CEA Participating Insurers

What are Participating Insurers for the CEA?

How CEA Partners and the CEA work Together?

Processes, Underwriting, Claims, and Sales of CEA Policies through the PI Program

A Comprehensive list of CEA Participating Insurers

CEA Insurance Partners AKA CEA Participating Insurers:

The California Earthquake Authority is a Public – Private insurer that only provides coverage for the peril of Earthquake. The California Earthquake Authority, or Authority, or CEA is a most unique insurer. The CEA provides the guidlines, rules, underwriting, and holds the capital in case a claim is made, yet the policies are sold, serviced, and claims management completed via the Participating Insurer program. Participating Insurers are home insurance companies that have applied and been approved to provide quake cover alongside their home insurance policies.

These Authority Earthquake policies are sometimes referred to as mini-policies. This article is about the CEA Participating program.

A Special Note on Earthquake Offers of Insurance in California:

All home insurance policies sold in California are supposed to be accompanied with an offer of earthquake insurance. Every Other Home Renewal [as in every other year] is also suppossed to contain an offer of Earthquake Coverage.

Some property insurers source their earthquake quotes and policies through the CEA, some do not. There is no law that requires the property insurers to work with the CEA.

Insurers that do not quote and bind CEA policies are not considered CEA Participating Insurer members. Insurers that do are Participating Insurers. This article is about these Participating Insurers.

About the California Earthquake Authority Participating Insurer Program:

The California Earthquake Authority Participating Insurer program, also known as the CEA PI program is a unique plan that allows admitted, approved, and “California-licensed property insurance companies” to “contract with participating insurers to service the policies of basic residential earthquake insurance issued by the authority.” Sources: CEA and California Insurance Code 10089.7 The Code also stipulates that the “Authority means the California Earthquake Authority.”

The Insurance code continues: “All policies of residential earthquake insurance provided by the authority shall be written by the authority. Authority policies shall be marketed and policyholders serviced by the participating insurer that writes the underlying policy of residential property insurance, and participating insurers shall be reasonably compensated for the claims and policyholder services they provide on behalf of the authority”. This is a long winded way of saying that the CEA holds the policy [claims payments] but the policies themselves are “serviced by the participating insurer.” Section 10089.28

There you have it: The CEA policies are “marketed and policyholders serviced by the participating insurer” yet “written by the authority.” Later we will go into what all of this means.

The CEA insurance policy [BEQ-3B (01-2019 edition)] defines Participating Insurer as “the insurance company that issued the companion policy, meets the legal requirements to offer residential earthquake coverage by participating in the CEA, and provides claims and policyholder services for this policy on behalf of the CEA.”

A Comprehensive List of CEA Participating Insurers:

The Following is a list of “Participating Insurers” that work with the CEA. It is our attempt of a comprehesive list. This list may not be a complete at the time of your reading. Ask your home insurer if they partner with the CEA to be certain. Our list is different from the one the CEA provides as we have condensed some of the insurers alongside their sister or parent organizations. That being said we attempted to make it as complete as could be done.

AAA Insurance: Listed on the CEA site, as ACA Insurance, Automobile Club of Southern California, and AAA Northern California. ACA, Auto Club of So Cal, and AAA Nor Cal are all typically sold out of AAA offices exclusively. ACA & Auto Club of So Cal are CEA Participating Insurers.

Allstate Insurance and Encompass Insurance: A captive agency national insurer. Allstate is one of the larger insurers in the West. Encompass is part of Allstate. Allstate is a CEA Participating Insurer and Encompass Insurance is a CEA Participating Insurer.

Amica Mutual: A Rhode Island Mutual Insurer typically sold through the insurer directly. Independent agents typically do not have access. Amica is a CEA Participating Insurer.

USAA: Listed on the CEA site as Armed Forces Insurance Exchange and USAA. The USAA is an sold exclusively to USAA members which are typically members of the State Department, Armed Forces, and individuals Legacy members. USAA is a California Earthquake Authority Participating Insurer.

