SB 505: Property insurance.
- Session Year: 2023-2024
- House: Senate
- Latest Version Date: 2023-09-08
Current Status:
Passed
(2023-09-08: Chaptered by Secretary of State. Chapter 180, Statutes of 2023.)
Introduced
In Committee
First Chamber
In Committee
Second Chamber
Enacted
What does this bill do?
The bill requires the California FAIR Plan Association to create and run a commercial insurance clearinghouse so licensed insurance companies can offer commercial policies to FAIR Plan commercial policyholders and help move those accounts into the regular market. The association must follow state privacy rules, tell policyholders how their personal information will be shared to enable offers through the clearinghouse, and provide a way to opt out.
The summary is provided by generative AI which can make mistakes. For original language, please view the details in the table below.
Under existing law, the California fair access to insurance requirements (FAIR) Plan Association is a joint reinsurance association of state insurers that is established to, among other things, assist persons in securing basic property insurance for qualified property for which insurance cannot be obtained through the normal insurance market.
Existing law requires the association to develop and implement a clearinghouse program to help reduce the number of existing FAIR Plan policies and provide the opportunity for admitted insurers to offer homeowners insurance policies to FAIR Plan policyholders.
This bill, on or after July 1, 2024, would require the association to develop and implement a similar clearinghouse program for commercial policies. The bill would require the association to comply with privacy statutes and regulations, as specified, pertaining to the information collected in both of the clearinghouse programs.
Under existing law, the California fair access to insurance requirements (FAIR) Plan Association is a joint reinsurance association of state insurers that is established to, among other things, assist persons in securing basic property insurance for qualified property for which insurance cannot be obtained through the normal insurance market.
Existing law requires the association to develop and implement a clearinghouse program to help reduce the number of existing FAIR Plan policies and provide the opportunity for admitted insurers to offer homeowners insurance policies to FAIR Plan policyholders.
This bill, on or after July 1, 2024, would require the association to develop and implement a similar clearinghouse program for commercial policies. The bill would require the association to comply with privacy statutes and regulations, as specified, pertaining to the information collected in both of the clearinghouse programs.
Under existing law, the California fair access to insurance requirements (FAIR) Plan Association is a joint reinsurance association of state insurers that is established to, among other things, assist persons in securing basic property insurance for qualified property for which insurance cannot be obtained through the normal insurance market. Under the plan, an insurer participates in the writings, expenses, and profits and losses of the association in the proportion that its premiums written during the 2nd preceding calendar year bear to the aggregate premiums written by all insurers in the program, excluding that portion of the premiums written attributable to the operation of the association.
This bill would make a technical, nonsubstantive change to this provision.Existing law requires the association to develop and implement a clearinghouse program to help reduce the number of existing FAIR Plan policies and provide the opportunity for admitted insurers to offer homeowners insurance policies to FAIR Plan policyholders.
This bill, on or after July 1, 2024, would require the association to develop and implement a similar clearinghouse program for commercial policies. The bill would require the association to comply with privacy statutes and regulations, as specified, pertaining to the information collected in both of the clearinghouse programs.
Under existing law, the California fair access to insurance requirements (FAIR) Plan Association is a joint reinsurance association of state insurers that is established to, among other things, assist persons in securing basic property insurance for qualified property for which insurance cannot be obtained through the normal insurance market. Under the plan, an insurer participates in the writings, expenses, and profits and losses of the association in the proportion that its premiums written during the 2nd preceding calendar year bear to the aggregate premiums written by all insurers in the program, excluding that portion of the premiums written attributable to the operation of the association.
This bill would make a technical, nonsubstantive change to this provision.
(a)Within 30 days following the effective date of this chapter, the association shall submit to the commissioner, for the commissioners review, a proposed plan of operation, consistent with this chapter, creating an association consisting of all insurers licensed to write and engaged in writing in this state, on a direct basis, basic property insurance or any component of basic property insurance in homeowners or other dwelling multiperil policies. An insurer described in this subdivision shall be a member of the association and shall remain a member as a condition of its authority to transact those kinds of insurance in this state.
(b)The proposed plan shall authorize the association to assume and cede reinsurance on risks written by insurers in conformity with the program.
(c)Under the plan, an insurer shall participate in the writings, expenses, profits, and losses of the association in the proportion that its premiums written during the second preceding calendar year bear to the aggregate premiums written by all insurers in the program, excluding that portion of the premiums written attributable to the operation of the association. Premiums written on a policy of basic residential earthquake insurance issued by the California Earthquake Authority pursuant to Section 10089.6 shall be attributed to the insurer that writes the underlying policy of residential property insurance.
(d)The plan shall provide for administration by a governing committee under rules to be adopted by the governing committee with the approval of the commissioner. Voting on administrative questions of the association and facility shall be weighted in accordance with each insurers premiums written during the second preceding calendar year as disclosed in the reports filed by the insurer with the commissioner.
(e)The plan shall provide for a plan to encourage persons to secure basic property insurance through normal channels from an admitted insurer or a licensed surplus line broker by informing those persons what steps they must take in order to secure the insurance through normal channels.
(f)The plan shall be subject to the approval of the commissioner and shall go into effect upon the tentative approval of the commissioner. The commissioner may, at any time, withdraw tentative approval or the commissioner may, at any time after giving final approval, revoke that approval if the commissioner feels it is necessary to carry out the purposes of the chapter. The withdrawal or revocation of that approval shall not affect the validity of any policies executed before the date of the withdrawal. If the commissioner disapproves or withdraws or revokes their approval to all or any part of the plan of operation, the association shall, within 30 days, submit for review an appropriately revised plan or part of a revised plan, and, if the association fails to do so, or if the revised plan is unacceptable, the commissioner shall promulgate a plan of operation or part of a plan as the commissioner may deem necessary to carry out this chapter.
