In a recent meeting of the Assembly Insurance Committee in California, discussions centered around the pressing challenges facing the homeowners insurance market, particularly the role of the FAIR Plan. As representatives gathered under the bright lights of the state capitol, the atmosphere was charged with urgency as stakeholders voiced their concerns about the current state of insurance availability and affordability.

John Norwood, speaking on behalf of the Independent Insurance Agents and Brokers of California, highlighted the stark reality that many independent agents are facing. With most agents holding appointments with only a handful of insurance companies, the options for homeowners seeking coverage have dwindled significantly. Norwood pointed out that while agents can typically shop around for policies, the current marketplace offers limited choices, particularly for homeowners insurance. He noted that many agents are left with only one or two viable markets, forcing them to submit fewer applications than ever before.

The conversation turned to the FAIR Plan, which was designed to provide coverage for those unable to secure insurance through traditional means. Norwood emphasized that the growth of the FAIR Plan reflects a troubling trend: a lack of voluntary market options. He expressed concern that the fear of additional assessments from the FAIR Plan is deterring companies from re-entering the market, exacerbating the problem for consumers.

Norwood also addressed the inadequacy of current insurance rates, citing a significant gap between the necessary rate increases and what has been implemented. He pointed out that while a 50-75% increase was deemed necessary in 2021, only a 15% increase was approved. This shortfall, he argued, has left companies struggling to afford reinsurance, leading them to shed risk wherever possible. As a result, homeowners in lower-risk areas are increasingly finding themselves non-renewed, pushing them toward the FAIR Plan for coverage.

The discussion also touched on the potential for a marketplace depopulation, where agents and brokers hope to transition clients back to traditional insurers once rates stabilize. Norwood expressed optimism that as the Sustainable Insurance Solution Program (SISP) is implemented and companies can adjust their rates accordingly, there may be a pathway for policyholders to return to the market.

As the meeting concluded, the urgency of the situation was palpable. Stakeholders left with a shared understanding that addressing the challenges in the homeowners insurance market is crucial for the well-being of California residents. The discussions underscored the need for collaborative efforts to create a more sustainable and accessible insurance landscape, ensuring that all homeowners have the coverage they need.