ASI and Progressive: ASI and Progressive are partners. These insurers do partner with Independent Agencies across the country. In addition Progressive does work directly with consumers as well. Progressive & ASI are CEA Participating Insurers.

FAIR: FAIR is the California Insurer of last resort. The FAIR plan is the insurer when no one else will write your policy. The FAIR plan just recently started partnering with the CEA. The FAIR plan is a CEA Participating Insurer.

Farmers Insurance Group, Foremost, and Toggle: Foremost Insurance and Farmers insurance are both multi line insurers that are part of the Farmers family of insurance companies. Toggle is a unque start up, focused on renters, that also is a part of the Farmers family. Toggle, Foremost, and Farmers are all CEA Participating Insurers.

Homesite: A Boston Mass based Property Casaulty Insurer, Homesite Insurance is not one that you will hear about very often. Homesite Insurance is a CEA Participating Insurer.

Hyundai Marine & Fire Insurance Policy: Hyundai insurance is based in New Jersey. Hyundai Marin and Fire Insurance is a CEA Participating Insurer.

Liberty Mutual and Safeco: Liberty Mutual acquired Safeco several years back. Safeco and Liberty Mutual are available for independent agencies to work with. Both Safeco and Liberty Mutual are CEA Participating Insurers.

Mapfre and Commerce West: Commerce West is part of the Mapfre family of insurance companies. Both are available for independent insurance agents to sell and process. Commerce West & Mapfre are California Earthquake Authority Participating Insurers.

Mercury: Headquartered in Los Angeles, Mercury is a multi line insurer that operates with various independent agencies. The company was founded about 1961. Mercury Insurance is a CEA Participating Insurer.

Nationwide and Nationwide PCS: Nationwide Private Client Service is Nationwide product for more expensive homes. Both Nationwide and Nationwide Private Client Service is a CEA Participating Insurer.

State Farm: State Farm is a mutual insurer and one of the largest insurers of homes in the state of California. State Farm is also one of the largest auto insurers in the United States. State Farm is a California Earthquake Authority Participating Insurer.

It might not seem mentionable since it is so obvious. But unless you sell Property Insurance in California, one would likely not have a partnership with the CEA. Therefore all of these insurers sell some form of property coverage in the state.

*Many of these insurers have been condensed and regrouped in order for it to make more sense. An example is AAA. This list is subject to change and may not reflect recent additions, deletions, or other ammendments.

**To get even deeper into the details here it should also be noted that their exists a super complex structure of corporate insurance that is way beyond the scope of this article. Simply put most insurers house sub entities under main entites. Those sub entity insurers are mostly NOT represented on our list nor the CEA list.

The Nuts of Bolts of the CEA PI Program Administration through PAM:

The CEA, through their PAM manual stipulates all of the fine points of exactly how this program works. PAM or Procedures and Accounting Manual is an approximatly 27 page procedural manual that the CEA uses. This CEA PAM manual reviews CEA Policy Issuance and Administration, among other topics. The administration section covers topics such Record Inspection, Reporting Specifications, Premium Deposit and Collection, Claims, Compensation, Training, Audits, Claim Disputes among numerous other topics.

This Manual in combination with the following documents: “the CEA Act, CEA Insurer Participation Agreement, CEA Plan of Operations, CEA Claim Manual, the CEA Eligibility Standards, CEA Technical Reporting Instructions, CEA Rate Manual(s), CEA Participating Insurer Operating Procedures Manual, Any other written notices or directives issued by the CEA” [CEA PAM Manual] …. “set forth procedures which CEA Participating Insurers… must follow to transact earthquake-insurance business on behalf of the CEA.”

In a simpler way of looking at it, according to the CEA website, CEA PIs may provide “CEA insurance quotes” and sell “earthquake insurance policies” and perform “policy renewals” while helping “policyholders make changes” and receive “…payments” and most importantly handle “earthquake…claims.” PIs are the face of the insurance policy. They, along with their agents sell the policy. The insurer than services the policy and even handles the claims. All along the CEA is in the background.

