California Department of Insurance Issues Wildfire Claims Reform Proposal

Insurance Commissioner Steve Poizner hosted a roundtable meeting with top-level insurance executives to improve the recovery process for wildfire victims and announce minimum standards to reform the claims handling process.

He joined insurance CEOs and representatives in examining ways to improve the claims-handling process and alleviate possible pitfalls in the future.He said compliance with the proposed minimum standards would provide uniformity in claims-handling for wildfire victims.

American International Group Inc., Allied Insurance /Nationwide, Allstate Insurance Co., Automobile Club of Southern California, Balboa Insurance Group, Chubb Group, Farmers Insurance Group, Fireman’s Fund Insurance Co., Liberty Mutual Group, The Progressive Group of Insurance Companies, Safeco, State Farm Insurance Co. and Travelers all complied with the Commissioner’s suggested voluntary claims-handling practices.

Poizner wants insurers to adopt a standard “Additional Living Expense,” (ALE) advance payment of 4 months for a total loss upon request and have additional ALE available upon proper proof following the advance period upon request. Current law imposes no requirement for advance payment of ALE.

This practice would recognize consumers need immediate support following a total loss in a wildfire and would deem it unlikely to replace a destroyed residence within 4 months.

Poizner proposal requires insurers to provide an advance payment of at least 25 percent of policy limits for a total loss of the standard contents with additional contents payments available upon proper proof and request. He also wants insurance companies to expedite payment of automobile property damage claims under comprehensive loss coverage.

Under current law, acceptance or denial of a claim must happen within 40 days following proof of claim [10 CCR 2695.7(b)], and payment must be made within 30 days after proof of claim [10 CCR 2695.7(h)]. It can be as much as 70 days from proof of claim to payment.

The Department of Insurance made no specification as to precisely how much of these claims should be expedited. It indicated competition among insurers would probably result in a payment standard even shorter than anything set for the entire industry.

The Comissioner wants all insurers to grant billing leniency for 30 days in designated wildfire disaster areas. He said some victims lose their insurance renewal notices whenever there is widespread wildfire loss. This can reportedly result in victims losing their insurance coverage for nonpayment of premium.

Many insurers already voluntarily grant payment leniency for wildfire victims and is not limited to homeowners insurance, said the Department. A renewal bill for auto insurance or life insurance is as likely to burn as is a bill for homeowners insurance.

Poizner would like to see insurers accept an expedited debris removal process coordinated through city, county and state agencies. The master debris removal vendor contracts would reside under pre-negotiated conditions, unless the insurer could provide more rapid debris removal outside of the state or local government-coordinated effort.

The reforms call for insurers to accept home inventory software (or paper alternatives) currently available to the public, without a requiring company-specific inventory forms.

And it asks insurers to accept reduced itemization of contents in wildfire total losses. In some cases, it might be appropriate for inventories to allow grouping of categories of personal property, such as allowing a listing of “100 DVDs,” instead of requiring a list of specific titles.

Source: California Department of Insurance, www.insurance.ca.gov.