOLOGY
THAT'S IN THESE MODELS. AND
THESE MODELS BEEN USED FOR YEARS
AND THAT DECADES ACROSS THE
GLOBE, SO THE IDEA THAT THAT WE
CAN'T UNDERSTAND THESE MODELS?
UM I THINK WE WOULD TAKE SOME
ISSUE WITH BUT I THINK WE'D LIKE
TO WORK WITH THE COMMISSIONER TO
WORK THROUGH THESE ISSUES AND
SAY HEY, IF YOU HAVE CONCERNS
ABOUT THE TECHNOLOGY, OR OR YOU
FEEL THERE IS A BLACK BOX THAT
YOU CAN'T SEE INTO. THEN LET'S
WORK THROUGH THAT. LET'S TALK
ABOUT THAT. CAN WE SET UP A
PROCESS? UH, YOU KNOW, I THINK
THE MODELERS YOU COULD PROBABLY
HAVE A WHOLE HEARING JUST ON
MODELS RIGHT? AND THE MODELERS
WOULD PROBABLY TELL YOU THEY'RE
HAPPY TO SHARE ALL THE DETAILS
OF THEIR MODEL. IF THERE'S AN N
D A IF IT'S NOT DISCLOSED TO
THEIR COMPETITORS, SO THAT'S ONE
ISSUE WITH THE CLIENT CLIMATE
MODELS. BUT THESE RULES THEY
WORKED FINE FOR MANY DECADES,
RIGHT, BUT THEY DON'T RECOGNIZE
THE RECENT IMPACT OF CLIMATE
CHANGE. AND WHAT IT POSES TO
CALIFORNIA PROPERTIES AND THEN
THESE RULES ALSO INCLUDE
ELEMENTS THAT DISCOURAGE
INSURERS FROM INCREASING
AVAILABILITY OF COVERAGE FOR
PROPERTIES IN WILDFIRE AREAS. SO
AS A RESULT, THE HOMEOWNERS
MARKET HAS FALLEN INTO CAPACITY
CRISIS WITH MANY CARRIERS WHO
WISH TO SERVE CALIFORNIA,
INSTEAD REDUCING NEW BUSINESS
CAPACITY AND NON RENEWING
PROPERTIES BECAUSE THEY CAN'T
ACHIEVE AN APPROPRIATE RETURN.
SO SOME EXAMPLES AND AGAIN WE'VE
TALKED ABOUT THEM, BUT BUT THESE
RULES IMPEDE THE GOAL OF
INCREASED AVAILABILITY. AND THEY
DO. I JUST WANT TO SAY THEY LONG
PREDATE THE CURRENT INSURANCE
COMMISSIONER. YOU KNOW, HE SORT
OF INHERITED THIS PROBLEM. THE
WILDFIRE START 2017 2018. HE
COMES INTO OFFICE THESE RULES
AROUND 35 YEARS AGO LONG BEFORE
HE WAS HERE. UM BUT WE DO HAVE
THIS NET COST OF REINSURANCE AND
RATE MAKING THAT THE FAIR PLAN
TALKED ABOUT UM IT'S HOW
INSURERS SPREAD. CALIFORNIA
WILDFIRE RISK GLOBALLY OUTSIDE
OF CALIFORNIA PROTECT THEMSELVES
FROM INSOLVENCY AND ENSURE THEY
CAN KEEP THE PROMISE TO PAY
CLAIMS AFTER A LOSS. WHEN THEY
HAVE TO DO WITHOUT REINSURANCE,
REDUCES AND ENSURES ABILITY TO
PROVIDE COVERAGE TO MORE
WILDFIRE EXPOSED PROPERTIES. SO
YOU END UP CONTRACTING BECAUSE
YOU CAN'T SPREAD THAT WRIST
SOMEWHERE ELSE. UM AND THEN,
SINCE THAT NET COST IS NOT
PERMITTED, IT'S NOT PERMITTED
EXPENSE AND THE IN THE PROPER
ONE. OH THREE RULES AND ENSURE
EITHER HAS TO PAY THAT OUT OF
THEIR OWN POCKET. OR THEY JUST
NON RENEWED THE RISKIEST
PROPERTIES SO THAT THEY CAN
MAINTAIN THEIR FINANCIAL
STRENGTH. SO THAT'S THE BUSINESS
DECISION THAT THEY'RE BEING
FORCED TO MAKE. ANOTHER RULE
THAT WE TALKED ABOUT WAS THE USE
OF CAT MODEL CATASTROPHE MODELS
AND CALIFORNIA REGULATIONS MAKE
IT ILLEGAL TO INCLUDE CLIMATE
CHANGE PROJECTIONS AND FIRE
INSURANCE RATES, SO INSURERS
MUST ESTIMATE THEIR FUTURE
LOSSES, LOOKING BACKWARDS AT THE
AVERAGE OF THE LAST 20 YEARS,
AND THAT DOES NOT REFLECT THE
CLIMATE RELATED RISKS OR THE
BENEFIT FRANKLY OF THE NEW
MITIGATION STRATEGIES. RIGHT SO
IF YOU'RE USING CAT MODELS, YOU
COULD ACTUALLY LOOK AT SOME OF
THOSE AREAS YOU TALKED ABOUT
WHERE YOU MAY NOT HAVE A LOSS
EXPERIENCE YET AND SAY I CAN
RECOGNIZE MY POTENTIAL LOSSES.
GET RAPED FOR THAT, AND I COULD
RECOGNIZE THE MITIGATION THAT'S
BEING DONE. BUT THAT DOESN'T
WORK IF I'M LOOKING BACKWARDS
BECAUSE I HAVEN'T EXPERIENCED
THE LOSS, AND THAT MITIGATION
REALLY ISN'T EVEN FACTORED INTO
THE RATES YET BECAUSE IT HASN'T
BEEN EXPERIENCED. SO THAT'S
WHERE THESE RULES INTERTWINED
AND THAT GETS, YOU KNOW, AND
THEN YOU KNOW WHEN YOU SORT OF,
SAY THE FAIR PLAN, YOU KNOW IT'S
WELL. INSURERS DON'T RENEW HERE.
BUT THEN IT GOES TO THE FAIR
PLAN, AND THEN THEY PAY IT ON
THE BACK END BECAUSE THEY'RE
GOING TO GET ASSESSED. IT MUST
BE CHEAPER. THAT'S NOT I DON'T
THINK THAT'S THE RIGHT EQUATION
THAT THEY'RE LOOKING AT RIGHT
THERE. THEY'RE BASICALLY SAYING
I CAN'T GET THE RATES. I NEED TO
GO IN THERE EVEN WITH THE
MITIGATION BECAUSE MITIGATION
ISN'T ELIMINATION, AND I DON'T
HAVE A LOSS EXPERIENCE TO
JUSTIFY THE RATES. I NEED TO GO
INTO THAT THAT PARTICULAR AREA
SO YOU CAN SEE WHERE THESE RULES
ARE STARTING TO COME INTO PLAY
AND AFFECTING INSURER BEHAVIOR.
UM SO IN ANY CASE, YOU KNOW THE
IMPACTS OF CLIMATE CHANGE IN
CALIFORNIA. READILY YOUR PARENTS
, RIGHT? WE HAVE THE DROUGHTS.
WE HAVE THE FLOODS. WE HAVE THE
MUDSLIDES, WILDFIRES AS A
CONSTANT TOPIC OF POLICY MAKING
, AND YET INSURERS ARE FORCED TO
PRETEND THERE IS NO IMPACT FROM
CLIMATE CHANGE. UM YOU KNOW, WE
TALKED ABOUT CALIFORNIA BEING
THE ONLY STATE THAT DOESN'T
ALLOW CONSIDERATION OF
REINSURANCE COSTS. AND REALLY,
THE FAIR PLAN PLAYS THIS VITAL
ROLE IN CALIFORNIA INSURANCE
MARKET AS INSURER OF LAST
RESORT. BUT WE WOULD SAY, RATHER
THAN GROW THE FAIR PLAN. WE
SHOULD PURSUE OPPORTUNITIES TO
INCREASE THE HEALTH OF THE
TRADITIONAL MARKET. AND WE THINK
WITH THE INCLUSION OF WILDFIRE
CATASTROPHE MODELS AND
REINSURANCE COSTS, INSURERS
COULD GREATLY INCREASE
AVAILABILITY AND THESE WILDFIRE
EXPOSED AREAS AND WE'LL BE ABLE
TO DEPOPULATE THE FAIR PLAN. AND
ONCE ADEQUATE RATES ARE APPROVED
, SO WE'RE KEENLY AWARE OF THE
CHALLENGES ARE POLICYHOLDERS AND
YOUR CONSTITUENTS OF FACE AND WE
WANT TO WORK WITH C D I WITH THE
LEGISLATURE ALL THE
STAKEHOLDERS. HAVE A MORE
HEALTHY AND COMPETITIVE
INSURANCE MARKET. SO THANK YOU.