How you Purchase CEA Earthquake Insurance through a Participating Insurer:

Each partnering insurer handles the sales process slightly differently. However they are all required to provide an offer of earthquake insurance to you. However they typically offer up the 15% deductible, while there are numerous other options and coverages available.

In general though each participating insurer needs to follow the rules agreed upon in their partnering agreement and rules in the Procedures and Accounting Manual and other documents.

The process for purchasing a quake policy through the CEA is that you typically automatically receive an estimate when you purchase your home policy. At this point you may choose to ammend the estimate to your liking. Next – You then purchase the CEA policy through your agent or broker. That being all said its not possible to get into too many specifics as some of the insurers are vastly different than others. Contact your insurer or agent today to get a CEA quote.

Lastly and for the record one CANNOT purchase a CEA policy from a non CEA PI. If the insurer is not on the CEA list [or some derivitive insurer] than you cannot purchase a CEA policy.

CEA PI Claims Settlement:

As we previously stated a few segements ago, it is that insurer than services the policy and even handles the claims. However when a claim needs to be paid out – that is where the situation becomes different than a typical insurance claim. The Participating Insurer may pay approved claims themselves or seek reiumbursement. “The Participating Insurer is not required on behalf of the CEA to advance any claim payment to any CEA policyholder, except…ALE coverage.” However it “is encouraged by the CEA” that “Participating Insurers may…advance…CEA claim payments in their discretion and obtain reimbursement from the CEA…” CEA PAM Manual.

The California Earthquake Authority will reiumburse the Participating Insurer via “the Fedwire system, electronically depositing the funds directly into the Participating Insurer’s designated bank account.” The Fedwire system is a “real-time, gross settlement system.” FRBServices.

ALE or Additional Living Expense is somewhat defined as “additional costs of living incurred by a policyholder should they be temporarily displaced from their place of residence.” This is not the CEA definition but is a good one from Investopedia. And the definition is not exact since its based more on Home Insurance.

During the claims process the unique situation becomes quite clear. The Insurer follows the rate manul and is heavily involved in approving and administering the claim and when the claim payment goes out, it more or less goes through the PI from the CEA to the policyholder.

CEA PI Renewals, Nonrenewals, and Cancellations:

CEA policies are companion policies in that the Participating Insurers must have a policy in force to have a CEA policy. It should be noted that, according the CEA PAM Manual: “The Participating Insurer must cancel a CEA policy upon cancellation of the companion policy of residential property insurance.” In addition: “If the companion policy is non-renewed, the Participating Insurer must non-renew the CEA policy as of the effective date of nonrenewal of the companion policy.” In other words if you cancel your home insurer in this situation thus you will also be cancelling your EQ insurer.

Insureds may choose to cancel their own CEA policy as well: “at any time by an oral or written request…” Otherwise assuming there is no underwriting change an offer of renewal is typically made alongside of the underlying home insurance policy. “If there is any non-material change to the CEA policy during the policy term…the Participating Insurer must issue a new declarations page displaying all such changes…” That of course is not the same if their IS a material change: “a new CEA Earthquake Insurance Application and a new policy are required.” What is material? That might be a post for another time.

CEA Compensation to Participating Insurers:

It should also be noted that CEA Participating Insurers are paid a “producer compensation..[of]…10%” and yet “the…amount of such compensation…[paid to the agents]…is to be determined by each Participating Insurer.” In other words Participating Insurers get paid 10% and it is up to that PI to determine how much to pay their own agents, or even to pay them at all.

Participating Insurers Potential Assistance with Keeping the CEA affloat:

Participating in the CEA program though – could potentially have a negative impact. According to the Code 100893.23 “if at any time the authority’s available capital is insufficient to pay benefits and continue operations, the authority shall have the power to assess participating insurance companies.” Starting off in the first year and indexed annually [to some extent] “the total amount of all assessments levied on participating insurance companies by the authority pursuant to this section shall not exceed three billion dollars.” That is not nothing.

