INSURANCE CRISIS: Why Your Premiums Are Skyrocketing and What You Can Do!

Summary

The video covers a comprehensive discussion about insurance issues related to recent California wildfires, hosted by Karl Susman. The host addresses multiple aspects of wildfire insurance claims, including how to handle total loss situations, smoke damage claims, and the California Fair Plan. Key points include the estimated $50 billion in claim costs, the process for accessing federal disaster assistance through FEMA and SBA, and the current state of the insurance industry in California. Susman emphasizes that insurance companies have been losing money in California for over a decade, paying out more in claims than collecting in premiums. He discusses recent regulatory changes from December that may provide a path forward for the industry, potentially leading to more competition and better pricing for consumers.

Highlights

Introduction and Wildfire Insurance Claims Overview

Karl Susman opens the show discussing wildfire insurance claims and federal assistance options. He explains that homeowners should first contact their insurance company for claims, then explore additional federal assistance through FEMA grants and SBA loans. The host emphasizes that both insurance coverage and federal assistance can be accessed simultaneously.

Smoke Damage and Property Assessment

The host addresses smoke damage concerns, noting that while media focuses on total losses (estimated 12-13,000 structures), an equal number of properties may be uninhabitable due to smoke and ash damage. Susman discusses the lengthy cleanup process, mentioning that some areas like Power Stage fire zone may require 12-18 months just for toxic ash removal before rebuilding can begin.

California Fair Plan and Insurance Industry Changes

Susman explains the California Fair Plan's recent need for $900 million to access $6 billion in reinsurance. He clarifies that the Fair Plan is funded by private insurance companies, not taxpayers. The host discusses how new regulations from December 2023 may help attract insurance companies back to California, potentially leading to more competition and better pricing for consumers.

Future of Insurance in California

The final segment covers the insurance industry's challenges in California, with companies having not made a profit in over a decade. Susman discusses potential economic losses from recent events approaching half a trillion dollars. He emphasizes the importance of having multiple insurance companies competing in the market rather than a few dominant carriers, suggesting this would lead to better risk distribution and more stable pricing.

Insurance Hour is hosted by renowned insurance expert Karl Susman. Karl is a frequent guest on television stations such as ABC, CBS, Spectrum, The CW and FOX, and now his popular radio program is available online throughout California and world-wide.

