With the insurance marketplace changing in California so drastically over the past few years, consumers have been exposed to aspects of the market that they’ve never seen before. It leaves many with questions about how everything works together, and when to approach which segment of the market.

Admitted Carriers
If a carrier is admitted in the state of California, they have made an agreement to be under the authority of the CA Department of Insurance (CDI) in exchange for being the first option offered to consumers in California. Because of this, they are often called “preferred” carriers. These carriers also pay into the California Insurance Guarantee Act (CIGA) which acts as a secondary “insurer” for claims that remain open if a carrier becomes insolvent and cannot keep its obligations to pay out on claims, up to $500,000 per insured. This should be the FIRST step on the path of finding insurance.

Excess & Surplus Lines Carriers
These carriers do not have to go through the same rate approval process that admitted carriers have to go through, and have much more flexibility of rate, among other things. This allows them to be more agile in a difficult market and to price for risks that have high risk factors. They do not pay into CIGA, and when they become insolvent, any open claims go unpaid. This is why it is important to carefully consider a carrier’s A.M. Best rating when making your choice. Stronger carriers are less likely to become insolvent.

Excess and surplus lines carriers can often tailor their coverage to complicated risks more easily, and this hand-crafted insurance usually means a higher premium. These carriers are able to offer insurance legally in California, but they are not “preferred” so are not supposed to be presented to the consumer, unless there are no admitted options. This should be the SECOND step in a healthy search for insurance.

California FAIR Plan (FAIR Plan)
This should be the LAST RESORT when it comes to property insurance in California. If you have not approached excess and surplus lines carriers. STOP. Do not pass Go. Head back to step two and get quotes from that segment of the insurance marketplace. The reason the FAIR Plan should be the last resort is that the insurance is NOT comprehensive (it leaves out a lot of coverage that most folks need) and it’s really expensive! Add to that the sad reality that they are not well-funded and the odds of them running out of money when tragedy strikes is high. Because of the new normal of many homes and communities struggling to find ANY insurance, the number of policies taken on by the FAIR Plan has increased dramatically over the past few years. This has made communicating with the FAIR Plan difficult and time-consuming – NOT something you want when you have a claim to report and want to get it fixed as soon as possible.

It’s a good idea to work with an agent or broker that understands how this process works, because they will always look to the excess and surplus market before the FAIR Plan if there is no access in the admitted market. They won’t be swayed by the fact that the FAIR Plan has been showing up in the news a lot lately – they know the dramatic limitations of the Plan. They want you to get insurance that gives you the coverage you need for the best price they can find.

Kimberly Lilley, CIRMS, CMCA, is the Director of Advocacy, Public Relations & Marketing for Berg Insurance Agency in partnership with LaBarre/Oksnee and can be reached at kimberly@berginsurance.com.