THANK YOU. DO WE HAVE ANY
QUESTIONS? SOME OF THEM WOULD NO
SURPRISE COURSE SHOULD HAVE SAID
ON THAT SIDE. NO NO, AND I
APPRECIATE I APPRECIATE WHAT
YOU'RE WHAT YOU'RE WHAT YOU'RE
SAYING, I GUESS, UM OBVIOUSLY,
WITH REINSURANCE BEING SO
EXPENSIVE, UM AND THEN NOT BEING
ABLE TO INCLUDE IT IN YOUR RATES
IF IT WERE INCLUDED IN THE
RATES. IS THERE A IS THERE A
GENERAL IDEA OF WHAT THAT WOULD
MEAN TO THE CONSUMER AS A
PERCENTAGE OF A OF A PLOT OF A
OF A I MEAN I DON'T KNOW. I
MEAN, SO HELP ME UNDERSTAND WHAT
IS THE IN COMPACT TO THE
CONSUMER? IF YOU CAN INCLUDE IN
REINSURANCE IN YOUR RATES? WELL
I MEAN, CERTAINLY WE WOULD SAY,
IF YOU'RE TALKING ABOUT PRICE
WISE, WE WOULD SAY IT'S STILL
GOING TO BE FAR LESS EXPENSIVE
THAN THE FAIR PLAN, WHICH IS A
HIGH RISK POOL. AND IT'S GOING
TO BE LESS EXPENSIVE THAN THE
SURPLUS LINES, WHICH REALLY
AREN'T REGULATED, AND THEY'RE
NOT SUBJECT TO THE PRIOR
APPROVAL PLOT PROCESS, SO I CAN
TELL YOU WITH A LOT OF CERTAINTY
THAT IT'S GOING TO BE FAR
CHEAPER THAN WHAT THEY'RE
SEEING. NOW WHEN YOU TALK ABOUT
THESE H OAS THAT ARE SEEING
1000% INCREASE AFTER BEING NON
RENEWED. I CAN ALMOST GUARANTEE
YOU. THAT'S NOT IT ADMITTED
CARRIER BECAUSE THEY'RE GREAT
FILING WOULD TAKE A YEAR AND BE
SUBJECT TO PRIOR APPROVAL. SO IF
SOMEONE CAN COME IN A MONTH
LATER AND INCREASE 1000% IT'S
GOING TO HAVE TO BE A NON
ADMITTED CARRIER. UM, WHO COMES
IN YOU KNOW, I WOULD HAZARD TO
GUESS AT THE NET IMPACT OF
REINSURANCE AND OBVIOUSLY, AS AS
MR SECOND WAS REFERRING TO UM,
YOU KNOW, REINSURANCE COSTS ARE
GROWING INCREDIBLY, THIS YEAR.
YOU KNOW YOU'RE GOING TO HEAR
ABOUT THE EARTHQUAKE AUTHORITY.
I'M SURE LATER THIS YEAR AS WELL
WHERE THEY'RE REINSURANCE COSTS.
I THINK THEY'RE LOOKING AT A 70%
RATE INCREASE OVER FIVE YEARS IF
THEY DON'T DO SOMETHING. UM SO
IT'S EXPENSIVE AND IT'S GOING TO
FLUCTUATE AS REINSURANCE. COST
FLUCTUATES, SO I COULDN'T I
DON'T UH, WISE. LIKE MISS ROACH
. I'M NOT AN ACTUARY, SO I CAN'T
PUT A NUMBER ON IT, BUT BUT
RIGHT? FAR LESS AND IF YOU
REALLY WANT TO GET AT THIS
AVAILABILITY ISSUE, WHICH YOU
KNOW WHAT WE'RE HEARING IS
REALLY A LOT OF PEOPLE. AS MARK
SAID, LET'S SAY I JUST WANT TO
BE ABLE TO GET ADMITTED
INSURANCE OVER HERE. I'M WILLING
TO PAY, YOU KNOW, IS IT 10 20%
MORE OR WHATEVER IT'S GOING TO
BE, BUT I JUST REALLY WANT TO BE
ABLE TO GET THAT INSURANCE AND
HAVE KEEP THE BOAT INSURANCE AND
LIFE INSURANCE IN THE CAR AND
KEEP IT ALL BUNDLED TOGETHER TO
WELL, REMEMBER IF THE FAIR PLAN
IS SET ACTUALLY SOUND RIGHTS AS
THEY'RE REQUIRED TO BY STATUTE,
AND THEY'RE GETTING THE RIGHT
THAT THEY NEED, THE THIRD SAID
BY DEFINITION BECAUSE THEY'RE
PICKING UP THE HIGH RISK THEIR
RATES ARE GONNA BE HIGHER. WE DO
SEEK SITUATIONS BECAUSE FAIR
PLANT DOESN'T NECESSARILY HAVE
ACTUALLY SOUND RATES WHERE WE DO
HAVE SOME COMPETITION AND THAT'S
NOT RIGHT. FAIR PLANT SHOULD
NEVER BE IN COMPETITION WITH
OTHER INSURERS. THEY SHOULD
CONTINUE TO BE THE INSURER OF
LAST RESORT. IN THE FINAL FINAL
QUESTION, I GUESS IS YOU TALK
ABOUT MY MODELING OR UP? YOU
KNOW WAYS OF LOOKING AT THINGS.
I GUESS I STILL STRUGGLE WITH,
UM YOU KNOW, ENTIRE ZIP CODES
LOSING COVERAGE IF YOU'VE GOT
COMMUNITY. MAYBE YOU'VE GOT A
GROUP OF HOMES THAT HAVE ALL
DONE WILDFIRE MITIGATION AROUND
THEM OR AS I TALKED ABOUT CAL
FIRE COMING IN AND DOING
WILDFIRE MITIGATION, AND THEN
SUDDENLY THE INSURANCE IS GONE
PERIOD. WHAT DO YOU TELL THE
COURT? WHAT DO I TELL MY
CONSTITUENTS? YOU KNOW, IT'S
LIKE YOU DID EVERYTHING RIGHT?
YOUR NEIGHBORS DID EVERYTHING
RIGHT? AND YOU STILL GOT CONSOLE
AND THE ONLY OPTION YOU NOW HAVE
IS THE FARE PLANTS. SO WHAT DO I
TELL MY CONSTITUENTS THERE?
BECAUSE I'M AT A LOSS. AND I'D
SAY, YOU KNOW, UNFORTUNATELY,
IT'S NOT LIKE THERE'S AN EASY
GOOD ANSWER, BECAUSE AT THE END
OF THE DAY, WE'RE ALL
EXPERIENCING THIS, YOU KNOW,
REALLY RECENT CHANGE IN RISK AND
THE VIEW OF RISK. AND THE
REALITY IS, YOU KNOW PRICES OF
INSURANCE ARE GOING TO GO UP
WHETHER YOU'RE WITH THE FAIR
PLAN OR THE ADMITTED MARKET. AND
THAT'S HOW CAN WE EXPAND THAT
AVAILABILITY AS TO THE HERD? YOU
KNOW, SOME PEOPLE SAY THE ZIP
CODE PRESSURE THAT HAPPENS FROM
THE MORATORIUM IN ONE PLACE. I
THINK MARK WAS ALLUDING TO THIS
MR SECTOR IS ALLUDING TO THIS
EARLIER. UM IT COULD BE THAT
YOU'RE BEING FORCED TO KEEP ALL
THIS RISK OVER HERE AFTER A FIRE
UNDER THE CURRENT MORATORIUM
RULES THAT THE COMMISSIONER WAS
TALKING ABOUT. SO NOW YOU YOU
ONLY HAVE A CERTAIN AMOUNT OF
CAPACITY. YOU HAVE A SOLVENCY
RISK. YOU HAVE A CERTAIN AMOUNT
OF CAPACITY AGAIN THAT GETS BACK
TO THE REINSURANCE. HOW CAN I
OFFLOAD RISK? WELL, IF I CAN BUY
MORE REINSURANCE, I CAN OFFLOAD
SOME OF THIS RISK AND THEN I CAN
TAKE ON NEW RISK. BUT NOW I'M
BEING FORCED TO KEEP THIS RISK
OVER HERE. SO THESE FOLKS WHO GO
AND MITIGATE AND CAL FIRE COMES
IN AND SAYS YOU'RE GREAT, AND WE
GO I DON'T HAVE ANY MORE
CAPACITY NOW BECAUSE I'M STUCK
WITH THE TWO MILLION HOMES THAT
ARE INSIDE THE MORATORIA. THAT'S
ONE PLAUSIBLE EXPLANATION. UM
THE OTHER EXPLANATION KIND OF
GOES AT WHAT I WAS SAYING, IS IT
MAYBE EVEN THOUGH THEY'VE DONE
THE RIGHT THINGS, THEY'RE STILL
IN HIGH FIRE SEVERITY ZONE, AND
IF THERE HASN'T BEEN A LOSS
EXPERIENCE THERE YET IT'S NOT IN
THE BACKWARDS LOOKING AND THEY
GO. I STILL CAN'T GET
INAPPROPRIATE RATE. BECAUSE AT
THE END OF THE DAY, I MEAN,
INSURERS ARE IN THE BUSINESS OF
SELLING INSURANCE AND IF THEY
COULD GET A RATE THAT THEY
THOUGHT WOULD MATCH THE RISK.
THEY WOULD GO IN THAT AREA AND
SOUTH. I MEAN, THEY'RE NOT GOING
TO WALK AWAY FROM A BUSINESS
OPPORTUNITY, IF THEY THINK IT'S
FAIR. THAT'S A GREAT ANSWER FOR
YOUR CONSTITUENT. I GUESS THE
FINAL AND I APOLOGIZE. I SAID
FINAL QUESTION BEFORE, BUT, UM.
IS THE REINSURANCE ISSUE IS THAT
BY STATUTE OR BY REGULATION
REGULATION. SO YES, IT'S A LONG
STANDING, BUT IT IS IN
REGULATION. IT'S NOT. I WANT TO
POINT OUT ONE ISSUE THAT'S COME
UP A LOT. THERE IS THIS MYTH
THAT CALIFORNIA CONSUMERS WOULD
HAVE TO PAY FOR FLORIDA
HURRICANE THAT IS NOT TRUE.
