California insurance commissioner on navigating the insurance maze after LA’s fires
California insurance commissioner on navigating the insurance maze after LA’s fires
Current figures put the number of structures destroyed in the Southern California wildfires near 12,000 and the value of losses are in the tens of billions of dollars. While the fires continue to burn, many of the area’s displaced are beginning to turn their attention to rehousing and rebuilding. That involves insurance in most cases.
These wildfires, however, came at a time when California’s insurance market was in flux. State Farm paused all pending residential nonrenewals in LA County for one year — a move that will impact thousands. Still, insurance remains pricey, some insurers have fled the state, and underinsurance remains a perennial issue. Now, this weekend, state officials are launching a new effort to help people navigate the insurance maze. But what does the road ahead look like for the insurance landscape in California?
“We’re never going to get to affordability if we don’t get insurers back into California. And the way we do that is by bringing down the risk,” said Ricardo Lara, California’s insurance commissioner.
Lara joined Marketplace’s Nova Safo to discuss the complications of navigating insurance following a natural disaster and provide tips for homeowners as they look to rebuild. The following is an edited transcript of their conversation.
Nova Safo: The claims process — that’s top of mind right now. What can people expect?
Ricardo Lara: What we’re asking people, as we get ready for the claims process, is to make sure you get a complete policy, and if you can’t obtain that, call our office and we’ll work to get that. What we are looking at is making sure that the claims are paid fully, fairly and as quickly as possible. That is my goal, and we’ve put insurance companies on notice to do the right thing during this crisis and support their customers, many of whom have been with them for years, paying their premiums fully and on time. And thus far, you’re going to see insurance companies either reaching out personally to their consumers, and also setting up these disaster vans to be able to access their consumers, as well.
You know, we are working in the department, working on these insurance workshops. And this is really important, because these are one-on-one with wildfire survivors. We do appointments with them, and we connect them to their insurance representatives that are all in one room so that we can get the claims process quickly moving and hopefully get them paid as quickly as possible. So we’re urging people to call us at 1-800-927-4357 to make an appointment. We’ll take walk-ins, but we really want to have people call our department, so we can assess their policy, make sure that they got the documents they need — if not, we can get those — so that we again get them through the claims process as seamlessly as possible.
Safo: What does “paid fully and fairly” look like?
Lara: Well, you know that all depends, right? We want to make sure that whatever the consumers signed with their insurance company, that the insurance company is contractually obligated to meet the terms of that contract. And those are going to be, you know, different by individual and by region, but that is my goal and my commitment to consumers: to make sure that the insurance companies meet that contractual obligation to the individual consumers.
Safo: Insurance payouts could be offered way before people know how much it will cost them to rebuild. How are they supposed to decide whether to accept a payout offer or not?
Lara: That is a great question, and this is something that we want to make sure we keep Angelenos on their toes in terms of making sure that when you’re working on an adjuster that it’s an adjuster that knows what they’re doing. You know, we are approving some out-of-state adjusters, but we are making sure that they understand what the rights are to the consumer, what the insurance statutes are in California that protect consumers and guarantee certain rights that are very different than other states.
And so what we are recommending to consumers as they’re going through the adjuster process — one, make sure that they’re legitimate, that they’re actually qualified to work. You can again, call our number, we can do that verification for you. We also help decipher that confusing policy of yours and make sure you’re getting everything in that contract that is supposed to go to you — especially during this very confusing and devastating process. And so we’re also telling consumers, take your time, don’t sign anything under duress, be leery of people soliciting you, especially on the site. That’s important. And one of the things that we’re also telling folks is, you know, as volunteers are painting these sites, make sure that you take pictures before of the devastation, of the debris, so that we have visual confirmation of the damage and the insurance company cannot fight you on that, because you have, you know, a visual confirmation of that before either volunteers or you enter your property and start cleaning up the debris that’s left over. These are just kind of tips that we ask.
We’re also telling people you might want to create a separate email that is just dedicated to the claims process so you have a documentation of your entire communications with your insurance company, with your adjuster, should something go wrong or you feel that you’re not getting what the insurance company’s contractually obligated to give you, we can access that data on your behalf and make sure that we make them whole. And if they don’t, that also serves us to go after them legally.
Safo: It seems that with construction costs really uncertain over the next several years, potential more inflation coming, it would be next to impossible for folks to really get everything they’re going to need from insurance for the rebuilding, just from insurance. Does that seem to you the likely outcome that there will be some kind of gap between what insurance is contractually obligated to pay, even in the best case scenario of people having really good insurance, and what people may need to rebuild — or at least be made whole?
