Insurance Commissioner Dave Jones recently announced that the California Department of Insurance is implementing new regulations to protect California home owners from being underinsured in the event of a disaster. These regulations target the homeowners insurance industry, and have been established to ensure that consumers who are victims of a disaster, such as an earthquake or wildfire, will be able to get the necessary financial relief to rebuild their homes. The regulations have been formulated to address the common problem of underinsurance that many homeowners face.
The new regulations include provisions:
– requiring insurers to create more consistent, comprehensive and accurate replacement cost calculations;
– requiring insurers to establish clear training standards for agents and brokers who sell homeowner’s insurance;
– creating standards for real estate appraisers who estimate replacement cost for insurance purposes;
– requiring the application of certain standards when estimating cost for insurance purposes;
– establishing record keeping requirements
The Association of California Insurance Companies and the Personal Insurance Federation of California (on behalf of Farmers Insurance, Liberty Mutual Group, Progressive Insurance Company, State Farm Insurance Companies, Allstate Insurance, Mercury Insurance, and other insurers) have jointly filed a lawsuit seeking to block these consumer-friendly regulations. The complaint alleges that the regulations restrict insurer underwriting, which is not an area regulated by the Department of Insurance. In response, Commissioner Jones has commented that the insurers “have clearly missed the mark with this lawsuit and their argument simply has no merit” not least because “the replacement cost regulation has nothing to do with underwriting. The industry is free to decide which customers to sell to and at what price, as long as they comply with the voter-approved initiative Proposition 103, make rate filings with the Department, and get them approved. This is just another attempt, in a long line of many, by the insurance industry to strip consumers of the protections they deserve.”