State’s insurance program attracts more customers

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Ventura County Star

People who cannot get property insurance on the open market are turning to a state-run, industry-financed program called Fair Access to Insurance Requirements Plan.

Created by the Legislature after the 1994 Northridge earthquake, when many people found it difficult to find insurance, the program costs more than regular insurance and covers only what mortgage lenders require — fire and other basic damage claims.

Earthquake and liability insurance must be obtained elsewhere at an additional cost.

“The FAIR plan has gone from maybe 100 applications a week to about 300 a day,” said Nanci Kramer, a spokeswoman for the California Department of Insurance. “They’re telling us that on a Monday they could walk in and see maybe 900 inquiries for insurance.”

Mounting evidence that the cost and availability of homeowners’ insurance is approaching a crisis in California has prompted a state Senate panel to investigate the industry. Insurance Commissioner Harry Low told the panel at a hearing Wednesday that he’s uncertain if there’s a crisis, but there is “certainly a problem.”

Complaints about homeowners’ insurance to the department’s consumer hot line have increased fourfold over the past six months, Low said.

Insurers have been pressing state regulators to approve premium increases, especially in the past year. Kramer said financially troubled giant State Farm Insurance has won three 7 percent raises in the last 12 months.

Other companies have won similar increases. However, even small increases can translate into much higher premiums for customers who have filed claims or own a home with higher-risk conditions such as close proximity to brushfire-prone areas.

Doug Heller of the Foundation for Taxpayer and Consumer Rights said his group will ask newly elected Insurance Commissioner John Garamendi to reconsider some increases when he takes office in January.

There are 157 companies writing homeowners insurance in California, Kramer said, but State Farm, Farmers Insurance Group and Allstate control 55 percent of the market. The largest of the other 154 companies has only a 5 percent market share, she said.

“Insurance is an essential product, something that everyone needs whether they like it or not,” said Norma Garcia, senior attorney with Consumers Union, a San Francisco-based advocacy group. “When we start looking at essential products and a constriction on their availability or on the value in the marketplace, then we start seeing serious consequences for consumers.”


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