Lara: You’re absolutely right. And unfortunately, we’ve seen this after these mega fires up and down the state. You start seeing construction costs go up, lack of labor, and you start seeing a competition for construction workers. I’ve even, in some instances, seen people leave a construction site because they’re being offered more money to go into another construction site. And so these are things that we’re working with our attorney general, with our local DAs. One of the fraud schemes that we often see after these mega fires is you have out-of-state adjusters and some unscrupulous attorneys making false promises.
And so what I say to people is, you know, “If you’re gonna hire an attorney, if you’re gonna hire or work with an adjuster, make sure they understand California insurance law, and they are aware of the rights that you have. But again, if you have any questions or any doubts, call us at 1-800-927-4357. We’ve extended our hours. We have people working Monday to Friday from 8 a.m. to 7 p.m., and now we have folks to meet this demand on the weekends from 9 a.m. to 1 p.m. It helps us to put you at ease during this very stressful time, which is inevitably going to be a long road to recovery, unfortunately.
Safo: Even if nothing else, though, is done wrong, even if the insurance companies and the adjusters all do the their jobs correctly, there is very strong likelihood, though, right, that there will be an amount that is not covered? Am I getting that right, or is that wrong?
Lara: No, I mean, I think the other thing, Nova — I think what you’re getting at too, which is a very real issue across the country, is the issue of underinsurance and people not understanding what they’re covered for, or maybe they didn’t adjust for any remodeling that they’ve done to their home, or, you know, didn’t appraise the house for what, you know, the new price adjustment is. This also happens when you inherit property. You constantly have to be talking to your agent to make sure that you’re properly insured. This is now the reality for so many Californians that are living in these wildland-urban interfaces or in wildfire areas.
Safo: Or apparently even in suburbs.
Lara: Yeah, no — you’re absolutely right. I mean, this is a thing where, you know, unfortunately — especially like first-time homeowners, they’ll go for a minimum coverage, because obviously, living in California, it’s hard. The insurance costs are rising. Mortgages’ costs are rising. And so you say, you know, “Let me get a bare bones policy, and eventually I’ll get to adjusting the price of my home or when I do upgrades.” And for so many people, they either forget or they know it’s too late. And so this is why one of the goals for me in this legislative process is to actually get money in people’s hands, working on the mitigation and doing the home-hardening that is critical, that we know works.
Fortifying the roof against hurricanes, like they’re doing in Alabama and South Carolina, we want to do that against fires here in California. That, at least, will do a couple of things: One, bring down the risk, and bring down the cost of insurance, because we’re bringing down the overall risk to the portfolio of insurance companies. We talk about how expensive it is in terms of insurance policies now, during this insurance crisis that we’ve been living through for a couple years now. We’re never going to get to affordability if we don’t get insurers back into California. And the way we do that is by bringing down the risk.
Safo: There’s been plenty of reporting that State Farm canceled some policies just before the fires in areas where there were fires, but there’s reporting that maybe they’re un-canceling some policies adjacent to those areas that they were planning on canceling or had just canceled. Did you confirm that? And what do you make of it?
Lara: No, absolutely. Like I said, all eyes are on insurance companies right now, including mine, and insurance companies have to do the right thing. And so last week, when I enacted the mandatory moratorium to protect homeowners policies, I also asked insurance companies to honor the policies that they have nonrenewed or intended to nonrenew prior to the wildfires. And so I’m pleased that yesterday, State Farm — which is our largest insurer in California — has answered my call by pausing all pending residential nonrenewals, not just in the affected fire areas, but everywhere in LA County for one year. That is impacting tens of thousands of policies.
And so what does that mean? It means that State Farm is going to be pausing nonrenewals for homeowners, rental, residential and business owner policies in the affected areas of the current wildfires and for all LA County consumers with pending nonrenewals or cancelations. And so, you know, I think this is a big move. It’s definitely an unprecedented move, but it shows that, you know, well, this is a crisis, and we need to be unconventional in how we address, you know, the access and the availability of insurance for survivors now.
And I’ll just tell you in closing, look, LA County is an economic powerhouse, and having a strong and healthy insurance market in LA is critical to the financial prosperity of the entire state and the nation. And insurance companies know that. The faster we’re able to recover here in LA County, the faster we can continue to to be financially successful in all these different business sectors.
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