Strong support in public meetings and written testimony for requiring insurance companies to provide discounts to consumers under new Safer from Wildfires framework
East County News Service
September 9, 2022 (Sacramento) -- California Insurance Commissioner Ricardo Lara has submitted his insurance pricing regulation to the California Office of Administrative Law. If approved, it that would recognize and reward wildfire safety and mitigation efforts made by many homeowners and businesses. The 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 Office of Administrative Law has 30 working days to determine whether the proposed regulation satisfies the requirements of the state’s Administrative Procedure Act. Once approved, the regulation text will be filed with the California Secretary of State and become state law.
“My department is laser-focused on doing everything we can to protect consumers and hold insurance companies accountable,” said Commissioner Lara. “My groundbreaking regulation will help more Californians find insurance they can afford. It aligns insurance discounts with fire safety actions being expedited by our state emergency leaders and local governments. And, most importantly, it will save lives by helping California become safer from wildfires.”
The new regulation would focus on a “ground up” fire protection effort that includes homeowners’ protecting their structure and immediate surroundings, but also communities working together to bolster fire protection. So, while it would likely help many homeowners here in San Diego’s East County towns, it could potentially leave some in remote rural areas still facing troubles getting insurance.
This regulation is part of a comprehensive solution that Commissioner Lara initiated after taking office to protect consumers from climate change-intensified wildfires. The Department is submitting this regulation as it recognizes National Preparedness Month in September.
Regulations follow extensive public input and Safer from Wildfires partnership with Governor Gavin Newsom’s Administration
Commissioner Lara directed the Department of Insurance to write regulations to protect consumers and improve market competition after hearing first-hand from consumers about their frustration with insurance companies that did not consider mitigation in their rating plans. Following town hall meetings in more than 38 counties and an extensive investigatory hearing in 2020,
Commissioner Lara took what he learned from Californians to shape these rules that will promote a fair, transparent, and safer insurance market. In October 2021, Commissioner Lara shared an initial version of the text of regulation. Following further public input, Commissioner Lara formally proposed his regulations in February of 2022.
The regulation incorporates “Safer from Wildfires,” a new framework of wildfire safety measures created in January 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
Once approved, the regulation will require all 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.
Transparency is another important benefit of this regulation, by requiring insurance companies to provide consumers with their property’s “risk score” and creating a right to appeal that score.
“My regulation is the result of listening closely to the needs of consumers and businesses and crafting common-sense, lasting solutions that strengthen our ability to protect Californians from the threat of climate change-intensified wildfires,” said Commissioner Lara.
The Safer from Wildfires regulation is part of a larger solution he is pursuing for consumers and wildfire survivors that includes working to increase insurance protections and market competition to help protect consumers. Commissioner Lara’s actions since taking office in 2019 include:
- Protecting more than 4 million homeowners from non-renewal or cancellation of insurance following declared wildfire emergencies, in order to speed up community recovery.
- Sponsoring new insurance protections signed into law by Governor Newsom — despite opposition from insurance companies — that will mean larger payouts for some consumer claims, less red tape from insurance companies, and more help for people under evacuation orders.
- Ordering the FAIR Plan, the state’s insurer of last resort, to offer a more comprehensive homeowners policy as an option, which a judge recently upheld, as well as expanding residential and commercial coverage limits for the first time in 25 years to keep pace with increased costs.
Support for wildfire safety regulation: What Californians are saying
Those supporting the regulation’s adoption include many on the front lines of wildfire safety such as fire leaders, local communities, homeowners’ groups, and agricultural businesses:
“We know firsthand that actions by property owners and communities can significantly reduce risks to lives and homes. The regulation proposed by the California Department of Insurance to require insurers to take projects such as vegetation management into account in setting premiums, to provide certain mitigation and wildfire risk information and to provide a process by which applicants and policyholders may appeal a wildfire risk score or classification assigned by the insurer will in turn incentivize property owners to further harden their homes, properties, and communities. We appreciate that the regulation will create more accurate risk assessments of properties and communities and better communication between insurers and residents.”