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Transcript

0:03

Buckle up everyone. You are strapped in and ready for Insurance Hour. With me, your host, Karl Susman, informing, educating, and entertaining one policy at a time. THIS IS INSURANCE HOUR. Hello, hello. This is Insurance Hour. I am your host, Karl Susman. Thank you so much for being here today. We have a full show for you. We are going to be talking about the wildfire. We are going to be talking about insurance premiums. We are going to be talking about the California Fair Plan and the billion dollars that has recently, let's just say, come up. Lots to go over. The phone lines are open. Give us a call. 559-656-0317. You can call or text that number or send your question indirectly to Questions@InsuranceHour.com. Let's jump right in. We're going to go over some of the listener questions that have come in. Let me start off with the first one that is the most common, which basically says my entire home is gone. Do I need to rely on standard homeowners insurance or is there some wildfire relief I should apply for? This is a good question. If you have an insurance policy, that's always going to be the first place that you're going to want to go, which makes sense. That's why you're paying for that insurance policy. Now, that might be from a private insurance company. It might be through an association like the California Fair Plan Association. But point is, you want to go there first. That's your first place to go. In addition, there are places that you can go with the federal government and I'm sure the state of California will be coming out with some other surprise ways to find money at some point soon. But meanwhile, you can go to disaster assistance online and you can get that website by just Googling federal disaster assistance. Find the link and go there. You're looking at two basic forms of additional assistance. One is in the form of a grant, which would come from FEMA. The other is in the form of a potentially low interest loan that would come from the Small Business Administration. Now, don't let SBA, the Small Business Administration make you think that, well, that's only for businesses. That's just the arm of the federal government that handles loans for people that need money after some type of a large event. This definitely qualifies for that. You can apply and it's important to keep in mind that depending on whether it's a loan or a grant, depending on the type of insurance policy you have, you can probably get coverage from your insurance company and also get assistance from the feds. So definitely look to take advantage of that. It reminds me, you know, I continue to get calls and talk to consumers every day who have lost everything, literally everything. And it's so difficult for me because for me, this is the business I've been in for 30 years and this is why I'm here, but I've never realized it as clearly until today. I'm used to getting the average person that will call in and say, oh, you know, my toilet overflowed and there's two or three thousand dollars in damage and then we have to worry about, well, do we want to replace the floor? Do they want to just dry it off? Is it going to be higher than their deductible? Is it going to impact their premium? Should they put the claim in? And these are the sort of plain vanilla types of things that I deal with. But that's not really why I'm here. Why I'm really here are four times like this when people really need to have some type of assistance with their insurance policy. This is what insurance policies are for. It's for these type of events. So I have to tell you, as painful as it is, it feels good to do what I'm doing right now. I'm sort of like the person that brings the good news when all of the other news is bad. All right. Let me move on. Next question says, I've got two school age kids and a lot of smoke damage. How quickly can I get help? This is a this is a big one. Smoke damage is one of the least talked about problems that happens during fires. I know that sounds funny because hello smoke fire. It's all sort of the same idea. But we're focused primarily on people that have total losses. That's what you're hearing the most about. That's what the news talks about. That's what the mainstream chit chat is about. It's about people who lost their entire home. There's another story. There are people that might not have lost their entire home, but they in essence have a home they cannot reside in. It might be covered in ash. It might have smoke damage that makes it unable to be lived in. There are a lot of things going on with structures that might not necessarily be entirely gone, but they certainly do need to have work done on them before they can be occupied safely. Now, this comes up more and more as time is going by, even though it's not what you hear about. But as as doing what I do for a living, I'm starting to see this happening more. So. In the event you are impacted by these fires and you want to be sure that your home is safe, you should definitely take the measures that are appropriate to find out. Talk to your insurance company first. They should be able to refer companies that will come out and let you know, is it safe? Is it not? Now, some of them might send out an actual separate company to do that. Some companies might actually have people on their claims staff that are trained for that. But understand that just because your structure is still standing, that does not mean by any stretch of the imagination that the home is safe and good to go. If we're looking at, I believe the last set of numbers were 12 to 13,000 structures that were entirely lost, we probably have at least that number again on top of that that were either damaged partially or to some extent are unable to be occupied for other various reasons. If we're taking the power stage fire, for example. that area is going to have an infrastructure problem for years. Literally years. That's not hyperbole. They have to go through first and clean out all of that toxic ash. That's not going to happen overnight. Some estimates are putting that somewhere around 12 to 18 months. That's 12 to 18 months before anyone can even think about putting a shovel in the ground to start rebuilding a home. That is unbelievable. And by and mind you, that is faster than we normally see after a wildfire. So it's just unbelievable to try and think that we're going to be take, this is going to be a very, very long process. So if there is damage to your property and you can't live in it, make sure that you go to your insurance carrier. If you even suspect that there's a problem and let them take the necessary steps, go ahead. You've got the insurance. Utilize it to find out if it's safe, give you whatever advice they might give you. And then you know what? If you're not comfortable with the advice you're getting, if you feel like your insurance carrier is not taking appropriate steps for you, then talk to your insurance agent or broker. Tell the claims adjuster, say, you know, I'm just not comfortable with what you're telling me. Can I talk to your boss? Is there a supervisor? Is there a manager? Understand that these adjusters and it's a thankless job because let's face it, claims adjusters deal with people when they're at their worst, right? When something bad has happened. They're only human and what you may see or think when you're in your own home might be different than they initially at least see or think. So just because they might show up once and say it looks okay, if you still don't think it's okay, ask for a supervisor, ask for a boss. You can absolutely do that. You're not going to get anybody in trouble. This is your house. This is your health and it's important that you take all necessary precautions. Speaking of precautions, this is time for a 60-second break. We will be right back with more. This is insurance hour. I am your host, Karl Susman. 