The latest from California, where regulators are attempting to control the cost of wildfire insurance;
Insurance Commissioner Ricardo Lara will enforce the new insurance pricing regulation he wrote recognizing and rewarding wildfire safety and mitigation efforts made by homeowners and businesses. Commissioner Lara’s regulation is the first in the nation requiring insurance companies to provide discounts to consumers under the Safer from Wildfires framework created by the California Department of Insurance in partnership with state emergency preparedness agencies. The regulation is now state law and enshrined in the California Code of Regulations.
“Protecting Californians from deadly wildfires means everyone doing their part, including insurance companies by rewarding consumers for being safer from wildfires,” said Commissioner Lara. “The reality of climate change is driving my determination to help communities better prepare, help our firefighters save lives, and help more Californians find insurance they can afford. My Department will work diligently to increase discounts to reward the hard work that California consumers do to protect their families, homes, businesses, and communities.”
Commissioner Lara’s regulation requires insurance companies to submit new rate filings incorporating wildfire safety standards created by the Department, and to establish a process for releasing wildfire risk determinations to residents and businesses within 180 days. Transparency is an important benefit of this regulation, by requiring insurance companies to provide consumers with their property’s “wildfire risk score” and creating a right to appeal that score.
REWARDING PROACTIVE POLICYHOLDERS
This regulation is part of a comprehensive solution that Commissioner Lara initiated after taking office to protect consumers from climate change-intensified wildfires. When Commissioner Lara took office in 2019, insurance companies representing 7 percent of the residential market provided insurance discounts and, under his leadership, that figure has grown to 40 percent. When this regulation is fully implemented, it will be 100 percent of the residential and commercial market aligned with the Safer from Wildfires framework.
Commissioner Lara directed the Department to write the regulation to protect consumers and improve market competition after hearing first-hand from consumers and business owners about their frustration with insurance companies that did not consider mitigation in their rating plans. During town hall meetings in more than 38 counties and an extensive Department investigatory wildfire hearing in 2020, many consumers testified that their homes and businesses were subject to “wildfire risk scores” that many did not know existed and had no right to appeal if inaccurate.
SO HOW WILL IT WORK?
The regulation incorporates the Safer from Wildfires framework, created in February 2022 by a first-ever partnership between the Department of Insurance and the emergency preparedness agencies in Governor Newsom’s Administration, including the California Department of Forestry and Fire Protection (CAL FIRE), the Governor’s Office of Emergency Services (CalOES), the Governor’s Office of Planning and Research, and the California Public Utilities Commission.
“Home Hardening retrofits, along with Defensible Space significantly increase a home’s chance of surviving a wildfire,” said Chief Daniel Berlant, CAL FIRE Deputy Director of Community Wildfire Preparedness & Mitigation. “Using the latest fire science and recent wildfire data, these retrofits and landscaping requirements provide a strong path to structure survivability. CAL FIRE is currently funding over three hundred million dollars in local wildfire prevention projects to prepare communities against wildfire, but we know it will take every resident doing their part to ensure California is fully protected.”
Regulations will drive down costs and create transparency for consumers
The regulation requires insurance companies to submit new rates that recognize the benefit of safety measures such as upgraded roofs and windows, defensible space, and community-wide programs such as Firewise USA and the Fire Risk Reduction Community designation developed by the state’s Board of Forestry and Fire Protection, which currently includes the counties of Los Angeles, Santa Barbara, and Butte as well as cities and local districts.
“Communities have been engaging in wildfire risk reduction through the national Firewise USA program for two decades,” said Michele Steinberg, wildfire division director for the National Fire Protection Association (NFPA). “The Firewise USA process requires annual preparedness work across neighborhoods, and a long-term commitment. This ongoing effort has proven to reduce property losses from wildfire and should factor into risk evaluations and insurance rates.”
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