Despite numerous challenges, a new set of regulations for California homeowners took effect on June 27, 2011.
These changes were geared toward improving the standards and training processes for the replacement value estimations of a homeowner’s insurance should a disaster occur. At the same time, the controversial alterations are still being contested by two insurance trade associations.
The new cost regulations include the following (California Code of Regulations Section 2695.183 (h)):
• Conditions for outlining the requirements that involve the replacement cost and value estimates designed to improve comprehensiveness, consistency, and accuracy in the calculation of the cost of replacement;
• Requirement that all broker-agents selling policies for residential insurance must take a replacement cost continuing education course of about 3 hours in length;
• Creation of real estate appraiser standards for the estimation of replacement costs on behalf of insurance companies; obliging the use of these standards for the estimation of construction and replacement costs;
• The necessity for insurers to offer broker-agents a written training for the use of the policies that have been put into place by that insurance company in order to comply with these new regulations.
According to Dave Jones, the Insurance Commissioner, the regulations are meant to make a notable impact on making certain that consumers who have suffered a disaster “are able to get the financial relief to rebuild their homes and their lives, while also dong much to ensure that homeowners are not underinsured.”
Conversely, though, the Personal Insurance Federation of California (PIFC) and the Association of California Insurance Companies (ACIC) have sued Commissioner Jones in an effort to halt one portion of the new regulations as they believe that the commissioner does not have adequate authority to dictate replacement cost calculation underwriting criteria.