CALIFORNIA COMPANIES CAN'T
SEGMENT THE RISK FOR CALIFORNIA
. SO THE CALIFORNIA CONSUMERS
PAYING FOR CALIFORNIA WILDFIRES
, FOR EXAMPLE, THE STATE OF
FLORIDA ACTUALLY DOES THIS
BECAUSE THEY DON'T WANT TO PAY
FOR CALIFORNIA WILDFIRES ON
FLORIDA RESIDENTS WHERE THE COST
OF INSURANCE IS SIGNIFICANTLY
HIGHER THAN IT HERE'S IN
CALIFORNIA. UM SO IT CAN BE DONE
. WE IN THE COMPANIES ARE
WILLING TO DO IT AND YOU KNOW,
IT'S JUST ANOTHER COST OF DOING
BUSINESS. AND IT WOULD THEY
WOULD CHALLENGE YOU HAVE IN THE
CALIFORNIA MARKET AS YOU LOOK AT
IT LIKE THIS. YOU'VE GOT HUGE
CLIMATE CHANGE CHANGES THAT
WE'RE NOT SEEING. WE'RE DRIVING
THE CAR BACKWARDS THROUGH THE
REAR VIEW MIRROR BECAUSE WE
CAN'T USE MODELS LOOKING
FORWARD. OKAY YOU HAVE YOU CAN'T
DO REINSURANCE. YOU HAVE TOOLS
THAT YOU CAN'T USE BECAUSE OF
MORATORIUMS AND OTHER TYPES OF
THINGS. FROM AN INSURANCE
COMPANY IS LOOKING TO EXPAND
THEIR BUSINESS. CALIFORNIA IS
NOT NECESSARILY ATTRACTIVE
MARKET BECAUSE THE RATES AREN'T
ADEQUATE NOW, SHARON SAID. THE
DEPARTMENT OF INSURANCE HAS BEEN
LOOKING AT THIS. I'M WORKING ON
THIS AND WE'VE BEEN WORKING WITH
THEM CLOSELY. I THINK ONE OF THE
CHALLENGES IS THAT DURING THE
PANDEMIC, THEY APPROVED ALMOST
NO RATES. CERTAINLY NOTHING ON
THE AUTO SIDE FOR 31 MONTHS, THE
HOMEOWNER STUFF HAS BEEN SLOW.
THE OTHER ISSUE. I THINK WE NEED
TO REMEMBER IS THE COMMISSIONER
TALKS A LOT ABOUT HIS MITIGATION
MODELS AND DISCOUNTS. REMEMBER
THE RATES? THE RATE FILINGS
ALREADY WENT TO BE MADE UNTIL
NEXT MONTH. THEY'RE GOING TO
TAKE A SIGNIFICANT AMOUNT OF
TIME BEFORE THEY ACTUALLY GET
APPROVED, AND EVEN THE D¯ÚI AND
THEIR OWN PAPERWORK SAYS EVEN IF
YOU DO ALL THOSE THINGS, AND WE
SAY YOU HAVE TO DO ALL OF THEM,
YOU CAN'T PICK AND CHOOSE. IT IS
ON THE MENU. THE COST SAVINGS
ARE NOT GOING TO BE SIGNIFICANT,
MAYBE ONLY $200. IF I MIGHT JUST
ADD ON. I MEAN, I WOULD I WOULD
SAY WITH REGARD TO, UM THE
REINSURANCE ISSUE I WOULD PUT IT
, MARK. YOU KNOW, WE DO WANT TO
BE ABLE TO WORK WITH THE
COMMISSIONER. THEY HAVE THOSE
CONCERNS. YOU KNOW, WHEREOF
CONSUMER GROUPS HAVE THOSE
CONCERNS ABOUT REINSURANCE AND
WHAT HAPPENS IN FLORIDA? WE
THINK THERE'S WAYS TO WORK
THROUGH THOSE IN A COLLABORATIVE
WAY AND ADDRESS THOSE CONCERNS.
SO. THANK YOU, GENTLEMEN. OKAY
THIS TIME I LIKE TO CALL UP THE
LAST. OH SORRY. GO AHEAD. REAL
QUICK QUESTION. YOU HEARD ME.
ASK THE INSURANCE COMMISSIONER
ABOUT THE CATASTROPHIC MODELING
. HE BASICALLY ALLUDED TO THE
FACT THAT IT'S THE DEPARTMENT
DOESN'T HAVE A CLEAR
UNDERSTANDING OF THE ALGORITHMS
AND HOW IT WOULD FUNCTION. ARE
YOU GUYS COMMITTED TO WORKING
WITH THE COMMISSIONER TO WALKING
THROUGH THE MODELING AND THE
ANALYTICS THAT GOES INTO THAT.
CERTAINLY, YES, OF COURSE. AND
YOU KNOW, PART OF THAT IS ON THE
MODELERS, BUT THEY'VE CERTAINLY
EXPRESSED TO US A WILLINGNESS TO
OPEN THE PROVERBIAL KIMONO AND
SHARE WHATEVER FOLKS WANT TO
LEARN ABOUT THOSE MODELS. THEY
JUST WANT TO BE ABLE TO PROTECT
THEIR INTELLECTUAL PROPERTY.
WHETHER THAT'S YOU KNOW, HAVING
ACADEMICS, PEOPLE FROM THE
DEPARTMENT. WHOEVER WANTS TO
LEARN MORE ABOUT THE DETAILS OF
THOSE MODELS. UM, WE BELIEVE
THERE'S MECHANISMS TO ALLOW THAT
TO HAPPEN. RIGHT WHICH DOES NEED
TO BE PUBLIC JUST WITH THE
COMMISSIONER THAT IS RIGHT, AS
AS MANY AS IT IS IN MANY STATES
, WHERE THE MODELS ARE REVIEWED
BY THE DEPARTMENT, BUT NOT
RELEASED, AND YOU WANT THIS FOR
ONE IMPORTANT REASON IS YOU WANT
THE MODELERS TO CONTINUE TO
PROVIDE THE BEST SCIENCE
POSSIBLE, BUT THEY DON'T
NECESSARILY WANT TO PROVIDE IT
TO THEIR COMPETITORS. THANK YOU
FOR THAT. AND THAT REALLY
APPRECIATE CHAIRWOMAN THAT WE
HAD THIS OPPORTUNITY TODAY TO
ENGAGE. I THINK WHAT'S CLEAR IS
THAT THE FAIR PLAN IS REALLY A
BAND AID FOR A MUCH BIGGER ISSUE
. AND SO I LOOK FORWARD TO
WORKING WITH YOU AND OUR AND
YOUR STAFF TO ON THESE ISSUES.
THANK YOU, MR VICE CHAIR. THANK
YOU, GENTLEMEN. THE LAST PANEL
WILL HEAR IS THE POLICYHOLDER
PERSPECTIVE AND WHAT THIS TODAY
WE HAVE AMY BACH, EXECUTIVE
DIRECTOR OF THE UNITED
POLICYHOLDER, AND JOHN NORWOOD,
LEGISLATIVE ADVOCATE FOR
INDEPENDENT INSURANCE AGENTS OF
AND BROKERS OF CALIFORNIA.
WELCOME MUCH. GOOD AFTERNOON,
AND, UM, I MAY ME BACH THIS YEAR
MARKS UNITED POLICYHOLDERS 32ND
YEAR AS A NONPROFIT THAT HAS
BEEN EDUCATING AND ASSISTING
INSURANCE CONSUMERS IN
CALIFORNIA AND HELPING SOLVE
INSURANCE RELATED PROBLEMS
ADVOCATING FOR FAIR PRACTICES,
LAWS, REGULATIONS AND WORKING
VERY CLOSELY WITH THE CALIFORNIA
DEPARTMENT OF INSURANCE AS WELL
AS MR NORWOOD'S CLIENTS, AGENTS
AND BROKERS. WE DO WEBINARS
HELPING PEOPLE PARTICULARLY NOW
SHOP IN THIS VERY, VERY
CHALLENGING MARKETPLACE
SITUATION THAT WE HAVE. CLEARLY
AS WITH MOST PROBLEMS, THIS ONE
REQUIRES SOME COMPROMISES AND
INNOVATION. COMBINED WITH
MODERATION, INSURANCE COMPANIES
HAVE BEEN HATING ON PROP. ONE
OH, THREE SINCE THE DAY OF THE
BALLOT MEASURE WAS PASSED. THEY
HAVE BEEN TRYING TO GET CREDIT
FOR REINSURANCE FOR A VERY LONG
TIME THEY HAVE BEEN PUSHING TO
BE ABLE TO USE CAT MODELS. UM
FOR A VERY LONG TIME. SO I JUST
WANNA SAY THAT THAT WHILE THERE
MAY BE, UM, NECESSITY NOW TO
GRANT IN SOME WAY, SOME OF WHAT
THEY'RE ASKING FOR, I WOULD SAY
A LOT OF MODERATION IS IN ORDER
HERE, BECAUSE, UM REMEMBER THAT
CAT MODELS ARE ARE NOTHING MORE
THAN VERY SOPHISTICATED CRYSTAL
BALLS. NO ONE KNOWS WHAT'S GOING
TO HAPPEN TOMORROW. AND HIS
FANCY AS THESE MODELS MAY LOOK,
THEY ARE OFTEN WRONG. AND WHEN
YOU SEE HOW, UM THE RMS 11,
WHICH IS A MODEL HURRICANE
RELATED MODEL WHEN YOU SEE WHAT
THAT DID TO AFFORDABILITY ALL
THROUGHOUT THE GULF COAST STATES
WHEN THAT MODEL CHANGE JUST A
LITTLE BIT. AND IT REALLY MADE
PRICES GO CRAZY. YOU KNOW, YOU
NEED TO BE MOVING WITH
MODERATION IN THIS SITUATION.
