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As part of his ongoing effort to keep insurance prices fair, Insurance Commissioner Ricardo Lara announced today that Kemper Independence Insurance Company has issued over $1.5 million in refunds to thousands of California homeowners after the Department of Insurance found the company overcharged policyholders for wildfire risk. Kemper and its affiliate insurance company, Unitrin Auto and Home Insurance Company, have also agreed to a combined penalty of $617,200 to the state’s General Fund as part of the settlement.
At issue were the companies’ use of wildfire risk scores to establish the price that policyholders paid for insurance. In 2015, the companies introduced new wildfire surcharges based on the property’s Fireline wildfire risk score. Properties with a higher Fireline score paid higher premiums.
The companies changed the pricing system in 2018 without the Department’s knowledge or approval as required by law, resulting in thousands of policyholders being overcharged for insurance.
Since then Commissioner Lara has enforced a new wildfire safety regulation requiring insurance companies to provide policyholders with their property’s risk score and the factors behind it, including a right of appeal for consumers that have hardened their home against wildfire. The Commissioner’s new regulation will also require insurance companies to offer wildfire safety discounts based on the new Safer from Wildfires framework created with other state emergency preparedness agencies. He created this regulation after meeting with thousands of Californians across the state after taking office in 2019.
“Fair pricing of insurance is a fundamental part of California’s consumer protection laws,” said Commissioner Lara. “My actions are aimed at making Californians safer from wildfires while protecting them from excessive costs.”
The companies have reported that 2,402 Kemper homeowners were impacted by the unapproved surcharges and some of those policyholders were overcharged over successive policy terms. Kemper has now refunded all of the overcharges with 10 percent interest compounded annually for a total refund amount of $1,589,113. No Unitrin policyholders were overcharged. As part of the agreed penalty, Kemper is to pay $542,200, and Unitrin is to pay $75,000