The California Fair Insurance Plan – Not So Fair
Homeowner insurance providers across California are swiftly canceling policies, leaving countless homeowners in a dire situation. The process appears arbitrary – a mere dart thrown at a map designates an area as high risk, prompting policy cancellations.
Cancellation without property inspection:
Recently, I experienced this firsthand when the insurance company I’ve faithfully been with for nearly 40 years abruptly canceled my policy due to wildfire concerns. Despite implementing defensible space measures and residing near a fire hydrant just 900 feet away, along with being within close proximity to a fully staffed fire department, as well as USFS and CalFire stations within three miles, none of these precautions seemed to matter to them. Over the past four decades, this insurer has pocketed over $250,000 in premiums from me for a “just in case” scenario. It’s a legal requirement to have homeowners insurance if you have a mortgage, yet insurers have been profiting immensely, especially in California, where they’ve raked in billions until recently facing losses due to wildfires. Farmers, the company I’ve been dealing with, boasts $17 billion in assets (2019). The recent panic among corporate insurance billionaires due to wildfires threatening their lavish lifestyles is alarming.
The Fair Plan
Enter the Fair Plan, available in about 29 states, including California. This state-run program serves as a last resort for obtaining insurance after being canceled by private insurers. However, the coverage it offers is exorbitantly expensive, covering only fire, lightning, internal explosion, and smoke damage. No coverage is provided for personal property, theft, snow load, roof damage, or other hazards. If you desire additional coverage, you’ll have to pay thousands more.
Since 2006, my homeowners insurance premiums have skyrocketed from $1,200 to $4,600 last year. With the Fair Plan, we anticipate paying significantly more annually for uncertain coverage. Many others have seen their policies increase by 35% to 50% or more, solely due to the Fair Plan’s limited coverage compared to comprehensive policies. It raises questions about where all this money is going.
How I believe the Fair Plan Works
Here’s how I believe the scheme works: Insurers are obligated to participate in the Fair Plan, which spreads out high-risk policies among them. Under the guise of the Fair Plan, policies are issued with reduced coverage for substantially higher premiums, generating billions more in profits, unless a disaster strikes. Insurance companies double dip because the Fair Plan only covers specific risks, prompting the sale of additional policies to cover other risks, leading to higher commissions for insurance agents/brokers.
Transparency is severely lacking in this scheme. The California Department of Insurance fails to disclose financial details, leaving consumers in the dark about where their money is going. This lack of transparency is deeply concerning, especially when taxpayers are footing the bill. Financial statements are conspicuously absent from their website.
This is an egregious scam. Insurance companies cancel policies, issue new ones under the Fair Plan with diminished coverage and inflated premiums, and then charge additional fees for the coverage that was lost. The profits swell their coffers, shielded by the opaque umbrella of the Fair Plan.
The Impact
Imagine shelling out up to $1,000 a month from your hard-earned salary just for homeowners insurance. It’s outrageous and borders on criminal. This reality is driving people away from California, with its exorbitant utility rates, sky-high taxes, and inflated fuel prices.
When I receive my new proposal from the Fair Plan, along with my regular insurance coverage, I’ll share the details. But for now, it’s clear that 350,000 homeowners in California are being exploited. It’s extortion, and it’s unacceptable.
Found out more today on the insurance extortion plan. Companies are not writing any policies in California if the risk factor is above 3/9 on the scale. This means they can force you into the fair plan in California which all insurers share in. Then they can double the rates for fire insurance – and then sell an additional policy to cover everything else. This is legal extortion backed by the State of California. Insurance companies should not be able to take a class of people that live in a fire or flood risk area and double their rates and force them to take two policies if they have a mortgage. Everyone in the state should be paying the same rates regardless of risk – which means everyone should pay more. That would be a Fair plan. The state chooses to extort people. Rural households have been the target of higher PG&E rates – Fuel Costs – Insurance Costs and more. What could be the reason? I could list many – but they would just be my opinion as to why. California Sucks!
I also found out that Insurance Companies will not write any policies – will cancel or non renew if you have any combustibles within the 0-5 foot zone. This is the way they are actually doing mass cancellations even though it is not the law yet due to lots of push back the senate bill AB3074 gives them complete authority to do so.
Mass insurance cancellations on tap for Mid-West. Insurers will trip over each other to exit states due to Tornado activity. They only want to write policies where there is no risk of having to pay anything. This is a crooked industry that exists because home mortgage companies require insurance. These companies work hand in hand. The only way is to pay cash for your home – take the risk yourself and stop paying these companies. I have paid more than 250K in insurance over my lifetime and never received anything in return – I could have gone on several vacations – and lived a luxury lifestyle instead of feeding these people.