60 seconds, stand by. We're back talking about insurance. Let's talk about earthquakes for a minute. Look, we know we live in earthquake country here in California. Powerful, devastating earthquakes have happened here before, and science says that they will happen again. They can't tell us exactly when, they can just tell us that it is going to happen. Count on it. Prepare for it. Did you know that earthquakes are not covered by your homeowners insurance policy? You need a separate policy to give you the peace of mind that you will be able to recover without getting financially wiped out the next time we get hit with a big one. There is a great company here in California that will provide you with earthquake coverage you need at a price you can afford. That company is GeoVera. I have a policy through GeoVera. I really like how easy it is to choose from all of their great coverage options backed by the financial strength that lets me know that they will be here for me when I need them the most. Go to getquake.com/insurance hour to learn more. That's getquake.com/insurance hour. Make sure you're ready for the day when the ground shakes again. Hello, hello, this is insurance hour. I am your host Karl Susman. Thank you so much for being here today. We are talking about the California Wildfires insurance premium and what you can do to try and protect yourself and potentially save some money on your insurance along the way. We're also going to talk about not getting scammed, but that goes without saying you should always be on the lookout for scams. Hey, listen, phone lines are open. Give us a call or text. That number is 559-656-0317 or send your questions into Questions@InsuranceHour.com. I want to thank our sponsor today, GeoVera Insurance Company. GeoVera offers earthquake insurance. I've actually had my personal earthquake insurance with GeoVera for several decades. And let me tell you, when there are wildfires and all of a sudden there's not a house left to insure for fire, what do you think GeoVera does? They step right up and they say, hey, look, we will cancel your earthquake insurance policy back retroactively to the day of the fires. You do not have to pay any money because you didn't have a house to insure. And they're prorating cancellations right away. They're doing the right thing, basically. So if you're looking to get a quote for earthquake insurance and if you're living in Southern California, then you probably should for sure, then check them out. Go to insurancehour. com. You'll see their sponsor link right on our page. It takes about two seconds to put in your address and get a quote. GeoVera Insurance Company, we thank you for your support of insurance hour. All right. We were talking about what to do in the event of a wildfire claim before this. And if you can collect money based on having your insurance policy pay out and potentially getting money from the feds. And we covered that in our previous segment. Now let's move on. I have another question that came in saying that they're a retiree living out of Social Security. How quickly will the insurance pay out so that they can get their home rebuilt? This is this is the question, right? How long is it going to take? And it's a it's a mix. bag and I'll explain why. For people, the ideal would be, I want to have my house rebuilt tomorrow. I want it done. And so the pressure is put on. Let's get that done. Let's get the money paid out to the people for their policies and let's get the homes rebuilt. The problem is there are many stages that have to happen first. First of all, the area where the fires happen, this is not your average everyday fire. The area has to be cleaned and made safe before you can even think about rebuilding. As it turns out right now, the Army Corps of Engineers is actively in the area of the wildfires doing debris cleanup and it's not a fast job. They're talking about 12 to 18 months before they can get that done. That's when we might be looking to be able to even start having an insurance company's contractor or adjuster or architect start actually doing the work. Now, is it possible that they can start drawing plans in advance? Of course. Is it possible to do things in the time before you can actually break ground and rebuild? Of course. And more importantly, to this point, to the question that I have received here, how quickly will I get that money? And the answer is very, very quickly. I can tell you that we're seeing millions of dollars flowing every single day from insurance companies to consumers. The Department of Insurance has also put a lot of pressure on the insurance industry to be sure they pay out right now. I'll give you an example. The Department of Insurance put out a bulletin and said, hey, we want you to pay out 100% of the contents coverage, your personal property coverage on the policy right now. We don't want you to wait. We don't want you to have to ask the consumer for an inventory or an itemization, even though, mind you, the contract says they have to. The Department of Insurance says, look, let's just get this done. Write those checks. And the insurance companies are stepping up and they're doing that. In addition, the Department of Insurance is pressuring insurance companies and they are responding to not non-renew people that are in some of these areas. So if your home, for example, was a total loss due to the fires, the insurance companies are not permitted to non-renew your policy for a total of two years, which sounded a lot better until you realized it could be near that long before they even start building. Remember, when you're going to be rebuilding, you're going to need to get a special insurance policy called a course of construction policy that's going to pay for your home while it's being built. Your homeowner's insurance policy, and again, your policy might be different, but in general terms, homeowner's insurance policies will not cover building a home from the ground up. That's going to be another insurance product. So while it's extremely important that you maintain some form of insurance policy to cover things like your liability exposure, your personal property exposure, things like that, when the time actually comes to engage in rebuilding, be aware that it's possible you may need a different type of policy to pay for that. Didn't mean to go off on that tangent, but... but understand that money should be coming quickly. If you are not getting money by the time you are, you're ingesting this information from me right now, something is wrong. Definitely something is wrong. If you've been impacted by the fires and you have not gotten any money, you should be reaching out to the insurance company right now and saying, wait a second, what's going on here? What could possibly be taking so long, especially because the Department of Insurance has specifically said you need to pay right now, right now, right now. Reach out to your agent or broker, they are your best advocate, and make sure that they push for you, or you can, again, go to the adjuster and make a lot of noise. The