UM, WE'RE VERY FORTUNATE TO HAVE
THE FAIR PLAN. WE HAVE TO
PRESERVE ITS CAPACITY TO
CONTINUE TO BE A RELIABLE SAFETY
VALVE FOR PERIODS LIKE THIS WHEN
INSURERS STOPPED COMPETING,
WHICH HISTORICALLY HAS HAPPENED
BEFORE, AND THEY'RE NOT TO THE
DEGREE WE'RE SEEING. CURRENTLY
THERE WAS A TIME WHEN ONE
LEADING INSURER WAS VERY UNHAPPY
WITH THE WITH THE EITHER THE I
GUESS IT WAS LEGISLATURE AND OR
THE DEPARTMENT AND STOP WRITING
HOME INSURANCE POLICIES FOR A
COUPLE OF YEARS, AND WE SAID
OKAY, FINE, YOU KNOW, DON'T LET
THE DOOR HIT YOU AND THEY CAME
BACK. SO THERE'S DEFINITELY SOME
SOME SOME POLITICS IN PLAY HERE,
BUT I DO NOT DOWNPLAY WHAT WE
HEARD FROM VICTORIA ROACH AND I
, OBVIOUSLY, UH, CERTAINLY I
KNOW THE COMMISSIONER AND HIS
TEAM ARE REALLY WORKING OVERTIME
NOT SO MUCH TO UNDERSTAND THE
MODELS I'D SAY, BUT TO, UM AND
TO ACT RESPONSIBLY ON THE RATE
INCREASED REQUESTS, AND I THINK
90 SOME PERCENT OF THE RATE
INCREASE REQUESTS HAVE BEEN
GRANTED IN THE LAST FEW YEARS. I
MEAN, YOU ASKED YOUR
CONSTITUENTS AND ASKED HIM DO
YOU? DOES IT? DOES IT FEEL LIKE
THE RATES ARE BEING SUPPRESSED?
AND THEY'RE GOING TO BE LIKE,
WHAT ARE YOU TALKING ABOUT?
RIGHT? SO WE HAVE BEEN THROUGH
THESE SITUATIONS BEFORE. NOT
THIS BAD. UM WE'VE COMPETITION
IS ALWAYS KIND OF FILLED IN. YOU
KNOW JOHN'S CLIENTS PARTICULARLY
, UM, YOU KNOW, BROKERS WHO CAN
PUT YOU WITH A VARIETY OF
DIFFERENT COMPANIES USUALLY WILL
WILL CUT WILL FIX THESE PROBLEMS
WHEN THERE'S A SHORTAGE OF
OPTIONS, BUT THAT WAS BEFORE
INSURERS STARTED USING RISK
MODELS. PREDICTIVE ANALYTICS, UM
AND SURVEYING, AERIAL
SURVEILLANCE AND ALL THE
ARTIFICIAL INTELLIGENCE
EVERYTHING THEY USE NOW TO
REALLY NARROWING RISKS. THEY'RE
BASICALLY HAVE BEEN SCARING
THEMSELVES OUT OF TAKING RISKS.
RIGHT? SO THAT IS A REAL THING.
UM, AND SO WE FIND OURSELVES
YES, WE DID HAVE SOME REALLY BAD
YEARS. AND WHEN YOU LOOK AT WHAT
THE WILD VIRUS WHEN YOU LOOK AT
WHAT HAPPENED TO FLORIDA'S
MARKET AFTER THEY HAD A SERIES
OF BAD HURRICANE YEARS, IT MAKES
SOME SENSE. BUT WHAT WE'RE
LOOKING FOR. HERE IS MODERATION,
RIGHT? SOME SORT OF MODERATION.
SO JUST A FEW MORE POINTS I WANT
TO MAKE YOU HEARD THE
COMMISSIONER TALK ABOUT WHAT
REALLY NEEDS TO HAPPEN. UM UH,
THERE TO MAKE THE FAIR PLAN
CONTINUE TO SERVE AS VERY
IMPORTANT FUNCTION. THERE IS
DEFINITELY SOME WAS GLAD TO HEAR
VICTORIOUS SAY THAT THEY'VE
DOUBLED THEIR STAFF. THEY
DEFINITELY DID NOT HAVE ENOUGH
STAFF. NOW THERE, YOU KNOW THEY
ARE RISING SOMEWHAT TO THE TO
THE DEMAND. UM BUT BUT, UH AND I
DO THINK THAT GIVEN THE
SITUATION WITH H OAS, WE'RE
HEARING IT. YOUR COLLEAGUES,
WE'RE ALL HEARING IT HAVING THE
FAIR PLAN BE ABLE TO OFFER
INCREASED LIMITS OF UP TO 20
MILLION DOES MAKE SENSE FOR
HORUS. AND THEN I DON'T THINK
THAT I THINK IT WOULD BE VERY
RISKY TO ALLOW THE FAIR PLAN OR
PARTICIPATING INSURERS TO GET
FULL CREDIT FOR REINSURANCE OR
TO MAKE UNLIMITED USE OF CAT
MODELS. I THINK THAT WOULD JUST
BE REALLY, UM I HAVE A I THINK
YOU'LL BE HEARING ABOUT IT FROM
YOUR CONSTITUENTS LOUD AND CLEAR
, BUT I THINK THE COMMISSIONER
IS REALLY DOING A PUTTING A LOT
OF TIME INTO SITTING DOWN WITH
THE INSURERS AND TRYING TO
FIGURE THIS OUT. UM I KNOW THAT
THE C E A. YOU KNOW, WE'VE BEEN
LOOKING A LOT AT WELL GIVEN THAT
THE YOU'VE BEEN HEARING ABOUT
REINSURANCE COSTS ALL DAY, RIGHT
REINSURANCE UNREGULATED. PRICES
ARE HIGHER THAN THEY'VE EVER
BEEN, UM AND YOU KNOW GLENN
POMEROY, WHO IS THE HEAD OF THE
CIA, AND I AND OTHER PEOPLE HAVE
BEEN THINKING FOR YEARS. ABOUT
WHAT? WHAT COULD THE STATE DO IN
TERMS OF PROVIDING SOME SORT OF
ALTERNATIVE MEASURE OF BACKSTOP
THAT REINSURANCE PROVIDES TO
REDUCE THE RELIANCE ON
REINSURANCE IS SOMEWHAT UNLESS
IN THAT SECTORS, BASICALLY BY
SCRIPT ON ALL OF US, RIGHT, SO
THAT'S SOMETHING TO LOOK AT.
