Marin's property insurance mess demands a solution

Homeowners all over Marin have either been hit with substantial increases in their property insurance premiums, had their carrier refuse to renew their policy or are unable to obtain insurance coverage after they purchase a new home.

Since those who own a residence or business property without adequate fire and casualty insurance are taking an unreasonable risk, families and small businesses in high-risk neighborhoods find themselves in a quandary.

It's a legitimate crisis across California's coast, but especially in the wildfire-susceptible North Bay. There may be an outsidethe-box answer to resolve the dilemma.

Insurance carriers are in business to make a profit. They will issue or renew policies if they believe that the insured is a safe risk and thus good business. If a residence or commercial structure is situated in an area where the carrier perceives the risk too great — whether due to wildfire, sea level rise, mudslides, earthquakes or some other calamity — it will either not issue a policy or, if it does, it charges premiums accordingly.

Since those risks are common in California, insurance companies have quit major portions of the state despite a huge market of potential policyholders.

Some insurance companies leaving the California market contend that regulations issued by Insurance Commissioner Ricardo Lara unreasonably restrict them from raising rates to adequately compensate them for their combined risk. Whether or not those complaints are fair and accurate, without state regulations, those carriers which remain in the market will then charge even higher rates than they do today.

When the crisis began, the state mandated that California insurance carriers jointly create the California FAIR (Fair Access to Insurance Requirements) Plan. It is a fire and earthquake insurer of last resort: As the company's website states, “The FAIR Plan provides basic fire insurance coverage for high-risk properties when traditional insurance companies will not.”

FAIR policies are far more expensive compared to traditional property insurance and their coverage is less comprehensive than the products Californians traditional insurance companies provide.

What's to be done? Might the state establish its own fire and casualty insurance carrier that issues first-class policies at neutrally set competitive rates?

Before readers start shouting “socialism,” let's look at how the state handled another insurance-related crisis.

Among early 1900s reformers, it was understood that those injured on the job were uncompensated and not protected if they suffered a serious injury that “arose in the course and scope of employment.” A law was passed mandating employers to provide no-fault workers' compensation insurance for their employees.

Workers' compensation insurance was then difficult to obtain and expensive. To meet the need, in 1913 the Legislature passed the Boynton Act creating a state-established compensation insurance fund.

For 120 years, the San Francisco-based state fund has been a self-supporting, nonprofit enterprise. It has operated as a private sector workers' compensation carrier. Similar state-initiated workers' compensation companies now operate in 21 states.

The state fund guarantees that a fiscally solvent company will be available to employers. It sets rates competitively but as low as economically prudent. The company operates high standards of financial management since the state doesn't guarantee payment of losses if the fund becomes insolvent.

State legislators should replicate the Boynton Act and create a similar state fund for fire and all-risks carriers to address today's insurance crisis. The basis behind the state fund is Article 14, Section 4 of the state constitution. To create a state fire insurance company, voters need to approve an amendment to Article 14.

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My column published Sunday failed to mention one of Marin's 10 municipalities conducting city council elections in November. On Sausalito's five-member council, the four-year terms of three incumbents are expiring. They include Mayor Ian Sobieski, as well as Melissa Blaustein and Janelle Kellman.