(g)The association may, on its own initiative or at the request of the commissioner, amend the plan of operation, subject to approval by the commissioner, who shall have supervision of the inspection bureau, the facility, and the association. The commissioner, or any person designated by the commissioner, shall have the power of visitation of and examination into the operation and free access to all the books, records, files, papers, and documents that relate to operation of the facility and association, and may summon, qualify, and examine as witnesses all persons having knowledge of those operations, including officers, agents, or employees thereof.
(h)An insurer member of the plan shall provide to an applicant who is denied coverage, or a policyholder whose policy is canceled or not renewed, the internet website address and statewide toll-free telephone number for the plan established pursuant to Section 10095.5 for the purpose of obtaining information and assistance in obtaining basic property insurance.
(i)To reduce the associations concentration and number of policies, and to encourage maximum use of the normal insurance market consistent with subdivision (c) of Section 10090, the association shall develop and implement a clearinghouse program on or before July 1, 2021, to help reduce the number of existing FAIR Plan policies and provide the opportunity for admitted insurers to offer homeowners insurance policies to FAIR Plan policyholders. An insurer that participates in the clearinghouse program shall sign an agreement with the association that sets forth the terms and conditions for the insurer to offer homeowners insurance through the policys listed agent or broker of record, if any. The clearinghouse program may include a provision to include nonadmitted insurers if admitted insurers have the first option.
(j)To reduce the associations concentration and number of commercial policies, and to encourage maximum use of the normal insurance market consistent with subdivision (c) of Section 10090, the association shall develop and implement a commercial insurance policy clearinghouse program on or before July 1, 2024, to help reduce the number of existing FAIR Plan commercial policies and provide the opportunity for admitted insurers to offer commercial insurance policies to FAIR Plan policyholders. An insurer that participates in the commercial policy clearinghouse program shall sign an agreement with the association that sets forth the terms and conditions for the insurer to offer commercial insurance through the policys listed agent or broker of record, if any. The commercial policy clearinghouse program may include a provision to include nonadmitted insurers if admitted insurers have the first option.
(k)(1)With respect to the clearinghouse programs referenced in subdivisions (i) and (j), the association shall comply with the Insurance Information and Privacy Protection Act (Article 6.6 (commencing with Section 791) of Chapter 1 of Part 2 of Division 1) and regulations on the Privacy of Nonpublic Personal Information (Subchapter 5.9 (commencing with Section 2689.1) of Chapter 5 of Title 10 of the California Code of Regulations).
(2)The association shall provide all policyholders with notice of each of the following:
(A)The manner in which the association shall share policyholders personal information to facilitate offers of private insurance through the clearinghouse programs.
(B)A method to opt out of the sharing of policyholders personal information in connection with the clearinghouse programs.
(a)Within 30 days following the effective date of this chapter, the association shall submit to the commissioner, for the commissioners review, a proposed plan of operation, consistent with this chapter, creating an association consisting of all insurers licensed to write and engaged in writing in this state, on a direct basis, basic property insurance or any component of basic property insurance in homeowners or other dwelling multiperil policies. An insurer described in this subdivision shall be a member of the association and shall remain a member as a condition of its authority to transact those kinds of insurance in this state.
(b)The proposed plan shall authorize the association to assume and cede reinsurance on risks written by insurers in conformity with the program.
(c)Under the plan, an insurer shall participate in the writings, expenses, profits, and losses of the association in the proportion that its premiums written during the second preceding calendar year bear to the aggregate premiums written by all insurers in the program, excluding that portion of the premiums written attributable to the operation of the association. Premiums written on a policy of basic residential earthquake insurance issued by the California Earthquake Authority pursuant to Section 10089.6 shall be attributed to the insurer that writes the underlying policy of residential property insurance.
(d)The plan shall provide for administration by a governing committee under rules to be adopted by the governing committee with the approval of the commissioner. Voting on administrative questions of the association and facility shall be weighted in accordance with each insurers premiums written during the second preceding calendar year as disclosed in the reports filed by the insurer with the commissioner.
(e)The plan shall provide for a plan to encourage persons to secure basic property insurance through normal channels from an admitted insurer or a licensed surplus line broker by informing those persons what steps they must take in order to secure the insurance through normal channels.
(f)The plan shall be subject to the approval of the commissioner and shall go into effect upon the tentative approval of the commissioner. The commissioner may, at any time, withdraw tentative approval or the commissioner may, at any time after giving final approval, revoke that approval if the commissioner feels it is necessary to carry out the purposes of the chapter. The withdrawal or revocation of that approval shall not affect the validity of any policies executed before the date of the withdrawal. If the commissioner disapproves or withdraws or revokes their approval to all or any part of the plan of operation, the association shall, within 30 days, submit for review an appropriately revised plan or part of a revised plan, and, if the association fails to do so, or if the revised plan is unacceptable, the commissioner shall promulgate a plan of operation or part of a plan as the commissioner may deem necessary to carry out this chapter.
(g)The association may, on its own initiative or at the request of the commissioner, amend the plan of operation, subject to approval by the commissioner, who shall have supervision of the inspection bureau, the facility, and the association. The commissioner, or any person designated by the commissioner, shall have the power of visitation of and examination into the operation and free access to all the books, records, files, papers, and documents that relate to operation of the facility and association, and may summon, qualify, and examine as witnesses all persons having knowledge of those operations, including officers, agents, or employees thereof.
(h)An insurer member of the plan shall provide to an applicant who is denied coverage, or a policyholder whose policy is canceled or not renewed, the internet website address and statewide toll-free telephone number for the plan established pursuant to Section 10095.5 for the purpose of obtaining information and assistance in obtaining basic property insurance.