LOOK AT FLORIDA'S UM, CAP FUND
THEIR HURRICANE KAPLAN, WHICH IS
BASICALLY A TYPE OF PUBLIC
INSURANCE FOR REINSURANCE. I'M
SORRY FOR HIGH RISK, SO THOSE
ARE MADE BASICALLY THE POINTS I
WANTED TO MAKE. UM YOU KNOW, I
ASSEMBLYMEMBER'S WOULD. I MEAN,
YOU KNOW, YOU KNOW WHAT ARE WE
DO A LOT OF WORK IN YOUR AREA
AND WE THROUGH OUR MY
ORGANIZATION'S WILDFIRE RISK
REDUCTION ASSET PROTECTION
WORKING GROUP FOR NOW, GOING ON
2.5 YEARS WE'VE BEEN WORKING
WITH STAKEHOLDERS TO GET THESE
MITIGATION PROGRAMS SOLID TO GET
THE STANDARD SOLID. TO GET THOSE
REGS IN PLACE TO GET THE
DISCOUNTS THERE BECAUSE WE ALL
RECOGNIZE THAT PEOPLE NEED
FINANCIAL INCENTIVES IN ORDER TO
SPEND TIME AND MONEY. ON FIXING
WHAT TO THEM AIN'T BROKE, RIGHT,
SO WE'RE MOVING IN THE RIGHT
DIRECTION ON MITIGATION
DISCOUNTS, AND I THINK THAT WE
GOT TO REALLY, UM, GIVE THE
COMMISSIONER AND HIS TEAM A
CHANCE TO DO THEIR JOB AND TRY
TO MOVE FORWARD HERE WITHOUT
DOING SOMETHING REALLY, REALLY
DRAMATIC. UM AND THANK YOU SO
MUCH FOR YOUR TIME AND
ATTENTION. REMEMBERS JOHN
NORWOOD ON BEHALF OF THE
INDEPENDENT INSURANCE AGENTS AND
BROKERS. CALIFORNIA UM ARE
MEMBERS SERVE CONSUMERS AND
PROVIDING INSURANCE AND
LITERALLY EVERY COMMUNITY AND IN
CALIFORNIA THEY DON'T JUST RIGHT
WITH THE BIG PERSONAL LINES
INSURANCE COMPANIES, BUT THEY
WRITE WITH THE OTHER 100
INSURANCE COMPANIES IN
CALIFORNIA, THE RIGHT HOMEOWNERS
INSURANCE AND COMMERCIAL
INSURANCE FOR BOTH RESIDENCES
AND BUSINESSES. ACROSS THE STATE
ARE MEMBERS TELL US IS THE WORST
CLIMATE THEY'VE EVER SEEN FOR
PROPERTY INSURANCE, THE TWO
HIGHEST PRICE OPTIONS THE FAIR
PLAN AND NOT ADMITTED MARKET OR
OFTEN, THE ONLY PLACES THEY CAN
GO. AS YOU'VE HEARD TODAY,
ADMITTED INSURERS ARE RETREATING
FROM CALIFORNIA MARKET AND HAVE
BEEN FOR SOME TIME THEY TELL
THEIR AGENTS NOT TO SUBMIT NEW
BUSINESS. THEY TAKE THEIR
COMPANY OFF COMPARATIVE RATING
SITES. THEY ELIMINATE PREMIUM
FINANCING OPTIONS. REDUCE
ADVERTISING, ELIMINATE DISCOUNTS
AND DO OTHER THINGS TO BASICALLY
DIFFER BUSINESS. I THINK A LOT
OF THAT, BY THE WAY IS DRIVEN BY
THE MORATORIUMS WERE IF THEY
CAN'T DEAL YOU KNOW, IN THESE
CERTAIN AREAS, THEY HAVE TO GO
SOMEWHERE ELSE BECAUSE WHAT'S
HAPPENING AND WE HAVE A CLIENT
LIKE THIS? THE REINSURER COMES
TO HIM AND SAYS, YOU'VE GOT TO
CUT BACK IF YOU CAN'T AFFORD
MORE INSURANCE. YOU GOTTA CUT
BACK YOUR MARKET, SO THEY'RE OUT
NON RENEWING PEOPLE THEY DON'T
WANT TO NON RENEW BECAUSE THEY
HAVE NO OTHER CHOICE. THE OTHER
THING IS, I THINK A LOT OF THESE
COMPANIES GIVEN THE MAGNITUDE OF
WHAT THE FAIR PLAN WAS TALKING
ABOUT IN TERMS OF POTENTIAL
ASSESSMENT, UM THEY'RE GONNA
THEY'RE NOT GONNA TAKE THAT, SO
THEY'RE MOVING OUT OF CALIFORNIA
AS QUICKLY AS POSSIBLE. THIS
THIS SYSTEM SIX CURRENT
SITUATIONS, NOT ONLY UNDERMINING
OUR MEMBERS BUT IT'S HAVING
CATASTROPHIC EFFECTS ON
CONSUMERS. WE'VE YOU KNOW,
CONSUMERS ARE IN SOME CASES
FACING FORECLOSURE BECAUSE UNDER
THEIR MORTGAGE, YOU KNOW THEY
HAVE TO HAVE INSURANCE AND OTHER
CASES IF THEY CAN'T FIND IT. THE
BANKS HAS THE ABILITY TO FORCE
PLACE INSURANCE AT REALLY,
REALLY HIGH RATES. WE HAVE
BUSINESSES THAT CAN'T GET LINES
OF CREDIT. THEY CAN'T FINANCE
NEW OPERATIONS. THEY CAN'T YOU
KNOW, ESSENTIALLY FINANCE THEIR
BUSINESSES BECAUSE RELAX OF
INSURANCE. THIS IS CURRENT
MARKET IS JUST NOT SUSTAINABLE.
UM THANK GOODNESS FOR THE FAIR
PLAN. BUT WE REALLY AND YOU
KNOW, EVEN WRITING WITH THE FAIR
PLAN. THERE ARE ISSUES. THERE'S
ISSUES OF COVERAGE ISSUES OF
STACKING POLICY. THERE'S NO
LIMITS ON ALL KINDS OF THINGS.
IT'S NOT TO BE ALL TO END ON.
THE FACT IS, SOMEBODY SAID IT IS
A BAND AID AT MOST. THAT BEING
SAID, OUR MEMBERS ARE GOING TO
KEEP PUMPING EVERYTHING THEY CAN
INTO THE FAIR PLAN BECAUSE THEY
DON'T HAVE A CHOICE. BUT YOU
KNOW THE IDEA THAT YOU'RE GOING
TO HAVE THE FAIR PLAN. TAKE ALL
THESE HIGH RISK POLICIES WITHOUT
ANY DIVERSIFICATION IN TERMS OF
GEOGRAPHIC RISK IS THE VERY
DEFINITION OF INSOLVENCY. IT'S
GONNA HAPPEN. WHAT WE REALLY
HAVE TO HAVE IS A COMPETITIVE
INSURANCE MARKET, WHERE INSURERS
HAVE CONFIDENCE IN THEIR RATES
CAN HAVE GEOGRAPHIC
DISTRIBUTION. AND THAT WILL
BRING YOU KNOW THE WE THINK THAT
WILL BRING THE MARKET BACK. OUR
OUR MEMBERS THEIR CUSTOMERS OR
CUT SQUARELY BETWEEN THE
DEPARTMENT OF INSURANCE AND THE
INSURERS IN THE STATE. YOU KNOW
THE INSURERS OF YOU AS YOU HEARD
TALK ABOUT THE FACT THAT THEY
CAN'T GET AN ADEQUATE RATE THAT
IT TAKES TOO LONG. WHATEVER THEY
CASE MAYBE THE INSURANCE
COMMISSIONER HAS COMPLAINED THAT
COMPANIES AREN'T ASKING FOR WHAT
THEY REALLY NEED THAT IF THEY
NEED 30% THAT'S GOING TO TAKE
YOU KNOW, FOUR OR 56.9 FILINGS,
AND THAT'S TAKING UP ALL THIS
TIME. ALL THAT MAY WELL BE TRUE.
BUT IT REALLY DOESN'T MATTER FOR
US. WE KIND OF ARE LOOKING FOR A
SOLUTION. AND THE BIG PROBLEM IS
, I THINK THE MAJOR FACTOR
CONTRIBUTING TO THE SITUATION IS
AN OUTDATED AND INFLEXIBLE
RATING LAW THAT DOESN'T
RECOGNIZE ACTUAL COSTS INCURRED
BY COMPANIES I E. REINSURANCE.
OR AND IGNORE THE SCIENCE OF
MODELING FOR FUTURE RISKS. AND
AND THAT'S JUST NOT
UNDERSTANDABLE. EVERYTHING WE'RE
DOING IN THIS COUNTRY, FEDERALLY
AND STATE IN TERMS OF CLIMATE
CHANGE AND ALL THE THINGS THAT
PEOPLE TALKED ABOUT GETTING RID
OF YOUR GAS STOVES. IS THAT ALL
BEING DRIVEN BY MODELING? THAT'S
ALL IT IS. CALPIRG USES MODEL.
OH, YES, SHE WAS HIS MOLLY CE A
USES MODELING. UM, THE
DEPARTMENT USES MODELING AND
THEIR OWN CLIMATE CHANGE REPORT
LAST YEAR. WHAT DID THEY SAY
THAT 70. THERE'S THAT THERE'S
GONNA BE A 77% INCREASE IN THE
NUMBER OF HOMES IN CALIFORNIA.
SUBJECT TO SEVERE WILDFIRE NOW,
YOU KNOW, GUESS WHAT EVERYBODY
IN THE WORLD HAS PUT THIS
PROVIDING FINANCING FOR
INSURANCE COMPANIES IN THE STATE
READS THAT AND GUESS WHAT, AND
THAT'S WHAT THEY'RE RESPONDING
TO, AND THAT'S WHAT WE HAVE. YOU
KNOW, NOBODY REALLY WANTS TO,
YOU KNOW, INCUR HIGHER INSURANCE
COSTS AND FORCE THAT ON THE ON
CONSUMERS, BUT, YOU KNOW, WE
BELIEVE THAT, UM CONSUMERS ARE
BETTER OFF, YOU KNOW,
ESSENTIALLY PAYING A LITTLE BIT
MORE FOR INSURANCE AND HAVING A
COMPETITIVE MARKET WHERE THEY
HAVE OPTIONS RATHER THAN BEING
FORCED INTO THE HIGHEST TWO
COVERAGES AND YOU LOOK AT THAT
YOU TAKE AS AN EXAMPLE. YOUR
HOMEOWNERS ASSOCIATIONS TODAY
THERE MAY BE SPENDING $50,000
FOR PROPERTY INSURANCE. WELL
WHAT WE'VE HEARD THROUGH IN OUR
BUSINESSES THAT COMPANIES NEED
20 TO 40% CHANGE IN RATES. WELL
TAKE 30% SO THAT SO NOW THEY
THEY HAD A 3% INCREASE. IT GOES
FROM 50 TO 65,000. AT LEAST
THAT'S DOABLE. IT'S A LOT
DIFFERENT THAN 304 100,000. TAKE
AN AVERAGE HOMEOWNER'S INSURANCE
POLICY. LET'S SAY $1000 ANNUAL
PREMIUM WELL GOES UP 30% THAT'S
A REALLY NICE DINNER OUT
SOMEPLACE, BUT THAT'S WHAT IT
IS. IT'S A LOT BETTER THAN
SPENDING 3000 OR $4000. YOU KNOW
, THAT'S YOU KNOW, THAT'S THE
CHALLENGE WE'VE GOT IS A AS A
INDUSTRY IS, REGULATORS AND
LEGISLATORS HAVE GOT TO SIT
DOWN. AND YOU KNOW, FIGURE THIS
OUT. I MEAN, THERE'S SOLUTIONS
THAT ARE OUT THERE. UM COUPLE
OTHER REAL QUICK COMMENTS WHEN
THE COMMISSIONER TALKS ABOUT 3%
OF THE MARKET HERE, THAT'S 3% OF
RESIDENCES IN THE WHOLE BARS IN
THE FAIR PLAN. IT'S NOT THE
NUMBER OF RESIDENCES ARE IN THE
NON ADMITTED MARKET. IT'S NOT
ALL THE BUSINESSES AND THINGS
ARE THERE, SO THIS PROBLEM WAS
BIGGER THAN 3% I THINK THAT'S
KIND OF UNDERSTATING THE ISSUE.