squeaky wheel gets the oil. Now, before we go on to the next question, I want to make a point about something else. There are three options that people have in the event of a total loss of their property in California. One is to rebuild the home right where it is. That's the one we're most familiar with. Option number two is that they can rebuild the home at another location. And option number three is they can purchase an already built home somewhere. Now, it's also important to know that for options two and three, the Department of Insurance has told the industry you are going to have to pay out your dwelling limit, including building code upgrades, which is an additional stack of dollars that are on most policies, for use in the event somebody wants to go rebuild somewhere else or in the event somebody wants to buy something else. So consumers will be made whole that way because they're going to get the most they can out of their policies, whether they rebuild where they are, rebuild somewhere else or buy something else. So there are options that are available. And I get asked frequently, are people going to stay? Are they going to rebuild? And again, it's a mixed bag. Sometimes people are saying we are strong, we are waiting, we are going to get back to our area that we loved and we lived in. And others are throwing up their hands and saying, I don't want anything to do with that area anymore. I don't want to be anywhere around it. I want to think about it anymore. And they're going other places. No judgment. Everyone has to make that decision for themselves. And I think as time goes by, we start to see how long the actual rebuilding process is going to be. I think we might start to see people maybe thinking about moving somewhere else. And it's a shame. It truly is because these were very, very unique areas indeed. And these areas will never truly be the same, of course, because the homes that were there are gone. But even when they start rebuilding, they're going to be different homes. They're going to be brand new. They're going to be built differently, safer, mind you. But they're going to be different than they were before. Truly, these areas will never be exactly the way they were. So you need to take take it as just a fact of life as fast as we can get people back into their homes. We need to get people back into their homes. And if they're not getting back into the homes where they were, we need it as quickly as possible. We'll get them into a home as quickly as possible. Let's take another quick break. When we come back, more of your questions coming up. This is in. I am your host, Karl Susman, 60 Seconds is all it is, and we will be right back, stand by. This show is a weekly trip into the world of the Disney theme parks and resorts. And this is the place where you get to use your ears to surround yourself with the magic. For your safety, please remain seated while listening to the WindowtotheMagic.com Podcast. Maybe there's a name for this, something like Disnotic Obsession. please visit WindowtotheMagic.com for more information, or you can find us on Apple Podcasts and in the iHeartMedia app. Hello, hello, this is Insurance Hour. I am your host, Karl Susman. Thank you so much for being here today. The phone lines are open. We are taking your questions about everything insurance related. Your favorite topic in mind. That number is 559-656-0317. You can call or text that number. If it's busy, leave a voicemail. We will get back to you. We'll get your question on the air next time, or send us your question to Questions@InsuranceHour.com. We are talking about all things insurance, and of course, how can we be talking about insurance and not talk about the recent wildfires? Now, people are in the claim stage at this point. Claims are hard. I'm not going to sugarcoat it. There is no such thing as an easy claim, because how does a claim happen? Well, it comes after a loss. Loss is bad. Loss is difficult. So the best thing that we can do is try and put ourselves in a situation where we are on the right path with our claims adjuster and with the insurance company. Now, I know we're the ones that have suffered the loss. The insurance companies are supposed to stand up and do the right thing. And I'm proud to tell you that for the most part, that is what I'm seeing. Vast majority of companies are really stepping up and making my job a lot easier because they're getting money to consumers. Now, you probably hear stories, there's always stories, about people that are having problems. Well, the people that have problems tend to make the most noise. And what I would tell you is if you're having a problem, if you're having issues, then you need to reach out directly to the insurance company. You can also reach out to home office for an insurance company. Believe it or not, they have a phone number. They have an email address. You can reach out to them directly and say, hey, I needed somebody else. This adjuster's just not doing it for me. And they will work with you. They want to work with you. What they don't want is to have your claim drawn out for a long time. to what people believe, carriers want these claims open and closed quickly. They want them closed quickly, and I'll explain why. Even though I know you're thinking, no, they don't, they want to hold my money, they don't, they want the claims done, I'll explain why. Statistically, actuarially, historically, take whatever word you want. It is a fact that the longer an insurance claim is open, the more expensive that claim becomes. You will not find a single insurance company executive that disagrees with that. It is a fact. So believe me, the carriers want to get you your money, they want to get the claim settled, they want to move on to the next thing. And when you're talking about disasters of this magnitude, they want to get onto the other clients, right? There is a finite number of people that are out there that can actually handle these claims. Certain companies have specific adjusters. They're called CAT adjusters, which are, it's sort of a shorthand for catastrophe adjuster. There are people that are used to working on these types of large-scale disasters. They go to the Southeast when there's hurricanes. They go to other parts of the country when there's flooding. They move around. Talk about a tough job. They see people at their worst after these insane disasters happen. So if you are not getting your claim handled properly, the first thing you want to do is tell your adjuster, I'm not happy. Seriously, just tell them, I'm not happy with this. The second thing is you can ask for a supervisor, a manager, or straight out just say, I want another adjuster. Just straight out. If that doesn't solve your problem, you can go to your insurance agent or broker, right? The person that wrote the policy for you and say, hey, hello, I need some help here. I am not getting what I need from this claims adjuster or this claim in general. And your insurance agent or broker should be able to guide you through some additional steps that you can go through to try and get some satisfaction out of the carrier. That's a thing. Don't forget. Just because you bought the policy from them, their job doesn't end at that point. Some do. And arguably, they're just salespeople. But for the most part, especially when you're talking about situations like this, you should feel comfortable at least reaching out to your agent or broker and asking for help. Hey, you know what, poke them in the