BILL ANALYSIS Ó SB 1302 Page 1 SENATE THIRD READING SB 1302 (McGuire) As Amended April 19, 2016 2/3 vote. Urgency SENATE VOTE: 39-0 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Insurance |13-0 |Daly, Melendez, | | | | |Travis Allen, | | | | |Bigelow, Calderon, | | | | |Chu, Cooley, Cooper, | | | | |Dababneh, Dahle, | | | | |Frazier, Gatto, | | | | |Rodriguez | | | | | | | |----------------+-----+----------------------+--------------------| |Appropriations |20-0 |Gonzalez, Bigelow, | | | | |Bloom, Bonilla, | | | | |Bonta, Calderon, | | | | |Chang, Daly, Eggman, | | | | |Gallagher, Eduardo | | | | |Garcia, Holden, | | | | |Jones, Obernolte, | | | | |Quirk, Santiago, | | SB 1302 Page 2 | | |Wagner, Weber, Wood, | | | | |Chau | | | | | | | | | | | | ------------------------------------------------------------------ SUMMARY: Increases the level of support insurance agents and brokers (agent) must provide to homeowners who have been denied homeowner's insurance coverage. Specifically, this bill: 1)Requires, effective March 1, 2017, the California FAIR Plan Association (FAIR Plan) to maintain a Web site and include that Web site address on all communications. 2)Requires an agent, when requested by the consumer, to submit a coverage application to the FAIR Plan. 3)Declares the bill to be an urgency statute and take effect immediately. EXISTING LAW: 1)Requires property insurers to establish the FAIR Plan to be the insurer of last resort for property insurance. 2)Requires the FAIR Plan to function according to a plan of operations approved by the Insurance Commissioner (commissioner). 3)Requires the FAIR Plan to issue basic property insurance to property owners unable to obtain coverage after making a SB 1302 Page 3 diligent effort. FISCAL EFFECT: According to the Assembly Appropriations Committee, negligible fiscal effect. COMMENTS: 1)Purpose. There remains a big gap in understanding of the FAIR Plan among many agents and brokers who are currently only required by statute to provide homeowners looking for insurance the FAIR Plan "800" toll-free phone number. They are not required to actually help the consumer apply for such coverage, and many do not understand the options for coverage provided by the FAIR Plan. 2)FAIR Plan. The FAIR Plan was created by the Legislature in 1968 to assure stability in the property insurance market following brush fires and riots in the 1960s that led many insurers to exit urban areas regarded as too risky to insure. It is a private association based in Los Angeles comprised of all insurers admitted to write property insurance in California. The FAIR Plan is not a state agency and no taxpayer funds are involved. The FAIR Plan offers a standard fire insurance policy for both structure and contents of residential and commercial properties. A FAIR Plan policy does not provide coverage for liability, theft or water damage typically found in most homeowners' policies, however. The homeowner or business generally must also purchase a "Difference in Condition" SB 1302 Page 4 policy or other supplemental coverage from the voluntary insurance market when purchasing a FAIR Plan policy. As the insurer of last resort, the FAIR Plan does not advertise, and many homeowners who have been non-renewed or are having difficulty finding insurance may be unaware of the FAIR Plan. Until recently only about 6,600 out of 90,000 agents and brokers in the state were registered to sell FAIR Plan policies, although according the Department of Insurance (DOI) that number has increased to about 10,000 as a result of outreach to the agent and broker community since the fires of 2015. It takes about two days for an agent or broker to register with the FAIR Plan and requires little more than submitting a copy of the agent or broker's license. No fees or testing are required, and the FAIR Plan offers a 10% commission for new business and 8% commission for renewals. At the same time, some insurance agents or brokers may be unable to place insurance with the FAIR Plan because they are "captive" agents and can contractually only sell policies of their contracting company. With approximately 126,000 FAIR Plan dwelling policies in place in the state, approximately 75% of those policies are in urban areas (largely Los Angeles) and about 20% in high and extreme wildfire risk areas. Until recently, applicants for FAIR Plan coverage in specific geographic areas had to provide the names of three insurance companies that had denied insurance coverage for their property in order to qualify for a FAIR Plan policy. Following the Valley and Butte fires last year the commissioner directed the FAIR Plan to make several changes to its operations, including some enhanced coverage options, eliminating the requirement that homeowners prove they were rejected three times for standard insurance policies, and giving more access to brokers registered with the FAIR Plan SB 1302 Page 5 To improve the ability of consumers to access the FAIR Plan and identify brokers who can help them place such policies, the FAIR Plan recently developed a broker lookup feature on its Web site that allows the consumer to enter their zip code or city to identify FAIR Plan registered brokers in their area. Analysis Prepared by: Paul Riches / INS. / (916) 319-2086 FN: 0003899