UM SO I THINK THAT'S SOMETHING
WE HAVE TO CONSIDER. THERE'S A
YOU KNOW, SOMEWHERE BETWEEN
500,000 MILLION PEOPLE OUT THERE
THAT REALLY HAVING A PROBLEM AND
IT'S GOING TO GROW IF YOU
BELIEVE YOU KNOW THIS MODELING
AND, UM SO WITH THAT, YOU KNOW,
HAPPY TO BE YOUR LAST SPEAKER,
BUT I APPRECIATE I APPRECIATE
THE OPPORTUNITY. THANK YOU MIS.
THANK YOU, MISS BUCK. THANK YOU,
MR NORWOOD. DO WE HAVE ANY
QUESTIONS? SOME OF THE MEMBER
WOULD, UM, THANK YOU. THANK YOU.
AND YOU KNOW, OBVIOUSLY, WE
HEARD HEARD THE INSURANCE. THE
INSURANCE COMPANY'S PERSPECTIVE.
HEARD YOUR PERSPECTIVE. THERE
FEELS LIKE THERE'S POTENTIAL
MIDDLE GROUND ON SOME OF THIS.
SO I GUESS I WONDER, YOU KNOW.
IS EVERYBODY IN A SILO HERE OR
IS THERE AN OPPORTUNITY FOR
EVERYBODY TO GET TOGETHER AT THE
TABLE? AND TALK ABOUT THIS AND
WORK OUT SOME SOME REAL
SOLUTIONS. AND I WOULD I WOULD
PUT CAL FIRE AT THE TABLE TO
BECAUSE IF THEY'RE THE ONES THAT
ARE SETTING STANDARDS OUT THERE
FOR WHAT IS ACCEPTABLE
MITIGATION FOR FIRE THAT
EVERYBODY NEEDS TO KNOW WHAT
THAT IS, AND WHY AND WHAT THAT
MEANS. IT CAN BE USED AND HOW
NOT BE USED. RIGHT. SO. IS THAT
HAPPENING OR IT'S CERTAINLY
HAPPENING THROUGH MY AT MY RAP
WORKING GROUP. WE'VE HAD CAL
FIRE WE, YOU KNOW, WE WERE IT
SORT OF HAS BEEN A PROCESS OF
LIKE WHAT ACTUALLY MOVES THE
NEEDLE, UM IN TERMS OF HARDENING
HOME AND DEFENSIBLE SPACE AND
THEN COMMUNITY LEVEL SHADED
FIELD BREAKS ALL THAT. I THINK
CAL FIRE IS VERY MUCH IN THE
CONVERSATION. I KIND OF FEEL
LIKE WE ARE STARTING TO GET
THERE'S A LOT MORE DIALOGUE
GOING ON NOW. I MEAN, OBVIOUSLY,
WE'VE EMERGING FROM THE CLOSED
PART OF THE PANDEMIC, AND
THERE'S A LOT MORE DIALOGUE, I
THINK BETWEEN THE DEPARTMENT OF
INSURANCE AND INSURERS HAPPENING
, I THINK, UM, YOU KNOW, WE'RE
ALL KIND OF RECOGNIZING, YOU
KNOW, THE MORATORIUMS HAVE BEEN
INCREDIBLY VALUABLE TO YOUR A
LOT OF YOUR CONSTITUENTS, RIGHT
? AND AGAIN, YOU KNOW, WE'VE HAD
KNOCK ON WOOD A COUPLE OF GOOD
YEARS. WHICH MAKES A HUGE
DIFFERENCE. YOU KNOW, THERE'S A
LOT OF PERCEPTION THAT DRIVES
INSURANCE, YOU KNOW, EXECUTIVES
WILLINGNESS TO TAKE MARKET SHARE
AND LEAVE. UM SO I THINK WE'RE
SOMEWHAT UM, YOU KNOW WE HAVE.
THE CARRIERS ARE VERY MUCH, UM,
A LOT OF THEM COMING AROUND TO.
OKAY WE WILL RECOGNIZE THAT YOU
CAN ACTUALLY DO THINGS TO
PREVENT A HOME FROM BURNING. I
MEAN, IT WAS A LONG TIME WHERE
THERE WERE THERE WAS SORT OF
LIKE WE'RE 10 YEARS AWAY FROM
IT. WE CAN'T. BUT NOW I THINK
THERE'S A LOT MORE DIALOGUE
GOING ON BETWEEN INSURANCE
COMPANIES AND MORE ACCEPTANCE
THAT MITIGATION ACTUALLY WORKS.
BUT WE GOT TO GET YOU KNOW WE'RE
ON TRACK WITH THE RAGS AND THE
FILINGS AND YOU KNOW, AND SOME
INSURERS HAVE STARTED TO, YOU
KNOW, DIP THEIR FEET IN WITH,
LIKE A 5% DISCOUNT OR THIS OR
NOT. WE'RE ON THE RIGHT TRACK,
I'D SAY. BUT UM, BUT THERE'S
JUST NO, NO CHANGING. YOU KNOW,
YOU CAN MOVE PIECES AROUND. BUT
CLEARLY WHEN YOU SEE WHAT
HAPPENED IN, YOU KNOW, THE OVER
2017 18 1920 YOU KNOW, WHILE I
GET I CRINGE WHEN I HEAR
INSURERS SAY, OH, IT WIPED OUT,
YOU KNOW, 20 YEARS OF
UNDERWRITING INCOME. THEY'VE
NEVER LIVED ON UNDERWRITING
INCOME ALONE EVER ANYWAY. THEY
ALWAYS HAVE WAYS OF INVESTING
AND THEY, YOU KNOW, SO BUT YOU
CANNOT DENY THAT IF YOU KNOW THE
THAT FROM THEIR PERSPECTIVE. YOU
KNOW THE SITUATION IS VERY
DIFFERENT AND THE RISK IS HIGHER
, AND PEOPLE HAVE TO PAY MORE.
AND THERE'S THAT'S THE HARD
MESSAGE HERE. I ABSOLUTELY THINK
THAT THERE'S ROOM FOR MIDDLE
GROUND. I MEAN, EVEN IF YOU
ALLOW INSURERS TO USE MODELING
AND REINSURE INSURANCE AND
PERSONS NOT GONNA ACCEPT THAT
OFF THE BAT, THEY'RE GOING TO
PUSH BACK JUST LIKE THEY DO.
THAT'S THE WHOLE PROCESS. UM WE
WOULD ENCOURAGE OF THE
LEGISLATURE REGULATORS, THE
INDUSTRY OF ASSOCIATED GROUPS TO
SIT DOWN AND I THINK YOU NEED
THERE NEEDS TO BE SOME OVERSIGHT
OF THAT TO MAKE SURE THAT IT'S
HAPPENING, AND THERE'S REGULAR
MEETINGS AND THEN WE'RE PUSHING
FORWARD TO GET SOMETHING DONE.
DONE UM, YOU KNOW, I SAID AGENTS
AND BROKERS IN THE MIDDLE
THERE'S JUST LIKE CONSUMERS AND
ARE IN THE MIDDLE OF THIS UNDER
DEPARTMENT REGULATIONS. WE CAN'T
EVEN BE AN INTERVENER. WHICH
MAKES NO SENSE. WE ACTUALLY HAVE
CUSTOMERS WE REPRESENT, AS
OPPOSED TO SOME GROUPS. UM SO
YEAH, WE WOULD ENCOURAGE VERY
MUCH THAT, UH, NEGOTIATIONS
DISCUSSIONS, MEDIATION. WHATEVER
YOU CALL IT START MOVING FORWARD
YESTERDAY. WELL AND THAT'S NOT,
YOU KNOW THAT THERE ARE THORNY
TOPICS THAT HAS HAPPENED WITHIN
THE PAST, YOU KNOW, AND YOU KNOW
, SO I HOPE THAT THAT THAT CAN
HAPPEN. I YEAH, I WOULD HAVE TO
AGREE. UM WITH YOUR ASSESSMENT
THAT. I WOULD SAY FOR ME AS A
CONSUMER, I WOULD GLADLY PAID
NOT GLADLY, BUT I WOULD PAY
WOULD PAY 20 OR 30% MORE PREMIUM
THAT GIVES ME COMPREHENSIVE
COVERAGE PLAN THAT IS HIGHER,
YOU KNOW, A MUCH HIGHER PREMIUM
THAT DOESN'T COVER COVER ME, BUT
IT'S THE ONLY THING AVAILABLE
AND SO HOW DO WE GET TO THAT
PLACE WHERE WE CAN BE ABLE TO
COMPANIES CAN BE ABLE TO OFFER
THOSE AGAIN SO THAT WE CAN ALL
BENEFIT IF I COULD. ONE LAST
COMMENT. IS THAT LIKE I SAID,
OUR MEMBERS REPRESENT A LOT OF
THE SMALLER MARKET SHARE IN THE
PERSONAL LINES COMING. THESE ARE
NOT SMALL COMPANIES. THEY'RE
JUST SMALLER MARKET SHARE AND
PERSONAL LINES THAT MAYBE WRITE
A LOT IN COMMERCIAL LINES. THE
BIG COMPANIES THAT ARE DOING
PERSONAL LINES THAT YOU SEE ON
TV ALL THE TIME THEY'RE GOING TO
STAY HERE. THEY'RE GOING TO WORK
THROUGH THIS. IT'S GONNA BUT
THESE OTHER COMPANIES THAT THAT
, AS AMY SAID, HAS OVER THE
YEARS BALANCED OFF THE MARKET
BECAUSE THEY BECOME AVAILABLE
WHEN SOMEBODY ELSE THEY SEE
CALIFORNIA AND IF THE RISK IS
TOO HIGH IN TERMS OF
ASSESSMENTS, MORATORIUMS, UM YOU
KNOW THEY THE MODELING AND THEY,
YOU KNOW, THEY JUST WALK AWAY. I
MEAN, THEY CAN GO SPEND THEIR
CAPITAL SOMEPLACE ELSE. AND THAT
AFFECTS OUR MEMBERS BECAUSE THEY
JUST DON'T HAVE AND THEIR
CLIENTS BECAUSE THEY DON'T HAVE
A PLACE TO PUT THAT BUSINESS
WHERE THEY'VE ALWAYS BEEN ABLE
TO PUT IT. SO IF YOU KNOW THE
MARKET'S NOT ALL THE SAME, AND
IT'S DIFFERENT FOR DIFFERENT
PEOPLE. AND WE JUST HAVE TO BE
INCLUSIVE OF THAT. THANK YOU SO
MUCH. MISS BUCK. MR NORWOOD. WE
APPRECIATE YOU BEING HERE. OKAY
AT THIS TIME, I'D LIKE TO OPEN
UP FOR PUBLIC COMMENT. IF YOU
COULD PLEASE STATE YOUR NAME
AFFILIATION AND PROVIDE A BRIEF
, UH, REMARK. THANK YOU, SIR.
