Hearing airs concerns over wildfire insurance coverage

Issue Date: July 20, 2022

By Kevin Hecteman

California's insurer of last resort needs some work. That was the message delivered on the California FAIR Plan at a state Department of Insurance hearing.

Insurance Commissioner Ricardo Lara said more Californians are turning to the FAIR Plan after losing coverage in the wake of years of devastating wildfires. New FAIR Plan policies ballooned from 23,049 in 2018 to 77,650 in 2020, according to department data, while renewals rose from 117,398 to 163,816 over the same period.

"We are here today because of our continued concerns that the FAIR Plan is not meeting its mission of ensuring access and availability of insurance for those Californians who need it," Lara said at the July 13 hearing in Oakland.

"Some businesses and homeowners cannot get coverage they need from the FAIR Plan alone," he said. "So they have to purchase difference-in-conditions insurance policies, which may or may not fill gaps in coverage, and may also be very, very cost-prohibitive."

All insurance companies authorized to operate in California must participate in the Fair Access to Insurance Requirements Plan. It was created in the 1960s after wildfires and civil unrest made obtaining insurance difficult. Farms and agricultural operations were excluded until the enactment of Senate Bill 11 last year.

California Farm Bureau Administrator Jim Houston testified that insurance is one more headache for farmers and ranchers. "We are dealing right now with fewer inputs—less water, less fertilizer, less energy, less employees," Houston said. "Having to deal with the insurance crisis on top of that really puts a strain on our businesses."

Houston said he's pleased the plan now covers farm structures, but he said frustrations continue because some insurance brokers remain uninformed on the details.

"Farm Bureau members have reported that they'll go and talk to the same broker that has provided them the nonrenewal, but not been able to advise them about the availability of the FAIR Plan or what their FAIR Plan options are," Houston said.

Those who seek FAIR Plan coverage often are met with a delayed response, if they even get one, Houston testified.

"Farmers and ranchers state that it takes almost a full business week to receive a response from the FAIR Plan," Houston said, adding that some people have then been denied coverage while others have to schedule an inspection.

"The delay in the response from the FAIR Plan can put not just farming operations under stress but can hold up real estate transactions, loans and other normal business activity," Houston said.

Houston said finding brokers, scheduling inspections and other demands to get coverage take "time away from the farm and the core function of the business." Then, lapses in coverage can make it impossible to obtain operating loans and therefore bring a crop to market.

"You simply cannot operate a farm," Houston said, "if you do not have insurance."

(Kevin Hecteman is an assistant editor of Ag Alert. He may be contacted at khecteman@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.