The following update comes from the California FAIR Plan Association. The FAIR Plan is an association based in Los Angeles made up of insurers authorized to transact basic property insurance in California. Coverage is available to all California property owners, but it provides insurance only as a last resort for people who can’t find homeowners insurance through the regular insurance market.
The update shares that people on the FAIR Plan will see an average rate change of 15.6% as of January 2021. The actual rate will vary, but this rate increase is due to climate change affecting wildfire risk, especially in homes in Wildland Urban Interface areas, like much of the Eastern Sierra. Here's a bit more from Brian:
The impact of climate change is expanding the risk of wildfire in California, and making wildfires more frequent and more destructive. The number and concentration of FAIR Plan customers in fire-prone areas known as the Wildland Urban Interface (WUI) have increased significantly, and are expected to continue to expand.
To manage this concentrated increase in risk, the FAIR Plan must issue policies with rates that are adequate to cover anticipated losses for any customer who files a claim. State law requires that FAIR Plan rates be actuarially sound and must be sufficient to reflect the Plan's risk exposure, and expected loss experience and expenses.
Beginning in early November, January 2021 renewals will be mailed and will reflect a rate change effective January 1, 2021. The average rate change that was approved by the California Department of Insurance is 15.6%. The actual rate changes customers will receive on their renewal policy will vary based on the wildfire exposure of the insured property.
Three product enhancements will be available beginning with policy terms effective January 1, 2021 or later:
Two new deductible options of $15,000 and $20,000. These new deductible options provide customers with new options that may be used to offset some or all a policy's rate change.
New Extended Dwelling Coverage can be purchased that provides an additional 25% of Coverage A. This coverage is not automatic and must be selected if your policyholder requests this coverage. There is an additional premium for this coverage.
The available limit of Supplemental Fair Rental Value coverage is being increased to 50% of Coverage A.
PLEASE NOTE that these product enhancements are available only on policy terms with a January 1, 2021 effective date or later. These product enhancements are not available to policies with effective dates prior to January 1, 2021.
Quotations including these new coverages, and reflective of the new rates effective January 1, 2021, will be available as of December 1, 2020. The online premium calculator for the new rates and coverages will also be available at that time. Please note that going forward new business quotations will be valid for 30 days instead of 60 days across all lines of business.
The California FAIR Plan was established in statute to ensure that all homeowners have access to basic property insurance coverage, no matter where they live in California. This includes providing coverage for homeowners in regions at risk of wildfire that do not have access to other insurance options.