The CEA PI Earthquake Disclosure:

The CEA PAM rulebooks stipulates a Disclosure document that is required to be included and we will review this CEA Earthquake Disclosure more at a future time. “The following written disclosure must be provided…” and it even notes the size of the font to be included. Therefore all CEA mini policies include this disclosure.

The Disclosure contains three abridged main Bullet Points:

Point One: Homeowner CEA Policy Differences – “CEA policy coverages are different from the coverages provided in your homeowners’ insurance policy….” There are all sorts of differences between your Homeowners and Earthquake policy and you should not assume they are similar in any manor. The CEA Disclosure lists a few of them, such as the coverage differences in “swimming pools..and chimneys” but that is flatly the least of it.

Point Two: No Guarantee Fund – “If CEA’s liability for earthquake losses exceeds the CEA’savailable resources, the CEA may reduce its payment to you or pay you in installments.” Additionally and possibly worse: “This policy is not covered by the California Insurance Guarantee Association and therefore the California Insurance Guarantee Association will not pay your claims if the CEA becomes insolvent and is unable to make payments as promised.” What this point in essence is saying is that CEA is NOT guaranteed as other common admitted insurers are. The California Guarantee Association is a very important little corner of insurer solvency and value.

Point Three: Premium Surcharges – “In certain cases, your CEA policy premium may be subject to future surcharges if the CEA’s obligations to pay earthquake losses rise to a pre-defined level…” And that additional premium could be as high as “20%” of your “premium.”

*this may not represent the latest version of this document at the time of your reading. And we did highlight points and condense language. Some sentences were ommitted.

Why Do Insurers Partner with the CEA to Provide Earthquake Insurance?

The State of California mandates that every home insurer offer earthquake options to their policyholders. The CEA provides those earthquake coverage options to some. According to California Insurance Code 10083: “California law requires insurance companies to offer earthquake insurance in conjunction with a residential property insurance policy.” If you do not accept the offer of insurance “the insurer… shall be required on an every other year basis to offer earthquake coverage.”

Additionally, as previously stated participating insurers are compensated a 10% compensation.

It cold be argued that there are ethical reasons for partnering with them as well. I mean – how could you be in good hands if you are not offered up earthquake cover?

I have been told that My Best Choice for Earthquake Insurance is through a Participating Insurer – Why would that Be?

Although not necesarily a common situation to run into, it is technically possible that a CEA policy might be the best earthquake option you can come by. However in this office’s opinion it is best to confirm via quotes from independent earthquake vendors that there is no better solution in the private market.

CEA insurance policies are often not the best deal that California consumers can get for earthquake insurance.

As to Why it Might be the Case, it can happen in some situations where the open market does not have an interest and the underwriting rules vary from Indepent Vendor vs the CEA.

If an Insurer Does not Partner with the CEA does that Mean that No EQ Option is Available?

No, Home insurers have a choice of where to get their earthquake quotes from. Just because its not from the CEA, does not mean that there is no option. The insurer is still required to offer you an Earthquake policy. However if the Home Insurer is not a participating insurer than they will not be able to provide you a CEA policy. Plenty of insurer present earthquake coverage solutions from the private market.

Additionally – there are often various Non CEA related independent insurers that may provide you a quote and or an insurance policy for quake coverage. These are the so called CEA Alternatives.

Can an Insurer Leave the CEA PI Program:

Participating Insurers do have the option to leave the program. However more than likely it would be a long slow process. Certainly you would be informed by your home insurer if this were the case.

Can New Insurers Join the CEA PI Program?

Yes, new insurers can be accepted into the Authority PI Program. The exact process is a bit beyond the scope of this article. However they would need to apply to join the program with the CEA.

Information Sources for CEA Participating Insurers:

Multiple source were used to write this article. The first main source is the CEA themselves. California Civil Codes were referanced as well. Wikipedia and Investopia were reviewed were considered. Some sources were cited by internet backlinks, but not all. When directly cited quotation marks were noted.

Notes on this Article:

QuakeCov is not appointed with all of the insurers in this article.