New homeowner insurance regulations announced late last month are aimed at bringing clarity and uniformity in estimating the replacement cost on homeowners insurance in the event of a disaster. California Insurance Commissioner Dave Jones announced the new regulations on June 27, stating they represent a concerted effort to significantly curb the common problem of underinsurance that many homeowners face.
"These regulations will go a long way toward ensuring that consumers who are victims of a disaster, such as a wildfire, are able to get the financial relief to rebuild their homes and their lives, while also doing much to ensure that homeowners are not underinsured," said Jones.
Included in the new regulations are provisions for laying out requirements applicable to replacement value and replacement cost estimates to create a more consistent, comprehensive and accurate replacement cost calculation; setting forth training standards for agents and brokers who sell homeowners insurance; creating standards for real estate appraisers who estimate replacement cost for insurance purposes; requiring the application of certain standards when estimating replacement and construction costs; and establishing record keeping requirements.
Personal Insurance Federation of California and the Association of California Insurance Companies have filed a lawsuit concerning the provision on replacement costs. The insurance trade associations charge that the regulation restricts insurer "underwriting" and claim the Department of Insurance does not have that authority.
According to Commissioner Jones and complaints filed with the Department of Insurance, when policies are sold to customers there has been confusion about what a "replacement cost" estimate actually covers. The new measures attempt to clear the confusion so consumers receive accurate information and are not misled by insurers. Insurance companies are not required to provide an estimate, but if they do, it must be complete and include certain components.
"Consumers are entitled to know at the outset what their replacement cost is so they can make informed decisions about their coverage," said Jones.
"We support any action which allows consumers struck by a disaster to get the help they need quickly, so they can rebuild their homes and lives," said Gene Lentz, president of the Silicon Valley Association of REALTORS®.
Lentz said REALTORS® are currently urging Congress to pass legislation in the House of Representatives to reform and reauthorize the National Flood Insurance Program. The program, which faces expiration at the end of the federal fiscal year on September 30, is critical for home buyers to obtain financing in areas where flood insurance is required. The bill would authorize the program for another five years and make long-sought reforms to put the program on a more fiscally sound footing.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.