BILL ANALYSIS Ó
SB 1302
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SENATE THIRD READING
SB
1302 (McGuire)
As Amended August 18, 2016
2/3 vote. Urgency
SENATE VOTE: 39-0
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|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, Wagner, | |
| | |Weber, Wood, Chau | |
SB 1302
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SUMMARY: Increases the level of support insurance agents and
brokers (agent) must provide to homeowner's 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 website and include that
website address on all communications.
2)Requires an agent to assist a consumer seeking a homeowner's
insurance policy to either
a) Submit a coverage application to the FAIR Plan on behalf
of the consumer.
b) Provide the consumer with contact information for the
FAIR Plan.
c) Obtain a policy for the consumer through an admitted or
non-admitted insurer.
1)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
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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
diligent effort.
FISCAL EFFECT: The Assembly Appropriations Committee found that
the bill would have 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 1960's 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.
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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"
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
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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
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 website 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: 0004446