eye. Not literally. Make them feel guilty if they feel like they're not doing their job. Say, hey, I bought this policy from you. Can you help me now, please? Not unreasonable. Don't be shy. All right. If you've gone through all of those processes, you can still reach out directly to the insurance company's home office. And then after all of those things are tried, you always have the opportunity to potentially see about getting a public adjuster or getting some form of legal representation. There's always a place for those things, but they're further down the line. Once you exhaust all of the other possible ways to get your claim handled. Remember, if you're going to have somebody else doing work on your own, on your behalf, it's gonna cost something, right? Somebody has to pay. It's going to come out of money likely that you would be getting. That actually reminds me, there was a question that I was going to go to next, I'll just talk about it now. It's someone that was emailing in and she was asking about helping her parents that live in the area of Southern California that was impacted by the fire. She said her parents were elderly, she's of course not, and wanted to know how she can go about helping her parents. I think the question was, can she just deal with the claim for them? Now there are some legal issues that can get a little sticky with this. I'm not an attorney, so disclaimer there. But in the event that you want to have somebody else handle the claim for you, you're going to have to let the insurance company know. You're going to have to give the authorization to somebody else. What we don't want to have happen is somebody pretend or just imply that they've been given permission. The claims adjuster starts talking to them and decisions are made and that's not what you would have done. You might not agree. Now, all of a sudden, who's in charge? Whose fault is it? What decisions were made and can they be unmade? So if it turns out that you do wanna have somebody else working on this for you or with you, just be sure that you let your insurance company know. You can start out by telling your claims adjuster. You can tell your insurance agent or broker, say, can you please make a note of this or let the company know, hey, I'm going to have my daughter take care of this for me. I just, I can't deal with this stuff. I can't follow it. They're asking me to give them information about making electronic deposits for the claim. I don't know how to do that, whatever the case may be. Don't be ashamed. Don't feel like only you can do this. You can assign this to a family member or a trusted friend or whoever you really want that can work on your behalf to help you with this. You do not have to do this alone. Scam alert. If you get a text message or you're getting emails that say, hey, we'll help you with your claim, just give us a call or shoot us a text and give us all this information and we'll help you be very careful because there's a lot of people out there, a lot of companies, unfortunately, that are overseas that are taking advantage of people in the wildfire areas. They are scamming them for their personal information to steal their identity. So while it's okay to assign your rights to someone to help you with your claim, don't do that lightly. And I would say, look at it with a jaundice eye if someone is randomly reaching out to you saying, hey, we're going to help you with this. We just need all this information. And guess what? All of your personal information is exactly what they're going to be asking for. So be careful, be alert. And understand that when times are bad like this, and it's so sad, this is when a lot of the scammers and the creeps really come out of the woodwork and start taking advantage. I've done an entire show that talks about nothing other than what to do to protect yourself from scams. It's a sad day when I can do an entire show on this. I could probably do three or four shows on this. Speaking of shows, it is time once again for us to take on a quick break. We're going to talk more about your questions. We're going to talk about what we are expecting for insurance premiums next. This is Insurance Hour. I am your host, Karl Susman. 60 seconds, and we will be right back. Thanks for watching. Thanks for watching. I'm your host, Karl Susman. I'm your host, Karl Susman. I'm your host, Karl Susman. I'm your host, Karl Susman. Have you been dropped by your insurance agency or senior premium skyrocket? Susman Insurance is here to help. We're a family-owned and operated insurance agency that's been serving our community for two generations. At Susman Insurance, we know how stressful it can be to find the right coverage, especially when prices go up or you're left without insurance. That's why we're committed to finding you competitive rates, whether it's for fire, home, earthquake, flood, auto insurance, you name it. We've got you covered. Give us a call or send a text to 310-820-5200 or visit us online at Susmaninsurance.com. Plus, stay updated on all things insurance by joining our text group. Just text 567-4-Karle-with-a-K. That's 567-367-5275 to get the latest updates straight to your phone. Susman Insurance, your family's insurance solution. Hello, hello, this is Insurance Hour. I am your host, Karl Susman. Thank you so much for being here today. Phone lines are open. We are taking your questions, comments, and anything else you want to throw at us about insurance. That number is 559-656-0317. You can also text that number or shoot us an email to Questions@InsuranceHour.com. We are happy to help you either way. Now, before the break, we were talking about everything from insurance scams to what to do if you have a claim and what recourse do you have if your claim is not getting handled properly. If you missed part of that show, a part of this show, just go back, I was gonna rewind, that's going to date me right there. Go ahead and back up and you can listen to the beginning or if you want to grab the show, you can find it online. Pretty much everywhere, just search for Insurance Hour. It's everywhere from the iHeartMedia app to YouTube to Spotify, Apple Podcasts, it's everywhere. Good show, lots of information. You should go grab it if you've missed any part. of it. All right, now we've just had a major disaster. They are talking about claim costs being somewhere in the neighborhood of 50 billion, that's with a B, dollars. It's a lot of money. So what are people asking? Well, they're saying, what is this going to do about our insurance premiums? So here's where I try and stay calm because I'm a consumer. I have to pay my insurance like everybody else. I don't get a single penny off of my insurance premium just because I do this for a living. But here's what I want to know. How do you think it will impact your fire insurance premium when a fire just occurred that cost in the neighborhood of 50 billion dollars? Well, when you put it that way, the obvious logical answer is, well, I would expect the price to go up because 50 billion dollars is a lot of money. The problem is... that in California, we like things to be fair. I can say that, I'm born and raised here. So I can say the good, the bad, and the ugly about California. But everyone likes things to be homogenous and fair. No one should have to pay more money than anyone else. Then everyone should help keep everything just hunky dory. The problem is some people that are living in areas that are more likely to be suffering from a wildfire