(i)To reduce the associations concentration and number of policies, and to encourage maximum use of the normal insurance market consistent with subdivision (c) of Section 10090, the association shall develop and implement a clearinghouse program on or before July 1, 2021, to help reduce the number of existing FAIR Plan policies and provide the opportunity for admitted insurers to offer homeowners insurance policies to FAIR Plan policyholders. An insurer that participates in the clearinghouse program shall sign an agreement with the association that sets forth the terms and conditions for the insurer to offer homeowners insurance through the policys listed agent or broker of record, if any. The clearinghouse program may include a provision to include nonadmitted insurers if admitted insurers have the first option.
(j)To reduce the associations concentration and number of commercial policies, and to encourage maximum use of the normal insurance market consistent with subdivision (c) of Section 10090, the association shall develop and implement a commercial insurance policy clearinghouse program on or before July 1, 2024, to help reduce the number of existing FAIR Plan commercial policies and provide the opportunity for admitted insurers to offer commercial insurance policies to FAIR Plan policyholders. An insurer that participates in the commercial policy clearinghouse program shall sign an agreement with the association that sets forth the terms and conditions for the insurer to offer commercial insurance through the policys listed agent or broker of record, if any. The commercial policy clearinghouse program may include a provision to include nonadmitted insurers if admitted insurers have the first option.
(k)(1)With respect to the clearinghouse programs referenced in subdivisions (i) and (j), the association shall comply with the Insurance Information and Privacy Protection Act (Article 6.6 (commencing with Section 791) of Chapter 1 of Part 2 of Division 1) and regulations on the Privacy of Nonpublic Personal Information (Subchapter 5.9 (commencing with Section 2689.1) of Chapter 5 of Title 10 of the California Code of Regulations).
(2)The association shall provide all policyholders with notice of each of the following:
(A)The manner in which the association shall share policyholders personal information to facilitate offers of private insurance through the clearinghouse programs.
(B)A method to opt out of the sharing of policyholders personal information in connection with the clearinghouse programs.
(a)Within 30 days following the effective date of this chapter, the association shall submit to the commissioner, for the commissioners review, a proposed plan of operation, consistent with this chapter, creating an association consisting of all insurers licensed to write and engaged in writing in this state, on a direct basis, basic property insurance or any component of basic property insurance in homeowners or other dwelling multiperil policies. An insurer described in this subdivision shall be a member of the association and shall remain a member as a condition of its authority to transact those kinds of insurance in this state.
(b)The proposed plan shall authorize the association to assume and cede reinsurance on risks written by insurers in conformity with the program.
(c)Under the plan, an insurer shall participate in the writings, expenses, profits, and losses of the association in the proportion that its premiums written during the second preceding calendar year bear to the aggregate premiums written by all insurers in the program, excluding that portion of the premiums written attributable to the operation of the association. Premiums written on a policy of basic residential earthquake insurance issued by the California Earthquake Authority pursuant to Section 10089.6 shall be attributed to the insurer that writes the underlying policy of residential property insurance.
(d)The plan shall provide for administration by a governing committee under rules to be adopted by the governing committee with the approval of the commissioner. Voting on administrative questions of the association and facility shall be weighted in accordance with each insurers premiums written during the second preceding calendar year as disclosed in the reports filed by the insurer with the commissioner.
(e)The plan shall provide for a plan to encourage persons to secure basic property insurance through normal channels from an admitted insurer or a licensed surplus line broker by informing those persons what steps they must take in order to secure the insurance through normal channels.
(f)The plan shall be subject to the approval of the commissioner and shall go into effect upon the tentative approval of the commissioner. The commissioner may, at any time, withdraw tentative approval or the commissioner may, at any time after giving final approval, revoke that approval if the commissioner feels it is necessary to carry out the purposes of the chapter. The withdrawal or revocation of that approval shall not affect the validity of any policies executed before the date of the withdrawal. If the commissioner disapproves or withdraws or revokes their approval to all or any part of the plan of operation, the association shall, within 30 days, submit for review an appropriately revised plan or part of a revised plan, and, if the association fails to do so, or if the revised plan is unacceptable, the commissioner shall promulgate a plan of operation or part of a plan as the commissioner may deem necessary to carry out this chapter.
(g)The association may, on its own initiative or at the request of the commissioner, amend the plan of operation, subject to approval by the commissioner, who shall have supervision of the inspection bureau, the facility, and the association. The commissioner, or any person designated by the commissioner, shall have the power of visitation of and examination into the operation and free access to all the books, records, files, papers, and documents that relate to operation of the facility and association, and may summon, qualify, and examine as witnesses all persons having knowledge of those operations, including officers, agents, or employees thereof.
(h)An insurer member of the plan shall provide to an applicant who is denied coverage, or a policyholder whose policy is canceled or not renewed, the internet website address and statewide toll-free telephone number for the plan established pursuant to Section 10095.5 for the purpose of obtaining information and assistance in obtaining basic property insurance.
(i)To reduce the associations concentration and number of policies, and to encourage maximum use of the normal insurance market consistent with subdivision (c) of Section 10090, the association shall develop and implement a clearinghouse program on or before July 1, 2021, to help reduce the number of existing FAIR Plan policies and provide the opportunity for admitted insurers to offer homeowners insurance policies to FAIR Plan policyholders. An insurer that participates in the clearinghouse program shall sign an agreement with the association that sets forth the terms and conditions for the insurer to offer homeowners insurance through the policys listed agent or broker of record, if any. The clearinghouse program may include a provision to include nonadmitted insurers if admitted insurers have the first option.
