EPL insurance, also known as Employment Practices Liability Insurance or EPLI, is a type of coverage that safeguards employers from potential legal claims initiated by their employees. These claims typically encompass allegations of discrimination (such as those based on gender, race, age, or disability), wrongful termination, and harassment.

Homeowner’s Insurance Crisis

California Commissioner’s 4-Part-Plan

The state’s Commissioner of Insurance has unveiled a comprehensive Four-Part Plan to drive significant reforms in the insurance industry. The plan includes joining the 49 other states that recognize insurers’ reinsurance costs, a move expected to bring stability and efficiency to the sector. Another essential aspect of the plan involves adjusting the rate of return for wildfire risks retained by insurers, rather than ceded to reinsurers, to encourage better risk management practices. Furthermore, the plan allows insurers to leverage catastrophe models in developing state-level rates, embracing advanced technology to enhance accuracy and precision. Additionally, the Commissioner’s Plan requires strict observance of the 180-day deemer provision in Insurance Code Section 1861.05(c) by the Department, eliminating pressure on insurers to waive it. These measures together aim to improve the insurance landscape in the state, ensuring fair practices, consumer protection, and a more secure environment for insurers and policyholders alike.

Cal. Code Regs. Tit. 10, § 2644.5 – Catastrophe Adjustment

In those insurance lines and coverages where catastrophes occur, the catastrophic losses of any one accident year in the recorded period are replaced by a loading based on a multi-year, long-term average of catastrophe claims. The number of years over which the average shall be calculated shall be at least 20 years for homeowners multiple peril fire, and at least 10 years for private passenger auto physical damage. Where the insurer does not have enough years of data, the insurer’s data shall be supplemented by appropriate data. The catastrophe adjustment shall reflect any changes between the insurer’s historical and prospective exposure to catastrophe due to a change in the mix of business. There shall be no catastrophe adjustment for private passenger auto liability.

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New Auto Binding Restrictions

Before a policy can be officially bound, a waiting period of 10-15 days is mandatory. During this time, the insurer may review and assess the application before finalizing the coverage. To complete the binding process, it will be necessary to submit photographs of all vehicles to be insured, including their VIN numbers and registration documents. This information is crucial for accurate underwriting and policy issuance.

However, the insurance landscape in California has encountered some challenges. Several insurance carriers are displaying a reluctance to conduct business in the state. As a consequence, the underwriting process has become cumbersome, and obtaining insurance quotes has become excessively high. This situation poses difficulties for both insurance providers and policyholders, calling for potential solutions to foster a more accessible and competitive insurance market in the state.

Homeowners Insurance Key Statistics

During times of inflation, insurance premiums experience a direct increase in response to the mounting expenses linked to factors that impact claims and policy costs. This year, we have witnessed a significant surge in repair costs, driven by soaring prices of materials and labor, exacerbated by inflation and a scarcity of skilled workers. Consequently, insurance providers find themselves compelled to raise premiums to accommodate the escalating expenses involved in covering claims. For consumers, this creates a burdensome double impact as they face the financial strain of both increased repair costs and higher insurance premiums.

Additionally, data analysis on natural disasters reveals a notable rise in catastrophic events’ occurrence over the past decade, resulting in an annual cost of $200 billion for the United States. Similar to the relationship between inflation and insurance costs, the mounting expenses associated with repairs due to these more frequent natural disasters will significantly influence the cost of insurance premiums. As repair costs continue to climb in response to the heightened occurrence of such events, insurance premiums will likewise reflect these rising expenses. The increasing frequency of catastrophic events poses a considerable challenge to the insurance industry, requiring them to adjust their pricing to address the higher risk landscape.