California Insurance Commissioner granted greater homeowners coverage authority

homeowners insurance companies

The state’s Supreme Court ruled that the legislature gave California power to make certain specifications.

The California Insurance Commissioner has the authority to decide which factors must be covered by homeowners insurance replacement cost estimate tools, says a state Supreme Court ruling.

This will allow the commissioner to say what estimate tools home insurance companies are permitted to use.

The decision updated a law from 2011 which was meant to help to reduce the ongoing underinsurance problem in the state. The original issue became truly problematic in 1991 when the Oakland Hills fire first truly showed how underinsured homeowners were in California. This became a steady and growing problem as Southern California suffered regular wildfires, particularly in 2003.

The California Insurance Commissioner sought to obtain more authority over the situation in order to encourage more appropriate coverage levels in the state’s homeowners insurance market.

The California Insurance Commissioner gained more authority following public hearings with state legislators.

California Insurance Commissioner Homeowners companiesThose occurred between 1992 and 2005. That said, while authorities had believed that the changes they’d made would be adequate, the wildfires of 2007 and 2008 changed their minds. Again, homeowners found themselves without adequate coverage to rebuild their homes. The underinsurance problem continued to be an issue.

The California Insurance Department launched an investigation in 2008 following that year’s bush fires. It confirmed the routine shortfall in homeowners insurance coverage. It determined that a majority of home policies had coverage amounts duplicating what had already been indicated by the replacement cost calculators of the insurance companies. Therefore, the department turned its attention to the calculators and their accuracy.

The California Insurance Commissioner obtained further evidence that even the most meticulous replacement cost estimate will become misleading if it is unable to take all necessary repair or rebuilding tasks into consideration. This includes tasks such as foundation replacement costs, debris removal and demolition expenses, on top of architectural plans, engineering reports, and overhead and profit. The Supreme Court has now granted the commissioner the authority to decide on the requirements of those cost estimation tools in the hopes of improving accuracy and reducing underinsurance trends.

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