(j)To reduce the associations concentration and number of commercial policies, and to encourage maximum use of the normal insurance market consistent with subdivision (c) of Section 10090, the association shall develop and implement a commercial insurance policy clearinghouse program on or before July 1, 2024, to help reduce the number of existing FAIR Plan commercial policies and provide the opportunity for admitted insurers to offer commercial insurance policies to FAIR Plan policyholders. An insurer that participates in the commercial policy clearinghouse program shall sign an agreement with the association that sets forth the terms and conditions for the insurer to offer commercial insurance through the policys listed agent or broker of record, if any. The commercial policy clearinghouse program may include a provision to include nonadmitted insurers if admitted insurers have the first option.
(k)(1)With respect to the clearinghouse programs referenced in subdivisions (i) and (j), the association shall comply with the Insurance Information and Privacy Protection Act (Article 6.6 (commencing with Section 791) of Chapter 1 of Part 2 of Division 1) and regulations on the Privacy of Nonpublic Personal Information (Subchapter 5.9 (commencing with Section 2689.1) of Chapter 5 of Title 10 of the California Code of Regulations).
(2)The association shall provide all policyholders with notice of each of the following:
(A)The manner in which the association shall share policyholders personal information to facilitate offers of private insurance through the clearinghouse programs.
(B)A method to opt out of the sharing of policyholders personal information in connection with the clearinghouse programs.
(a)Within 30 days following the effective date of this chapter, the association shall submit to the commissioner, for the commissioners review, a proposed plan of operation, consistent with this chapter, creating an association consisting of all insurers licensed to write and engaged in writing in this state, on a direct basis, basic property insurance or any component of basic property insurance in homeowners or other dwelling multiperil policies. An insurer described in this subdivision shall be a member of the association and shall remain a member as a condition of its authority to transact those kinds of insurance in this state.
(b)The proposed plan shall authorize the association to assume and cede reinsurance on risks written by insurers in conformity with the program.
(c)Under the plan, an insurer shall participate in the writings, expenses, and profits and profits, and losses of the association in the proportion that its premiums written during the second preceding calendar year bear to the aggregate premiums written by all insurers in the program, excluding that portion of the premiums written attributable to the operation of the association. Premiums written on a policy of basic residential earthquake insurance issued by the California Earthquake Authority pursuant to Section 10089.6 shall be attributed to the insurer that writes the underlying policy of residential property insurance.
(d)The plan shall provide for administration by a governing committee under rules to be adopted by the governing committee with the approval of the commissioner. Voting on administrative questions of the association and facility shall be weighted in accordance with each insurers premiums written during the second preceding calendar year as disclosed in the reports filed by the insurer with the commissioner.
(e)The plan shall provide for a plan to encourage persons to secure basic property insurance through normal channels from an admitted insurer or a licensed surplus line broker by informing those persons what steps they must take in order to secure the insurance through normal channels.
(f)The plan shall be subject to the approval of the commissioner and shall go into effect upon the tentative approval of the commissioner. The commissioner may, at any time, withdraw tentative approval or the commissioner may, at any time after giving final approval, revoke that approval if the commissioner feels it is necessary to carry out the purposes of the chapter. The withdrawal or revocation of that approval shall not affect the validity of any policies executed before the date of the withdrawal. If the commissioner disapproves or withdraws or revokes their approval to all or any part of the plan of operation, the association shall, within 30 days, submit for review an appropriately revised plan or part of a revised plan, and, if the association fails to do so, or if the revised plan is unacceptable, the commissioner shall promulgate a plan of operation or part of a plan as the commissioner may deem necessary to carry out this chapter.
(g)The association may, on its own initiative or at the request of the commissioner, amend the plan of operation, subject to approval by the commissioner, who shall have supervision of the inspection bureau, the facility, and the association. The commissioner, or any person designated by the commissioner, shall have the power of visitation of and examination into the operation and free access to all the books, records, files, papers, and documents that relate to operation of the facility and association, and may summon, qualify, and examine as witnesses all persons having knowledge of those operations, including officers, agents, or employees thereof.
(h)An insurer member of the plan shall provide to an applicant who is denied coverage, or a policyholder whose policy is canceled or not renewed, the internet website address and statewide toll-free telephone number for the plan established pursuant to Section 10095.5 for the purpose of obtaining information and assistance in obtaining basic property insurance.
(i)To reduce the associations concentration and number of policies, and to encourage maximum use of the normal insurance market consistent with subdivision (c) of Section 10090, the association shall develop and implement a clearinghouse program on or before July 1, 2021, to help reduce the number of existing FAIR Plan policies and provide the opportunity for admitted insurers to offer homeowners insurance policies to FAIR Plan policyholders. An insurer that participates in the clearinghouse program shall sign an agreement with the association that sets forth the terms and conditions for the insurer to offer homeowners insurance through the policys listed agent or broker of record, if any. The clearinghouse program may include a provision to include nonadmitted insurers if admitted insurers have the first option.