have historically been subsidized by people that don't live in those types of communities and areas because the way the regulations were written, those rates had to be kept at a certain level based on just arbitrary numbers, to be honest. So what we're going to see now is we are going to see more of a, I don't wanna say honest way of doing business, but we're going to see a more balanced way of doing business in California. And what that means is if you're going to be living in an area where you are in a higher risk for fire, right? Maybe you're up that snake road and it's a one lane, small road, a couple of miles up in the hills. Fire truck couldn't even make a turn if it wanted to get there. You are going to be paying significantly more for your fire insurance than your counterpart that might live in the middle of the city. Now you hear that, and I guess depending on when you look out the window, what you see, if you're looking at trees, that probably upsets you. If you're looking at other buildings in the city, you're probably very happy. Understand that insurance contracts are just that, they are contracts. The insurance company has to decide what is the likelihood you are going to have a claim. If the likelihood is higher, the premium should be higher, right, we can agree on that. If the likelihood is less, then your premium should be less. As obvious as that sounds, that's not the way our old regulations in California used to work. They have changed fortunately as of December of last year. So we are going to start to see more of a correct premium for the risk system. So what is that going to look like? It looks... like we're going to have to get every insurance company that has left California, all of them that basically said, look, I think it costs $1,000, regulations only let me charge $400, and now we're having these massive claims, I was bleeding money before, and now I have to pay out billions of dollars. I am out of here. We have to convince those companies to come back to California and write business. So how do we do that? We have to create an environment that spurs competition. Competition is what built this country. It's what made us great. It's the fact that we want to do something better, and then someone else comes along and says, no, I can do it better. And then someone else comes along and says, no, I can do it better. Competition drives prices down. And the old regulations literally drove competition away. And it's not hyperbole. That is what it did. And this is fact, by the way, this is not opinion. Everything I'm telling you now is easily researchable and documented online. You can check with the Department of Insurance. You can check with all the public filings from the insurance industry. You can check wherever you want. None of this is my opinion. This is just what's out there. This is what happened. Insurance carriers were leaving California because they were not able to charge what they believe was the premium they needed to have enough money to pay for claims. Well, guess what? Let's look at a company that chose to stay and charge the premiums that were knowingly insufficient. Know who I'm talking about? How about State Farm? Yes, they have openly said in the past, we need to charge more premium for the risks that we have. And old regulations didn't allow it to happen. And now they are in such bad financial shape, some lenders are threatening to not accept their insurance policy as being valid enough to protect the bank's collateral, meaning your house. Want another example? The California Fair Plan. We're going to talk about that in the next segment. What's going on with the California Fair Plan? Do they not have enough money? Do they actually need another billion, would it be, dollars to pay their claims? How could that be? It's very simple. The old regulations did not provide the California Fair Plan with the flexibility to charge the correct premium for the actual exposure that it had. I know it sounds like, well, duh, of course you have to charge the right premium for the right risk, but that's not how it works here in California. That's not how the old regulations worked. The old regulations would wave this false flag that, oh, we're going to protect consumers and we're going to keep prices down and we're going to do all this stuff. And effectively what it did is it drove competition away. The carriers that were left were either not solvent, meaning they didn't have enough money to pay their claims, or when there was a large enough disaster, like we're seeing right now, they really didn't have enough money to pay their claims. And now we're all going to be paying for it. And again, more on that in the next segment. need to change the environment in California, not literally, the business environment so that more insurance companies will come here to write business to compete. And yes, is it going to cost a little bit more money initially because the carriers don't really know what they're going to be allowed to charge tomorrow. So they might have to charge more today to play a little catch up, yes. But when all of those companies start competing, does competition always lower the rates? The answer is also yes. So we have to accept some of that pain that the last 30 years or so of unbelievable regulation that did not allow the industry to properly price the risk, we're going to have to pay for that with money now, unfortunately. After the break, we're going to talk a little bit about the California Fair Plan, what that means and a little bit more about the future of insurance in California. I'm Karl Susman, and this is Insurance Hour. Ladies and gentlemen, boys and girls, in just a few moments, the WindowtotheMagic Podcast Show will begin. My name is Patrick. My name is Calvin. I'm Mouseketeer Greg. My name is Paul, and I will be your guide through the wonderful world of Disney sound experiences. This show is a weekly trip into the world of the Disney theme parks and resorts. And this is the place where you get to use your ears to surround yourself with the magic. For your safety, please remain seated while listening to the WindowtotheMagic.com Podcast. Maybe there's a name for this, something like Disnotic Obsession. Surround yourself with the magic! Please visit WindowtotheMagic.com for more information, or you can find us on Apple Podcasts and in the iHeartMedia app. Hello, hello, this is Insurance Hour. I am your host, Karl Susman. Thank you so much for being here today. Phone lines are open for your insurance-related questions / complaints. That number is 559-656-0317. Call or text that number. You can also send an email to Questions@InsuranceHour.com. Mind you, you can also find us on social media, all that fun stuff. Find us on X, find us on Instagram. You want to say something? Go for it. I'm there for you. Hey, if anyone has any pullover at X, been trying to get Insurance Hour as the actual name we use. There was some old account, I guess, long, long ago that had it, did something bad, and the account has been suspended and never used since. But I cannot seem to get anybody over at X to help me. I'm happy to pay for it, to buy that account that's been blank and suspended for years and years. So, you know what? You will find me on X, it is under insurance hour with two underscores after that. Kind of annoying, right? Especially when nobody is holding on to the actual name that I want. So, hey, special prize for you. If you can help get me in connection with somebody up there where