MADAM CHAIR AND MEMBER. THANK
YOU VERY MUCH FOR THE
OPPORTUNITY. MDN DUNMIRE WITH
THE CALIFORNIA BUILDING INDUSTRY
ASSOCIATION. I ALSO WANT TO
THANK YOUR CHIEF CONSULTANT FOR
HER EFFORTS. MISS O'MALLEY WAS
VERY HELPFUL. CALIFORNIA BILLY
INDUSTRY ASSOCIATION BILLS NINE
OF THE 10 HOUSING UNITS BUILT
EACH YEAR IN THE CALIFORNIA LAST
YEAR. THAT WAS 100 AND 20,000
HOUSING UNITS. MY COMMENTS TODAY
AND THIS MAY SCARE PEOPLE WHO
KNOW MY BACKGROUND IS IN TOTAL
AGREEMENT. WITH THE CONSUMER
PERSPECTIVE, THE CONSUMERS AND
WE'LL TALK ABOUT TODAY ARE THE
CONDOS WE BUILD. WE BUILD TENS
OF THOUSANDS OF CONDOS IN
CALIFORNIA AND RIGHT NOW
BUILDING CONDOS IS INCOMPLETE
AND TOLD JEOPARDY. THE
INDIVIDUAL THAT YOU HEARD ABOUT
THE INSURANCES. THAT WAS I MEAN,
THE BUILDING INDUSTRY WAS
TALKING ABOUT THE HIGHER RATES
WAS ME OUR RECORD FOR INCREASE
IN PREMIUM ON A CONDO
ASSOCIATION YEAR. EVERY YEAR WAS
6900% NOT 1000 6009% SO 40,000
TO 2.8 MILLION MONTHLY CHARGE
CHANGE FROM $250 PER MONTH FOR
THE ASSOCIATION DUES. TO 1500 A
MONTH. WE'RE TALKING ABOUT
FORECLOSURE AND BANKRUPTCY OF
PEOPLE WHO BOUGHT HER HOMES LAST
YEAR. AND THAT FOCUS IS TODAY.
IT'S NOT LIKE COULD HAPPEN. SO
HERE'S OUR SOLUTION IN THE
MINUTE I HAVE. WE BELIEVE THE
FAIR PLAN IS THE SHORT TERM AND
THE EMPHASIS HERE IS THE SHORT
TERM SOLUTION. FAIR PLAN ENSURES
A $3.3 MILLION HOME BUT DOESN'T
ENSURE A $500,000 CONDO BECAUSE
ITS COMMERCIAL COVERAGE AND IT'S
AN ASSOCIATION THIS ROACHES
BRILLIANT. SHE SUMMARIZED HER
CHALLENGES. WE WANT A SHORT TERM
SOLUTION. 12 18 MONTHS WITHIN
THEIR FAIR PLAN FOR A CONDO
ASSOCIATIONS UP TO 20 MILLION
PER BUILDING UNIT. AND THAT
WOULD AT LEAST GET US THROUGH
THE NEXT 18 MONTHS. THE PRIVATE
MARKET THE ADMITTED CURIOUS
HEARD ABOUT THEY HAVE TO SOLVE
THIS. AS MUCH AS MISS ROACHES
HAS 220 BILLION AND EXPOSURE.
THE PRIVATE MARKET YOU READY FOR
THIS NUMBER HAS FOUR QUADRILLION
DOLLARS IN EXPOSURES, SO THERE'S
CAPACITY IN THE PRIVATE MARKET,
SO WE WANT TO GET THE PRIVATE
MARKET BACK IN. WE URGE THEM TO
GO TO THE COMMISSIONER QUICKLY
AND COME UP WITH THE RATES THEY
NEED. WE'LL TAKE 40% OVER 6900%
EVERY DAY OF THE WEEK. THERE'S A
PARTISAN FOR ME TO SAY THAT
THAT'S WHAT WE NEED. SO WE WANT
THIS MARKET TO WORK. WE WANT THE
PRIVATE SECTOR BACK IN. WE NEED
A FAIR PLAN TOMORROW. BECAUSE
WE'RE TALKING ABOUT PEOPLE
TOMORROW, NOT BEING ABLE TO STAY
IN THEIR HOMES. LAST THING WE
ARE NOT SELLING ANYMORE CONDOS
THAT ARE COMPLETELY BUILT WITH
CONTRACTS AND 100% CASH OFFERS
BECAUSE THERE'S NO INSURANCE
THAT'S HAPPENING TODAY, SO WE
WOULD LOVE TO BE PART OF THE
STAKEHOLDERS. WE WANT TO BE PART
OF THE SOLUTION, MADAM CHAIR.
THANK YOU. YOU'RE WELCOME. THANK
YOU. I'M SHORT, SO I'M GONNA
BRING THIS DOWN. UM SO THANK YOU
GUYS. FIRST FOR THOSE OF YOU
THAT REMAINED, UM WE APPRECIATE
IT VERY HEAVILY. MY NAME IS
AURORA MILLET. I AM WITH SKY
INSURANCE BROKERS. I AM ALSO, UM
WHAT PEOPLE OUT THERE WOULD
CONSIDER A HIGH WILDFIRE EXPERT
IN THE MARKETPLACE. WE FOCUS
ALMOST 100% OF OUR EFFORTS ON
HELPING THOSE AND HIGH RISK
AREAS. I WANT TO TALK A LITTLE
BIT ABOUT WE. WE'VE ALL HEARD
THAT FAIR PLAN IS THE BAND AID
AND A LOT OF THE PRESSURE. THAT
FAIR PLAN IS FEELING AND THE
REASON WHY THEY'RE HAVING TO
INCREASE THEIR RATES AS THE LACK
OF OVERSIGHT THAT OUR
COMMISSIONERS DOING ON THE
INSURANCE INDUSTRY, SO HE FIRST
DEREGULATED THE REASONING THAT
YOU COULD NOT GO TO FAIR PLAN
FOR PRICE. AND WE UNDERSTAND THE
MINDSET FOR THAT. WHAT THAT DID
WAS OPEN UP FOR VERY
UNSCRUPULOUS AGENTS AND TO THE
MARKETPLACE, INCLUDING CAPTIVES
LIKE FARMERS. UM, TRIPLE A THEY
ARE NO LONGER ADVISING CUSTOMERS
TO GO OUT THERE AND LOOK FOR
ALTERNATIVES IN THE MARKETPLACE.