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Date
|
Status
|
|---|---|
| Sep 8, 2023 | Chaptered by Secretary of State. Chapter 180, Statutes of 2023. |
| Sep 8, 2023 | Approved by the Governor. |
| Aug 30, 2023 | Enrolled and presented to the Governor at 2 p.m. |
| Aug 24, 2023 | In Senate. Ordered to engrossing and enrolling. |
| Aug 24, 2023 | Read third time. Passed. (Ayes 73. Noes 0. Page 2801.) Ordered to the Senate. |
| Aug 17, 2023 | Read second time. Ordered to consent calendar. |
| Aug 16, 2023 | From committee: Do pass. Ordered to consent calendar. (Ayes 15. Noes 0.) (August 16). |
| Jun 28, 2023 | From committee: Do pass and re-refer to Com. on APPR. with recommendation: To consent calendar. (Ayes 13. Noes 0.) (June 28). Re-referred to Com. on APPR. |
| May 18, 2023 | Referred to Com. on INS. |
| May 8, 2023 | In Assembly. Read first time. Held at Desk. |
| May 8, 2023 | Read third time. Passed. (Ayes 36. Noes 0. Page 1022.) Ordered to the Assembly. |
| Apr 25, 2023 | Read second time. Ordered to third reading. |
| Apr 24, 2023 | From committee: Be ordered to second reading pursuant to Senate Rule 28.8. |
| Apr 18, 2023 | Set for hearing April 24. |
| Apr 12, 2023 | From committee: Do pass and re-refer to Com. on APPR. (Ayes 7. Noes 0. Page 684.) (April 12). Re-referred to Com. on APPR. |
| Mar 30, 2023 | Set for hearing April 12. |
| Mar 29, 2023 | Re-referred to Com. on INS. |
| Mar 20, 2023 | From committee with author's amendments. Read second time and amended. Re-referred to Com. on RLS. |
| Feb 22, 2023 | Referred to Com. on RLS. |
| Feb 15, 2023 | From printer. May be acted upon on or after March 17. |
| Feb 14, 2023 | Introduced. Read first time. To Com. on RLS. for assignment. To print. |
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Date
|
Description
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Location
|
Votes
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|
|---|---|---|---|---|
| Aug 24, 2023 | SB 505 Rubio Consent Calendar Second Day Regular Session | Assembly Floor |
Passed |
|
| Aug 16, 2023 | Do pass. To Consent Calendar. | Assembly Standing Committee on Appropriations |
Passed |
|
| Jun 28, 2023 | Do pass and be re-referred to the Committee on [Appropriations] with recommendation: To Consent Calendar | Assembly Standing Committee on Insurance |
Passed |
|
| May 8, 2023 | Senate 3rd Reading SB505 Rubio | Senate Floor |
Passed |
|
| Apr 12, 2023 | Do pass, but first be re-referred to the Committee on [Appropriations] | Senate Standing Committee on Insurance |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
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Organization
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Position
|
Date
|
|---|---|---|
| American Property Casualty Insurance Association | ** Support | |
| California Association Of Realtors | ** Support | |
| California Department of Insurance | ** Support | |
| California Fair Plan Association | ** Support | |
| California Farm Bureau Federation | ** Support | |
| Community Alliance With Family Farmers | ** Support | |
| Independent Insurance Agents & Brokers of California, Inc. | ** Support | |
| Norwood Associates LLC | ** Support | |
| Personal Insurance Federation Of California | ** Support |
Date of Hearing: August 16, 2023
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Chris Holden, Chair
SBPCA Bill Id:SB 505
Author:(Rubio) – As Amended Ver:March 20, 2023
Policy Committee: | Insurance | Vote: | 13 - 0 |
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| ||
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Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill requires, by July 1, 2024, the Fair Access to Insurance Requirements (FAIR) Plan to establish a clearinghouse program for commercial insurance policies.
Specifically, this bill:
- Requires implementation of the commercial insurance policy clearinghouse program, similar to the clearinghouse for homeowners’ insurance policies, to help reduce the number of existing FAIR Plan commercial policies and provide the opportunity for admitted insurers to offer commercial insurance policies to FAIR Plan policyholders.
- Requires, with respect to both clearinghouse programs, the FAIR Plan to comply with the Insurance Information and Privacy Protection Act and Privacy of Nonpublic Personal Information regulations and provide every policyholder with notice of how the clearinghouse programs will share policyholder’s personal information to facilitate offers of private insurance and how the policyholder can opt out of such information sharing.
FISCAL EFFECT:
No state costs to the Department of Insurance (CDI).
COMMENTS:
- Purpose. According to the author:
Currently, California only allows residential property insurance policies in the FAIR Plan to be reviewed online by the admitted market insurance companies, which has been able to facilitate the movement of some residential property insurance policies out of the FAIR Plan and back into the admitted market. Without any statutory requirement for the FAIR Plan to provide a plan to encourage commercial policies in the admitted marketplace, this may leave commercial insurance policyholders, including farm policies, in the FAIR Plan for potential perpetuity.
This bill is co-sponsored by Insurance Commissioner Ricardo Lara and the California Farm Bureau Federation and supported by the FAIR Plan and other insurer associations.
- FAIR Plan. The FAIR Plan is a private association of all licensed insurance companies created by the Legislature in 1968 to serve as the “insurer of last resort” for basic property insurance in the event of a market failure. Although originally envisioned to cover urban commercial property following the Watts Riots, the FAIR Plan has expanded to include homeowners’ insurance across the state.
AB 3012 (Wood), Chapter 258, Statutes of 2020, created a homeowners’ insurance clearinghouse program with the goal returning residential FAIR Plan policyholders to the regular market. Admitted insurers have the right of first refusal to offer coverage to a FAIR Plan policyholder, with non-admitted insurers allowed to participate after 30 days. This bill requires the FAIR Plan to create a similar clearinghouse program for commercial policies, with the goal of reducing the concentration of such FAIR Plan policies and encouraging maximum use of the regular market.
Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081
Date of Hearing: June 28, 2023
ASSEMBLY COMMITTEE ON INSURANCE
Lisa Calderon, Chair
SBPCA Bill Id:SB 505
Author:(Rubio) – As Amended Ver:March 20, 2023
SENATE VOTE: 36-0
SUBJECT: Property insurance
SUMMARY: Requires the Fair Access to Insurance Requirements (FAIR) Plan to develop and implement a clearinghouse program for commercial insurance policies. Specifically, this bill:
- States that the FAIR Plan must create the commercial clearinghouse program, on or before, July 1, 2024.