good old Elon's company is, help me get the name insurance hour. I actually delivered a hand, delivered a note to them at headquarters in San Francisco. And I, of course, never heard back. So anyway, there's my little, I had to vent and get that off my chest. But the point is you can find us on social. I'm happy to talk to you there as well. All right, let's talk about the California Fair Plan. The California Fair Plan is an organization that was created by legislation due to the Watts fires back in the late sixties. The Watts riots and fires, I should say. It was designed to create an organization where it was sort of a fallback. In the event that you could not purchase insurance from a private company. then this organization would offer at least basic fire insurance. So you wouldn't go without fire insurance. Now, who pays for it? Well, the regulators created the organization and they put it in charge all of the admitted companies in California. They said, okay, if you want to write business in California, you have to also fund and run this organization called the FAIR plan. By the way, FAIR plan stands for Fair Access to Insurance Requirements. In case you're curious, that's what it's for. Since a lot of times insurance is required and if a private company won't write the policy, now you've got that option to get it through the FAIR plan. So legislation created it, FAIR plan was born. All of the admitted companies that are doing business in California have to run it, staff it, write the policies and pay the claims. Now you might stop and say, no, wait a minute, wait a minute. So you're saying that if company A says, I don't want to write your house, for example, because it's in the hills and too much of a risk for fire, you go to company B, company C, you go to a bunch of companies and they all say, no, we don't want to take that risk. So you end up going to the FAIR plan and then there's a loss. FAIR plan is all of the insurance companies that just said no and they're paying the claim. As wonky as that sounds, that is exactly what happens. It's one of the reasons I get frustrated when I hear people talking about, oh, the insurance companies are just trying to dump everyone on the FAIR plan as if that gets them off the hook. It literally keeps them on the hook. It puts them on the hook. It's their money paying for those claims. So again, be educated, listen to the facts. Insurance carriers cannot dump clients to the FAIR plan and not have to pay claims. That's exactly what FAIR plan does, pays the claims and guess who pays that? The insurance companies. It's just a fact. You can look it up if you want to be sure. But I'm telling you, that's how it works. Now, so what's happening with these FAIRs? You've heard about an assessment, a billion dollars that the California Fair Plan needs. What's that all about? Well, the California Fair Plan only has so much money on hand based on the premium that it collects, which makes sense, right? Just like an insurance company, they collect premium and they have money on hand. The California Fair Plan does the same thing. It collects premium and keeps money on hand. Also, what the California Fair Plan does is it purchases something called reinsurance. Now, reinsurance, put very simply, is a concept where an insurance company takes some of the premium that they receive and they give it to another insurance company and then they share in the exposure. So, let's just say you're paying $1,000 in premium, an insurance company might say, okay, I'm going to take $500 of that, give it to another insurance company. And then if there's a claim, since we both have half the premium, we're both going to pay half the claim. Now, it's not exactly that way because the carrier actually has to pay more money. to be able to get the other company, the reinsurance company to take it. But simply put, that's the way reinsurance works. It's a terrific concept, because what it does is it spreads the risk, right? It allows more insurance companies, which means more wallets, which means more money to be behind you in the event that there's a claim. So the California Fair Plan did this as well, just like all insurance companies do. The California Fair Plan, run by insurance companies, did the same thing. It purchased reinsurance. Now, the reinsurance has something called a retention limit. Oh gosh, Karl, you're just going crazy with all these annoying terms. All right, a retention limit is just a fancy way of saying deductible for our purposes now, okay? So what happened is that the California Fair Plan purchased reinsurance, but before they can access that extra cash, which by the way is right around $6 billion in cash, they have to pay out about $900 million. Look at it like a deductible. Once Fair Plan pays out the 900 million, they have access to the other $6 billion to continue paying claims. Well, Fair Plan did not have $900 million in the bank. So they had to turn around and go to their masters, which are again, the insurance companies, not the state of California, not the taxpayers. They had to go to the private insurance companies and say, hey, we kind of need this $900 million threshold in order to get access to this other $6 billion. And by the way, we need it right now. So the Fair Plan asked the California Department of Insurance, can we do this? The California Department of Insurance, I believe did the right thing and said, well, yeah, you need that money to pay claims. It's there, go get it. That's what the Fair Plan is for. Backed by insurance companies, paid for by insurance companies. So the billion dollar bill went out to the individual private admitted insurance companies for the Fair Plan to be able to collect. so that it could continue paying claims and have access to that $6 billion in reinsurance. Now, the good news is, we believe at this point that that is sufficient money to be able to pay all of the outstanding and known claims for this event that the California Fair Plan has. So, when people are saying, oh, the Fair Plan's out of money, they need a bailout, they need this, they need money, they've gotten the money from the insurance industry, and they have their reinsurance of close to $6 billion as well. People that have a Fair Plan policy are going to get their claims paid, and there's money to be paid from the private insurance companies, from their money in the bank, and now from their reinsurers as well. Just the reality. Listen, we have one more segment to go. I'm going to talk a little bit more about what's coming next in the insurance world and what you need to know. This is Insurance Hour. I am Karl Susman. We will be back in 60 seconds. Stay put. Are you feeling lost in the search for the right insurance? Making call after call. Only to find no one willing to go that extra mile for you? At Susman Insurance Agency, we understand that frustration and we're here to change your experience. Where others see obstacles, we see opportunities. While many might shy away from jumping through hoops, at Susman Insurance Agency, we are prepared to leap. Looking under every rock, exploring every avenue. That's not just what we do. It's who we are. Our dedicated team doesn't just offer policies. We provide solutions. Solutions born from persistence, expertise, and a genuine commitment to finding you the best coverage possible. We don't just meet expectations. We surpass them. If you're tired of hearing no or it's not possible, it's time to turn to a team that believes in yes and let's make it