AIG and Chubb intend to non-renew thousands of high-end California homeowner policies over the coming months as a result of fire exposure in the state, according to a recent Wall Street Journal article titled “Wildfire Risk in California Drives Insurers to Pull Policies for Pricey Homes.” Law firms that are members of the AIG panel or Chubb panel of defense counsel in California will want to monitor this situation closely.
California homeowners with multi-million dollar properties insured by AIG’s Private Client Group will be notified starting this month that their policies may not be renewed. The insurance giant may offer some current policyholders coverage through a different AIG division more closely aligned with the excess and surplus (E&S) market. These alternative policies may cost three to five times more in annual premiums, with the possibility of reduced levels of coverage, according to the Journal.
Chubb reportedly will be more selective in their approach to the California homeowners insurance market. They will continue to write new policies while declining others, based on underwriting and pricing considerations. Chubb Chief Executive Evan Greenberg is quoted as saying “someone else will have the pleasure of writing” business for which “we cannot charge an adequate price for the risk.”
Farmers Insurance, which was founded in Los Angeles in 1928, will continue to write California homeowners insurance policies. Allstate Corp. is also a leading company in the California market, according to the Journal. Those carriers that remain active in writing and renewing policies have taken advantage of pricing increases in recent months.
Many insurance carriers are at odds with the California Department of Insurance, which requires them to price policies based on historical loss experience rather than anticipated future losses indicated by catastrophic loss models.
Implications for AIG and Chubb Panel Counsel Law Firms
As leading primary carriers like AIG and Chubb reduce their appetite in the California homeowners market, many policyholders will find themselves in the secondary market. This could reduce the volume of claims handled by many defense law firms. Claims may also be different, since admitted E&S carriers are typically subject to less regulation by state insurance departments.
To the extent that the excess and surplus carriers writing policies in California operate out of the Lloyds market in London, it can be expensive to pursue E&S panel appointments due to the travel and entertainment expenses traditionally associated with this segment.
If other carriers like Allstate or Farmers pick up the slack, matters may increase for these defense panel counsel law firms.
The State of California also serves as an insurer of last resort. The California FAIR Plan offers California property owners access to basic fire and earthquake insurance when access to coverage in the traditional market is not available. The FAIR Plan provides a “Difference in Conditions” policy to bring coverage in the range of a comprehensive homeowners insurance program.
One thing is certain. Insurance defense law firms that are active in the California homeowners insurance market should aggressively strive to diversify their client base. Relying too heavily on one or two key insurers is a risky business model. The time to start looking for more business is before you are desperate.
Background on California Wildfires
California continues to face extreme weather conditions amid a changing climate, according to Governor Newsom’s office. The state plans to invest $648 million for additional firefighters and firefighting equipment this year. It will also allocate $1.2 billion for forest management and fire prevention actions in 2022, to supplement the $1.5 billion budgeted for 2021.
As one example of extreme fire loss, the Dixie fire that started in July 2021 affected the counties of Butte, Lassen, Plumas, Shasta, Tehama. The fire covered almost 1 million acres and 1,300 structures. It is reported to be the largest single source wildfire in California history. It was second in size only to the August Complex fire in 2020 that burned in the counties of Mendocino, Humboldt, Trinity, Tehama, Glenn, Lake, and Colusa.
Insurance Defense Marketing for Law Firms
If your insurance defense law firm is asking how you can improve your marketing communications and business development efforts, give us a call. We have helped more than 220 insurance defense law firms in 40 states pursue new client opportunities.
Legal Expert Connections, Inc. offers three key benefits to insurance defense law firms nationwide:
- We are the leading U.S. legal marketing agency specializing in the insurance defense market. We make it our business to identify who you need to contact at an insurance company, corporation, or municipality to be considered as a panel counsel member. We accelerate your business development process by helping you focus on introducing your law firm to new prospective clients.
- You get a structured business development process. We guide your law firm through a proven three-step campaign that brings discipline, focus, and productivity to your marketing efforts.
- Increase revenue with professional, Bar-compliant legal marketing campaigns. We do the research to identify insurance panel managers, so you can focus your time on the business development process.
This article is provided for educational purposes only. It is not to be interpreted as legal advice or an opinion in regard to any topic discussed. The article should not be used as a substitute for legal advice from a licensed attorney in your state. Every situation is different and circumstances vary widely depending on the governing state law, policy provisions, and related considerations.