- Specifies the intent of the bill is to reduce the FAIR Plans concentration and number of commercial policies and encourage the maximum use of the normal insurance market.
- Allows the FAIR Plan to include a provision allowing non-admitted insurers, if the admitted insurers have the first option.
- Requires the FAIR Plan clearinghouse program to comply with specified privacy laws.
EXISTING LAW:
- States that the FAIR Plan was established to assure stability, to assure the availability, to encourage maximum use, to provide for equitable distribution among admitted insurers of the responsibility for insuring qualified property for which basic property insurance cannot be obtained through the normal insurance market. (Insurance (Ins.) Code, Section 10090)
- Specifies that rates for the FAIR Plan shall not be excessive, inadequate, or unfairly discriminatory, and shall be actuarially sound so that premiums are adequate to cover expected losses, expenses and taxes, and shall reflect investment income of the plan.” (Ins. Code, Section 10100.2)
- Requires the FAIR Plan to develop and implement a residential clearinghouse program. (Ins. Code, Section 10095)
FISCAL EFFECT: Unknown
COMMENTS:
Purpose: According to the Author,
Currently, California only allows residential property insurance policies in the FAIR Plan to be reviewed online by the admitted market insurance companies, which has been able to facilitate the movement of some residential property insurance policies out of the FAIR Plan and back into the admitted market. Without any statutory requirement for the FAIR Plan to provide a plan to encourage commercial policies in the admitted marketplace, this may leave commercial insurance policyholders, including farm policies, in the FAIR Plan for potential perpetuity. While coverage for farms by the admitted carriers would typically be covered by one policy, coverage for farms under the FAIR Plan will sometimes require separate policies: one residential policy covering the farmhouse, and another commercial plan for the business structures. The requirement of two separate policies creates confusion and could drive up costs and management issues for agricultural businesses. We must ensure that there is a proper structure to allow FAIR Plan policies, and others, to be moved back into the admitted market, thereby helping ease the confusion and costs for insureds. SB 505 addresses these shortfalls by expanding the FAIR Plan’s existing clearinghouse program to include commercial insurance policyholders, thereby encouraging more policies to transition back to the admitted commercial market which will making insurance more affordable for consumers and businesses.
The FAIR Plan: The FAIR Plan is an “association” of all licensed insurance companies by the California Department of Insurance (CDI) that provides basic property insurance in California. It was created in 1968, following urban disturbances, notably the Watts Riots in Los Angeles.
Background: Simply stated, the purpose of the FAIR Plan is to be the “insurer of last resort” for “basic” property insurance in the event of a market failure. At inception, that was essentially urban commercial property. Ultimately, it has expanded to include homeowners’ insurance anywhere in the state, provided that the insurance “cannot be obtained” in the normal manner in the market. The FAIR Plan is not intended to compete with the voluntary market.
The FAIR Plan was established to ensure that urban property owners, mostly businesses, would have “fair access” to the property insurance necessary to continue to operate in a market that insurers viewed as too risky to cover. That risk evaluation resulted in a substantial market withdrawal by insurers from the urban property market. Despite its initial creation as an urban/business “insurer of last resort,” the FAIR Plan expanded to provide coverage in “designated” brush fire regions of the state. It operated fairly well in this manner until the mid-1990’s, when, as a consequence of the genuine homeowners’ insurance crisis that followed the Northridge earthquake in 1994, the entire state was designated as the appropriate FAIR Plan coverage region.
FAIR Plan policies are capped at $3.3 million for residential properties and $8.4 million for commercial properties. Both these caps were increased by the Insurance Commissioner in 2020 for residential and 2021 for commercial.
By statute, the FAIR Plan policy is not as broad as traditional homeowners’ policies, it is nonetheless a fully sound and guaranteed policy that satisfies lenders’ security requirements and protects the property against the primary risk factor faced by homeowners, which is fire. Other coverages are readily available in the market (typically through the purchase of a “difference-in-conditions” or “DIC” policy), which provides wraparound coverage that, coupled with a FAIR Plan policy, results in the same protection provided by a standard homeowner’s policy. Because the FAIR plan’s role is to provide coverage when the regular market won’t, it is not the role of the FAIR Plan to provide DIC policies when there is a healthy market for those policies.
According to CDI, in 2019, there was an estimated 8,343 commercial structures insured statewide by the FAIR Plan, which jumped to 10,468 structures in 2020.
FAIR Plan Clearinghouse: The FAIR Plan residential clearinghouse was created in 2021. Statute places the responsibility on the FAIR Plan to develop the clearinghouse program with these goals: reduce the concentration of policies and push the use of the regular insurance market; lower the quantity of policies in the FAIR Plan; and provide the insurers the ability to take on additional business. The intent of the program is to get FAIR Plan policyholders back into the admitted market. The policies in the clearinghouse are initially limited to the admitted market for the first 30 days, at which point non-admitted insurers may also participate by offering a homeowners policy to someone in the FAIR Plan.
This bill expands this same program to commercial policies held by the FAIR Plan. This committee looks forward to monitoring the purpose of this program for both residential and commercial policies to ensure the intent is accomplished which is to move FAIR Plan policyholders back into the admitted market. Please note that the program allows for both admitted and non-admitted insurers to participate.
Previous Legislation: AB 3012 ((Daly/Wood) Chapter 258, Statutes of 2020)) created a residential FAIR Plan clearinghouse program with the goal of allowing admitted and non-admitted insurers an opportunity to retrieve FAIR Plan policies.