happen. Don't settle for less. Reach out to Susman Insurance Agency at 877-411-5200. Visit us online at Susmaninsurance.com or email sales at Susmaninsurance.com. Let's uncover the insurance solutions you deserve. Susman Insurance Agency, going the extra mile every time. Hello, hello. This is Insurance Hour. I am your host, Karl Susman. Thank you so much for being here today. Phone lines are still open for our final segment. That number to call or text is 559-656-0317 or email your questions in to Questions@InsuranceHour.com. You can also find us online, of course. Just search for Insurance Hour. You'll find us on the iHeartMedia app and on all great radio stations out there as well. YouTube, Spotify, Apple Podcasts, all that good stuff. Hey, listen, before I forget, I do the best I can to give you the most up-to-date and accurate information that I can. But I'm only human, and I might not always get it right. So if you hear something that just does not seem right to you or you've been told something that... that is completely the opposite, then let me know. There's no ego involved here. I wanna get the right information to you. And if that means I have to do some extra research when you bring something to my attention and it turns out that I've given this out the wrong information, I will absolutely come right back here and tell everybody the idea is the right information, not just Karl's information. So again, I do the best I can. I always will to give you the most up-to-date and accurate information I can, but it's not perfect. So if you hear something that doesn't seem right, let me know. Let me go research it two, three, four times over and make sure that everyone that's listening has the right information. And if it didn't come from me first, if it came from you, doesn't matter, let's just get the right information out. Okay, what's next for insurance in California? Let me just give you the 10,000 foot view down. We've just had a major, major disaster in Southern California. We've had major disasters every three or four years for over a decade. The property insurance industry in California, and by property I'm talking about homeowners, insurance policies, condominium owners, insurance policies, renters, insurance policies, things like that, has not made a profit in the state of California in more than a decade. Understand what that means. That means that a private company has paid more in claims in the last 10 years than it has collected in premium. Let me say that one more time. The companies in the state of California have paid out more in claims than they have collected in premium. Well, how does that work? Well, they're losing money. They're making money in other states. They might be making money on other types of insurance to try and make it up, but either way they are losing, not winning. So what we're seeing is companies leaving California because they can only lose money for so long, right? Look, we are massive. We are the fifth largest economy in the world, but that just means their potential for loss is massive as well, and that's what they're seeing. So with the new regulations that have just literally passed by the skin of our teeth in December, we are set to be in a position where the insurance industry has a path forward. Even with all of this destruction and the billions of dollars, they're saying the total economic loss from this event could be, and I'm not kidding, close to half a trillion dollars. I mean, you can't even conceive of what those numbers even mean. What the heck is half a trillion dollars, right? That's what they're talking about. So, even with this happening, thanks to these new regulations that the Department of Insurance passed, we do believe there is a path forward for the industry in California. What that path looks like is going to be a slow, resurgence of companies coming to California, filing new types of products, new prices, new discounts, and what we really want is to see them start competing for our business. When companies compete, prices go down. Anyone that doesn't believe that shouldn't be paying attention to this show because we all know we are Americans. We know how this works. Competition is what has made us great. It's what's going to get California out of this rut. It's going to get us back into a position where we have not one or two carriers that dominate the market and can wave a wand and threaten to leave and make everybody have to kowtow. No, we want to have as many insurance companies here as we possibly can writing business, competing for business so the prices get pushed down and, as importantly, we can spread the risk. Because what do you think is better for California consumers? For us to have a handful of companies that control the majority of the California market or to have a dozen or more companies that all take a piece of the California pie. They all write insurance and they're all taking the potential exposure in different places and divvying it up. Guess what? If that were the case right now, we would not be seeing the California fair plan having so much premium and being so underwater. We would not see companies like State Farm having such financial trouble. We would not see so many companies leaving the state. We would see the opposite. We would see every company not being thrilled with these massive losses, but the percentage and the actual dollars that they would be out of pocket would be something that they could sustain. It's something that they could price appropriately for over a period of time. It's something that would allow them to do business. Remember, insurance is not a given, right? It's not a right that everybody has to have it. These are private companies. They have to be able to make money. Not just because that's what private companies do, but because they have to be able to make money to be able to pay claims, right? This is not altruistic. Insurance companies write insurance to make money. And yes, they make money and they pay claims. Both things have to happen for an insurance company to thrive and survive. And unfortunately, we have not had an environment for the last 30 or so years where that has worked and that has definitely worked to the detriment of consumers. And I am looking forward to seeing that change, thank goodness. And I am looking forward to seeing how much creativity in product and pricing and discounting and how we can spread the risk between lots of insurance companies and lots of different companies that will offer fire insurance, if not just directly to consumers, but in packages. I'm looking to see what the American competitive market can do. And with that, I want to thank you for being here. We are going to be talking about more insurance related topics, but go ahead. Call, text, email anytime 559-656-0317 or Questions@InsuranceHour.com. This is insurance hour and I am Karl Susman. Everyone stay safe. I do want to thank all of you for taking the time to listen today. I know insurance is not necessarily the most sexy concept. It is important that you understand what it is you're looking for, what it is you think you're getting and finally what you actually did purchase. You simply need to know more than you used to. Things are more complicated. If you have any questions, please reach out to me directly at 559-656-0317. You may also send your questions to Questions@InsuranceHour.com. Informing, educating and entertaining one policy at a time, THIS IS INSURANCE HOUR. This show is dedicated to Shamrock Papa.