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Q

In the state of California, if an insurance company is not going to renew an auto policy, how much notification does the company need to give and does it need to be in writing?


A

California does require an insurance company to send non-renewal notices and cancellations notices within a certain period of time.

The CA Department of Insurance (DOI), the insurance regulator for the state, notes that an insurance company is only obligated to give you 10-day notice of cancellation due to non-payment of auto premium. What this means is if your premium is not in their office and applied to your account by 12:01 a.m. the day that it is due, the insurance company will send you a 10-day notice of cancellation.

A 10 day notice gives you the chance to pay the insurance before your policy is cancelled. If the company does not have your money, you do not have the coverage, and they will not send out another notice telling you that you have been cancelled. You can see why it is very important to make sure your payment been made in plenty of time.

California Proposition 103 established new criteria which determine an insurer's ability to cancel or non-renew your policy. There are only three reasons an automobile policy can be canceled/non-renewed once it is issued:

  1. Fraud/material misrepresentation;
  2. Non-payment of premium; or
  3. Substantial increase in the hazard insured against.

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In relation to a cancellation for nonpayment of premium, your insurer must provide you with 10-day written notice after the payment due date before the insurer can effectively cancel the policy. As we mentioned earlier this gives you an opportunity to pay the past due premium and keep the policy in force or to secure other insurance.

Non-renewal is defined by the CA DOI as the termination of an insurance policy at its normal expiration date.

Section 678 subsection (a) of the California Insurance Code (CIC) states that at least 45 days prior to the policy expiration, an insurer shall deliver to the named insured or mail to the named insured at the address shown on the policy either of the following:

(1) An offer of renewal of the policy contingent upon payment of premium as stated in the offer, stating each of the following:

(A) Any reduction of limits or elimination of coverage.

(B) The telephone number of the insurer's representatives who handle consumer inquiries or complaints. The telephone number shall be displayed prominently in a font size consistent with the other text of the renewal offer.

(2) A notice of nonrenewal of the policy. That notice shall contain each of the following:

(A) The reason or reasons for the nonrenewal.

(B) The telephone number of the insurer's representatives who handle consumer inquiries or complaints. The telephone number shall be displayed prominently in a font size consistent with the other text of the notice of nonrenewal.

(C) A brief statement indicating that if the consumer has contacted the insurer to discuss the nonrenewal and remains unsatisfied, he or she may have the matter reviewed by the department. The statement shall include the telephone number of the unit within the department that responds to consumer inquiries and complaints.

Subsection (b) notes that:

In the event an insurer fails to give the named insured either an offer of renewal or notice of nonrenewal as required by this section, the existing policy, with no change in its terms and conditions, shall remain in effect for 45 days from the date that either the offer to renew or the notice of nonrenewal is delivered or mailed to the named insured. A notice to this effect shall be provided by the insurer to the named insured with the policy or the notice of renewal or nonrenewal.

The insurance law above does not mention specifically that the notice must be in writing however it would appear that it should be since they need to send you the notice needs to be delivered to you, usually by mail. If you need more information on CA insurance laws regarding non-renewal and cancellation notices, contact the California Department of Insurance whose consumer division should be able to answer your questions.


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