REGISTERED SUPPORT / OPPOSITION:
Support
California Association of Realtors
California Department of Insurance
California Fair Plan Association
California Farm Bureau Federation
Community Alliance With Family Farmers
Independent Insurance Agents & Brokers of California, INC.
Personal Insurance Federation of California
Opposition
None on file.
Analysis Prepared by: Kathleen O'Malley / INS. / (916) 319-2086
SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 | SB 505 |
THIRD READING
Bill No: SB 505
Author: Rubio (D)
Amended: 3/20/23
Vote: 21
SENATE INSURANCE COMMITTEE: 7-0, 4/12/23
AYES: Rubio, Nguyen, Alvarado-Gil, Dodd, Jones, Niello, Portantino
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: Property insurance
SOURCE: Author
DIGEST:
This bill requires the Fair Access to Insurance Requirements (FAIR) Plan to develop a clearinghouse program that connects voluntary market insurers to FAIR Plan commercial policyholders.
ANALYSIS:
Existing law:
- Establishes the FAIR Plan residential property owner’s clearinghouse program to help residential homeowners locate homeowner insurers who may provide an alternative to FAIR Plan fire insurance policies.
- Requires an insurance company that participates in the clearinghouse program to sign an agreement with the FAIR Plan that sets forth the terms and conditions for the insurance company to offer homeowners’ insurance through the policy’s listed agent or broker of record, if any,
This bill:
- Expands the FAIR Plan clearinghouse program to include commercial insurance policyholders.
- Requires the FAIR Plan Association to comply with the Insurance Information and Privacy Protection Act.
- Requires the FAIR Plan to provide all policyholders with notice of specified privacy rights.
Background
According to the author, “Currently, California only allows residential property insurance policies in the FAIR Plan to be reviewed online by the admitted market insurance companies, which has been able to facilitate the movement of some residential property insurance policies out of the FAIR Plan and back into the admitted market. Without any statutory requirement for the FAIR Plan to provide a plan to encourage commercial policies in the admitted marketplace, this may leave commercial insurance policyholders, including farm policies, in the FAIR Plan for potential perpetuity.”
In 1968, California created the FAIR Plan to ensure basic home insurance coverage was available to individuals who otherwise were unable to obtain a policy in the private, voluntary market. In July of 2021, with the enactment of AB 3012 (Wood, Chapter 258, Statutes of 2020), the FAIR Plan developed and implemented a clearinghouse program to help reduce the number of existing FAIR Plan policies. The FAIR Plan also provided the opportunity for admitted insurance companies to offer homeowners insurance policies to policyholders. This program included multiple benefits and served as a critical resource for insurance companies and consumers alike.
In order to respond to growing concerns from farm owners, vintners, and other outdoor businesses about insurance availability following major wildfires, the California Department of Insurance (CDI) for the first time directed insurance companies to provide data in 2021 related to outdoor businesses and insurance availability following major wildfires. This data includes claims, losses, and non-renewals for calendar years 2017 to 2020. The data shows that while wildfire risk and losses occur in many agricultural regions of the state, a few areas have borne the brunt of recent wildfire losses. CDI data shows that, in 2019, there were an estimated total of 8,343 commercial structures insured statewide by the FAIR Plan, which jumped to 10,468 structures by 2020. Commercial policies in the FAIR Plan continue to grow year after year without any structured pathway for these policyholders to get back into the admitted market.
Related/Prior Legislation
AB 3012 (Wood, Chapter 258, Statutes of 2020) developed a clearinghouse program that connected voluntary market insurers to FAIR Plan residential property policyholders.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
SUPPORT: (Verified 4/25/23)
American Property Casualty Insurance Association
California Association of Realtors
California Department of Insurance
California Fair Plan Association
California Farm Bureau Federation
Norwood Associates, LLC
Personal Insurance Federation of California
OPPOSITION: (Verified 4/25/23)
None received
ARGUMENTS IN SUPPORT: California Department of Insurance points out that the numbers of structures covered in the FAIR Plan have increased over the past few years. SB 505 will ensure that there is a pathway for commercial policies to move from the FAIR Plan back into the admitted insurance market and help make insurance coverage more affordable for consumers and businesses.
When commercial policyholders transition to the voluntary market it will help reduce the FAIR Plan’s risk concentration. According to the FAIR Plan, this is an approach that should be encouraged because it is a step toward restoring the necessary balance in the California insurance market that is needed today.
According the California Farm Bureau Federation, thousands of Farm Bureau members have had insurance policies non-renewed over the past five years, resulting in their need to be insured through the FAIR Plan. Accessing comprehensive and affordable insurance ensures that farmers can focus on the business of supplying the state and nation with a healthy abundance of fresh fruits, vegetables, and nuts. SB 505 takes an important step to help move commercial
insurance policies out of the FAIR Plan and back to the competitive market.
Prepared by: Jill Rice / INS. / (916) 651-4110
4/26/23 15:11:48
**** END ****
SENATE COMMITTEE ON INSURANCE
Senator Susan Rubio, Chair
2023 - 2024 Regular
Bill No: SB 505 Hearing Date: April 12, 2023
Author: | Rubio | ||
Version: | March 20, 2023 | ||
Urgency: | No | Fiscal: | Yes |
Consultant: | Jill Rice | ||
SUBJECT: Property insurance
DIGEST:
Requires the Fair Access to Insurance Requirements (FAIR) Plan to develop a clearinghouse program that connects voluntary market insurers to FAIR Plan commercial policyholders.
ANALYSIS:
Existing law:
- Establishes the FAIR Plan residential property owner’s clearinghouse program to help residential homeowners locate homeowner insurers who may provide an alternative to FAIR Plan fire insurance policies.
