SECTION SEVEN: Improve Access to Commercial Insurance and Increase Insurance Consumer Protection

The civil disturbance resulted in extensive damage to commercial properties, much of which were uninsured or under-insured. Of the billion dollars in damages, approximately one-half of those damages were covered by insurance. Unfair insurance practices and discrimination have denied many affected merchants and businesses from reliable insurance coverage. The immediate effects of the civil disturbance was extensive damage to commercial property within the central city. The immediate and long term adverse effect of this damage is increased by the lack of insurance for a large portion of the damaged commercial property. Of the billion dollars in damages, approximately one half of those damages were covered by insurance. Discrimination and unfair underwriting practices have denied the central city merchants and businesses from reliable insurance coverage. We must increase business access to property insurance in economically distressed areas. Recommendation/ Action #22 Expand the existing FAIR Insurance Program to cover business interruptions, full property and inventory replacement, and periodic payments to make the insurance more affordable to small businesses. In order to increase access and affordability of commercial insurance in the center city the state should expand the existing state Fair insurance program to provide a full range of business insurance to those areas where commercial insurance has not been available. The current state Fair insurance plan program should be expanded to provide full business insurance including business interruption, full property and inventory replacement, and periodic payments to make insurance coverage more affordable for small business. Recommendation/ Action #23 Strengthen the Department of Insurance's current prohibitions on insurance company practices that result in urban areas being denied access to affordable business insurance. Recommendation/ Action #24 Require the Department of Insurance to help small businesses understand the types of coverage that provide realistic protection by conducting outreach, providing insurance education. and disclosing the risks of insuring with nonadmitted companies. In order to decrease the problem of businesses being underinsured, the Department of Insurance should undertake an outreach and education program with small businesses. The outreach program should assist small businesses in understanding the kinds of insurance that are available and the appropriate level and types of coverage that will provide realistic protection for small businesses. The small business outreach and education program should also provide information on the limitations inherent in the reliance on nonadmitted insurance carriers. In response to the immediate problems experienced by small businesses in the impacted areas, the Department of Insurance should provide community-based assistance in recovering payments for small businesses. Ms small business assistance should include multi-cultural staff to investigate insurance company practices and provide consumer assistance to limited-English-speaking business owners. Recommendation/ Action #25 Direct insurance companies to clearly disclose whether the insurance offered provides full replacement coverage for buildings, inventory, and lost income. Many of the small businesses that experienced loss for which insurance payments have been inadequate, were not aware, at the time that insurance was purchased, that full-replacement value for property, inventory, and lost income was not being provided. Insurance agents and carriers must provide a more comprehensive explanation of the nature and limitation of insurance coverage. Recommendation/ Action #26 Increase the safeguards for small businesses purchasing insurance from surplus line brokers and insurance companies, by means of a prior authorization requirement from the Department of Insurance and the establishment of a guarantee fund. The failure of unlicensed insurance companies to pay claims in a timely fashion has been a major problem for small business owners. Unlicensed companies should be required to obtain prior authorization, from the California Department of Insurance, before a surplus line broker may offer or sell that product. Additional safeguards are needed to provide a guarantee fund, for surplus line policies, to be used in the event that a nonadmitted insurer becomes insolvent or otherwise fails to make timely payments under a valid policy.

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