THEY ARE SIMPLY LOOKING AT THE
CASH DOLLAR, EVEN IF THEY CAN
WRITE IT AND ADMITTED MARKET AND
THEY GET MORE PREMIUM OFFER
WRITING AND IN THE FAIR PLAN,
THEY'RE PUTTING THEM INTO THE
FAIR PLAN. AND THE COMMISSIONER
IS AWARE OF THIS, AND HE'S DOING
NOTHING TO REGULATE HOW AND WHEN
THOSE CUSTOMERS ARE IN THERE AND
HOW TO GET THOSE CUSTOMERS OFF
OF THE FAIR PLAN, SO UNTIL WE
START HOLDING HIM ACCOUNTABLE
FOR THE OVERSIGHT THAT HE NEEDS
TO DO, WE'RE GOING TO CONTINUE
TO PUT PRESSURE ON TO THE
CALIFORNIA FAIR PLAN. HAVING US
SAY THAT THEY NEED TO DO A
COMPREHENSIVE POLICY IS GOING TO
FOLD IT. IT'S GOING TO PUT EVEN
MORE PRESSURE ON THERE. IT'S
GOING TO HAVE A LONG TERM EFFECT
ON THE INSURANCE MARKET. THE D I
C POLICIES THAT ARE AVAILABLE
OUT IN THE MARKETPLACE. HE'S NOT
REGULATING THOSE. THEY ARE NOT
ONLY SURCHARGING UNDER THOSE
POLICIES, AND THEY'RE GETTING
SER CHARGED UNDER THE CALIFORNIA
FAIR PLAN, SO COMPANIES BEING
ABLE TO RATE FOR FIRE WHEN
THEY'RE NOT PROVIDING FIRE IS
100% UNDER THE REGULATION OF OUR
CURRENT COMMISSIONER, AND HE'S
DOING NOTHING TO HELP ABSOLVE
THOSE INCREASED COSTS ON OUR
HONOR ON YOUR CONSTITUENTS. SO
UNTIL THIS TYPE OF REGULATION
STARTS TO HAPPEN, THIS IS GOING
TO KICK THE CAN DOWN THE ROAD
AND WE'RE NOT GOING TO HAVE ANY
SOLUTIONS OR GIVE ANYTHING FOR
THE STANDARD MARKET TO COME BACK
IN TO RELIEVE SOME OF THAT
PRESSURE OFF OF THE FAIR PLAN.
THANK YOU. HI I'M SHORTER THAN
SHE IS. APPARENTLY MY NAME IS
DON FOSTER AND I AM A FARMERS
AGENT IN PARADISE, CALIFORNIA
BEEN A FARMERS AGENT FOR 20
YEARS. I AM LUCKY THAT I'M A
FARMERS AGENT BECAUSE THEN IF I
CAN'T PLACE YOU WITH FARMERS, I
THEN BECOME A BROKER, SO I
REPRESENT MULTIPLE COMPANIES
CURRENTLY HAVE 500 NON RENEWAL
SITTING ON MY DESK. OKAY FROM
MULTIPLE CARRIERS. FARMERS IS
NOT ONE OF THEM. FARMERS HAS NOT
NON RENEWED ANYONE FOREMOST IS I
WANT TO PUT IN EVERYBODY'S EAR
THAT IS HERE. MOBILE HOME
COVERAGE MANUFACTURED HOMES. BIG
PROBLEM. FARMERS IS TRYING TO
REBUILD OUR TOWN. I'M SORRY.
PARADISE IS TRYING TO REBUILD
OUR TOWN. UM I WOULD LOVE IT IF
FARMERS DID IT, BUT THEY ARE
ONLY DOING A COUPLE. UM WE HAVE
SO FAR DONE A LITTLE OVER 2000
HOMES. WE LOST 17,000 RESIDENCES
IN ONE DAY'S FIRE AND MULTIPLE
COMMERCIAL BUILDINGS. UM
CURRENTLY RIGHT ABOUT 60% OF
THEM IN THE STANDARD MARKET. I
AM A BIG PROPONENT OF THE FAIR
PLAN. I ONLY ARE OFFERED AS A
LAST RESORT. BUT UM, SURPLUS
LINES ARE HARDER AND MORE
EXPENSIVE. I MEAN, YOU CAN HAVE
A FAIR PLAN POLICY THAT'S GOING
TO BE $6000 AND LLOYD'S OF
LONDON PRODUCT THAT'S GOING TO
BE $16,000 FOR LESS COVERAGE. SO
SURPLUS LINES IS KIND OF A
NIGHTMARE RIGHT NOW FOR US IN
OUR COMMUNITY. UM THE BIGGEST
THING I WANTED TO MAKE SURE TO
MENTION IS I DON'T UNDERSTAND
WHY NOBODY IS TALKING ABOUT WHAT
THEY DID FOR EARTHQUAKE, RIGHT?
I MEAN, THEY DIDN'T KNOW THAT
WAS COMING. THEY DIDN'T HAVE ANY
CAT MODELS. THEY DIDN'T HAVE
ANYTHING. NO CRYSTAL BALL THAT
TOLD THEM AN EARTHQUAKE WAS
GOING TO HAPPEN AND DESTROY
EVERYTHING. BUT THE GOVERNMENT
GOT TOGETHER IMMEDIATELY WITHIN
SIX MONTHS AND CREATED THE
CALIFORNIA EARTHQUAKE AUTHORITY.
THE COMMISSIONER HAS TOLD ME
POINT BLANK THE REASON HE
DOESN'T BACK. THAT IS BECAUSE
ONLY LESS THAN 10% OF
CALIFORNIANS HAVE EARTHQUAKE
INSURANCE. UM. THAT I MEAN,
THAT'S UNFORTUNATE, SO THE OTHER
OPTION TO THAT WOULD BE ADDING A
CATASTROPHE DEDUCTIBLE ON THE
STANDARD POLICY. IF THEY WERE
ABLE TO HAVE A, UH, WILDFIRE OR
A CATASTROPHE DEDUCTIBLE ON THE
STANDARD POLICY, THEN YOU COULD
HAVE $1000 DEDUCTIBLE FOR A
KITCHEN FIRE AND THAT MAY OPEN
THE MARKET BACK UP FOR THE
STANDARD PEOPLE. MR WOOD. WHAT I
TELL YOUR CONSTITUENTS WHEN THEY
ASKED ME WHAT THE HECK AM I
SUPPOSED TO DO? I TELL THEM TO
CALL YOU. UM, YOU'RE WELCOME. I
MEAN, CALL CALL, YOU KNOW,
COMMISSIONER LARA MAKE YOUR
GOVERNMENT AWARE OF THE FACT
THAT THIS IS AN ISSUE AND IT'S
THE STANDARD MARKET THAT'S
BROKEN. NOT THE FAIR PLAN. UM I
LIVE IN PARADISE I SELL IN
PARADISE AND IN MCGILLIAN, THE
COMMUNITIES AROUND THERE AND
LIKE I SAID, 60% OF MY
BUSINESSES, STANDARD PLACEMENT.
I HAVE LESS CALIFORNIA FAIR PLAN
POLICIES THAN MOST BROKERS I
TALKED TO, AND I'M WITH ARORA ON
THE FACT THAT THERE ARE BROKERS
OUT THERE THAT RIGHT WITH THE
FAIR PLAN BECAUSE TO BE HONEST,
IT'S EASIER TO WRITE WITH THE
FAIR PLAN NOW THAN TO WRITE WITH
ANY OTHER CARRIER, AND THAT IS
HORRIBLE. I AM STRONGLY I PRAY
EVERY NIGHT AND I'M NOT THAT
RELIGIOUS. I DID BUY A NEW
CRYSTAL BALL BECAUSE MINE BROKE
IN THE FIRE AND I ASK IT EVERY
NIGHT. PLEASE DO NOT LET
COMMISSIONER LARA WHEN AND MAKE
THEM WRITE A COMPREHENSIVE
POLICY. I WILL GET OUT OF
INSURANCE. I'LL PROBABLY GO TO
WORK FOR THE FAIR PLAN. WE ALL
WILL. RIGHT SO THAT REALLY IS A
EVERYTHING. EVERYBODY ELSE HIT
ON EVERYTHING ELSE. UM, AND THE
FAIR POINT PLANS, NOT THE FIXED
EVERYTHING. IT SHOULD. IT SHOULD
BE REMOVED FROM THAT. PIGEON. WE
HAVE ANYBODY ELSE FOR PUBLIC
COMMENT. NOPE. OKAY. UM ALL
RIGHT. WELL, THIS IS CONCLUDES
OUR HEARING. I JUST WANT TO TAKE
A MINUTE TO THANK THE COMMITTEE
STAFF FOR ALL THE WORK THAT
YOU'VE DONE PUTTING THIS HEARING
TOGETHER, AND I'M GONNA GRAB
THIS UP QUICKLY. UM, I BELIEVE
THE KEY TAKEAWAY TODAY IS THE
NEED FOR MODERNIZATION. WE'RE
STILL RELYING ON A FRAMEWORK FOR
THE INSURANCE INDUSTRY THAT WAS
ESTABLISHED IN 1988. AND WE'VE
HEARD TODAY THAT THE FRAMEWORK
WE HAVE HINDERS US FROM
CONSERVATIVE CONSIDERING MORE
ADVANCED TECHNOLOGIES. IT WAS
CREATED AT A TIME WHEN WE
WEREN'T GRAPPLING WITH THE
SEVERITY OF CLIMATE CHANGE,
WHICH WE ARE KIND OF IN THE
THROES OF RIGHT NOW BECAUSE THE
FAIR PLAN IS NOT UNDER THE
PROVISIONS OF PROP 103. THIS
ASSOCIATION SEEMS TO BE THE EASY
ANSWER WHEN THEY ADMITTED MARKET
ISN'T PROPERLY WORKING. BUT IS
THIS THE ONLY SOLUTION? WE HAVE
TO CONTINUE TO EXPAND THE FAIR
PLAN? I'M LOOKING FORWARD TO
ONGOING DISCUSSIONS AND WANT TO
THANK THE MEMBERS, PANELISTS AND
THE PUBLIC FOR BEING HERE TODAY.
RIGHT THAT'S IT. THANK YOU ALL.
NOT IN THE BATHROOM. YEAH. YEAH.
OVER FOR YOU. DEFINITELY. WE DID
IT TONIGHT. BUT I'M GOING. TO
HIÂU. YES. RIGHT? WALK OUT. I
KNOW, YOU KNOW. NO. YEAH YEAH,
NO RUSH. IT FIRE. COUNTY.