- Requires an insurance company that participates in the clearinghouse program to sign an agreement with the FAIR Plan that sets forth the terms and conditions for the insurance company to offer homeowners’ insurance through the policy’s listed agent or broker of record, if any,
This bill:
- Expands the FAIR Plan clearinghouse program to include commercial insurance policyholders.
- Requires the FAIR Plan Association to comply with the Insurance Information and Privacy Protection Act.
- Requires the FAIR Plan to provide all policyholders with notice of specified privacy rights.
Background
According to the Author
Currently, California only allows residential property insurance policies in the FAIR Plan to be reviewed online by the admitted market insurance companies, which has been able to facilitate the movement of some residential property insurance policies out of the FAIR Plan and back into the admitted market. Without any statutory requirement for the FAIR Plan to provide a plan to encourage commercial policies in the admitted marketplace, this may leave commercial insurance policyholders, including farm policies, in the FAIR Plan for potential perpetuity.
While coverage for farms by the admitted carriers would typically be covered by one policy, coverage for farms under the FAIR Plan will sometimes require separate policies: one residential policy covering the farmhouse, and another commercial plan for the business structures. The requirement of two separate policies creates confusion and could drive up costs and management issues for agricultural businesses. We must ensure that there is a proper structure to allow FAIR Plan policies, and others, to be moved back into the admitted market, thereby helping ease the confusion and costs for insureds. SB 505 addresses these shortfalls by expanding the FAIR Plan’s existing clearinghouse program to include commercial insurance policyholders, thereby encouraging more policies to transition back to the admitted commercial market which will making insurance more affordable for consumers and businesses.
In 1968, California created the FAIR Plan to ensure basic home insurance coverage was available to individuals who otherwise were unable to obtain a policy in the private, voluntary market. In July of 2021, with the enactment of AB 3012 (Ch. 258, Stats. of 2020), the FAIR Plan developed and implemented a clearinghouse program to help reduce the number of existing FAIR Plan policies. The FAIR Plan also provided the opportunity for admitted insurance companies to offer homeowners insurance policies to policyholders. This program included multiple benefits and served as a critical resource for insurance companies and consumers alike.
In order to respond to growing concerns from farm owners, vintners, and other outdoor businesses about insurance availability following major wildfires, the California Department of Insurance (CDI) for the first time directed insurance companies to provide data in 2021 related to outdoor businesses and insurance availability following major wildfires. This data includes claims, losses, and non-renewals for calendar years 2017 to 2020. The data shows that while wildfire risk and losses occur in many agricultural regions of the state, a few areas have borne the brunt of recent wildfire losses. CDI data shows that, in 2019, there were an estimated total of 8,343 commercial structures insured statewide by the FAIR Plan, which jumped to 10,468 structures by 2020. Addressing current insurance coverage issues for businesses in these areas will help address future issues in other parts of the state. Commercial policies in the FAIR Plan continue to grow year after year without any structured pathway for these policyholders to get back into the admitted market.
Related/Prior Legislation
AB 3012 (Wood, Chapter 258, Stat. of 2020) developed a clearinghouse program that connected voluntary market insurers to FAIR Plan residential property policyholders.
ARGUMENTS IN SUPPORT:
California Association of REALTORS contends that the creation of a clearinghouse for commercial policies, which include the master policies for Homeowner’s Associations (HOAs), just makes sense as over 14 million Californians live in HOA communities. These communities are losing coverage or being non-renewed and/or forced on the FAIR plan at alarming rates. The clearinghouse will be used as a tool by the insurance industry to help bring these policy holders back into the traditional marketplace. This will encourage a healthy insurance marketplace for all.
California Department of Insurance points out that the numbers of structures covered in the FAIR Plan have increased over the past few years. SB 505 will ensure that there is a pathway for commercial policies to move from the FAIR Plan back into the admitted insurance market and help make insurance coverage more affordable for consumers and businesses.
When commercial policyholders transition to the voluntary market it will help reduce the FAIR Plan’s risk concentration. According to the FAIR Plan, this is an approach that should be encouraged because it is a step toward restoring the necessary balance in the California insurance market that is needed today.
According the California Farm Bureau Federation, thousands of Farm Bureau members have had insurance policies non-renewed over the past five years, resulting in their need to be insured through the FAIR Plan. Accessing comprehensive and affordable insurance ensures that farmers can focus on the business of supplying the state and nation with a healthy abundance of fresh fruits, vegetables, and nuts. SB 505 takes an important step to help move commercial insurance policies out of the FAIR Plan and back to the competitive market.
The Independent Insurance Agents and Brokers of California (IIABCal) argue that the FAIR plan is under immense pressure in the current insurance marketplace and as such, insurers have withdrawn from or stopped writing insurance in the voluntary market, forcing more and more consumers to rely on the FAIR Plan for their residential and commercial property protection. Any potential reduction to the FAIR Plan’s risk concentration would benefit the current insurance crisis.
Personal Insurance Federation of California (PIFC) argues that as a result of FAIR Plan’s low level of capital and liquidity, and reinsurance coverage that is far below that of similar entities, California insurers are increasingly concerned that they are exposed to an unlimited assessment to fund FAIR Plan losses that could be in the billions of dollars. Thus, expanding the clearinghouse program to reduce the FAIR Plan’s concentration and number of commercial policies could help improve its financial stability. PIFC believes expanding the purpose and goals to apply similarly to commercial insurance policies is an appropriate step to address the growth in FAIR Plan commercial policies and related concentration risks that contribute to FAIR Plan’s financial challenges.
SUPPORT:
American Property Casualty Insurance Association
California Association of REALTORS
California Department of Insurance
California FAIR Plan
California Farm Bureau Federation
Independent Insurance Agents and Brokers of California
Personal Insurance Federation of California
OPPOSITION:
None received
-- END --
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