—Mariposa County Supervisor Rosemarie Smallcombe, who represents areas around Yosemite National Park damaged by the recent Oak Fire
“Commissioner Lara’s proposed regulation will transform the insurance landscape by rewarding wildfire risk reduction, creating safer communities and restoring access to affordable coverage. Giving people a financial incentive to do their part is a critical and fair step to getting "all hands on deck" to save homes and lives. United Policyholders strongly supports this common-sense and sustainable solution to the property insurance problems millions of Californians are experiencing.”
—Amy Bach, Executive Director of United Policyholders, a 31-year-old non-profit assisting California insurance consumers whose statewide Wildfire Risk Reduction and Asset Protection (WRAP) working group is working toward the goal of this regulation
“California Professional Firefighters commends Commissioner Lara and the Department of Insurance for their ongoing work to respond to our State’s wildfire challenges. The Commissioner’s work to promote and strengthen home and community hardening, while improving access to homeowners’ insurance, are a critical part of the State’s response to these challenges.”
—Brian K. Rice, President of the California Professional Firefighters
“Representing more than one-third of all housing units in California, Homeowners Associations across the state are taking wildfire mitigation actions at the community-wide level that will make residents safer. We support the regulation proposed by Commissioner Lara requiring insurance companies reward communities for their actions, helping save lives and protect access to affordable insurance.”
—Jeffrey Beaumont, Chair of the Community Associations Institute, California Legislative Action Committee
“As climate change increases the severity of California’s fire seasons, California Farm Bureau members simply cannot conduct the business of farming without access to affordable, nondiscriminatory policies. This regulation could help reduce wildfire risk, by incentivizing individual and community mitigation measures that provide a return on those investments by policy holders, hopefully, through increased market competition, consumer choice, and access to comprehensive, affordable insurance across all of California.”
—Jamie Johansson, President, California Farm Bureau
“Coalition for Clean Air agrees with Commissioner Lara that insurers should recognize consumers’ wildfire mitigation actions in their rate filings. Rates should provide incentives to harden homes and communities. Those actions will help save lives and homes, and will also reduce toxic smoke that is emitted when buildings burn.”
—Bill Magavern, Policy Director, Coalition for Clean Air
“Realtors have been advocating for transparency with regard to fire risk scores for quite a while and we are pleased at Commissioner Lara’s efforts. The proposed regulations would compel insurance companies to consider a homeowner’s fire mitigation efforts in setting their rates. Homeowners deserve to be rewarded for their efforts.”
—Anna Buck, Legislative Advocate for the California Association of REALTORS
“The Rancho Murieta Regional Fire Safe Council has for years pursued wildfire risk reduction through home hardening and fire fuels reduction measures that have contributed to ongoing overall wildfire safety in the community. Requiring financial acknowledgement by the insurance industry in their rating plans for homeowners and businesses which meet the criteria of ‘Safer from Wildfire’ will continue to provide a more favorable private insurability status by increasing the safety of communities.”
—Greg Pryor, a retired firefighter and resident of Rancho Murieta in Sacramento County
“The need to get outdoors is greater than ever, and we have more Californians who want to go camping than we have camping accommodations. Yet one of the greatest barriers for campgrounds and RV parks is the ability to obtain insurance with appropriate coverage at reasonable rates. Providing rebates or rate decreases for fire abatement strategies will allow these small businesses to stay protected and in turn allow them to serve more California consumers.”
—Dyana Kelley, President of the California Outdoor Hospitality Association, which represents RV parks and campgrounds across the state
“Despite a long history of proactive fuel reduction work, many owners in my community have found themselves priced out of fire insurance, or with their policies cancelled outright. I believe that communities and property owners who take proactive steps should have that work reflected in their insurance rates and strongly support the regulation you are considering.”
—Katie Weber, a property owner in Yosemite West who worked with her neighbors to be certified as a Firewise USA community, which is recognized in the proposed regulation
“When my husband and I renewed our homeowners policy last year, we were astounded to see the cost had doubled with no recognition of the wildfire safety actions we have taken including working with our neighbors to become a Firewise USA community. This proposed regulation is clear on steps homeowners can take to reduce their fire risk. I wholeheartedly support the mandate that insurers take into consideration fire mitigation steps homeowners have taken when determining the risk of the dwelling and what cost should be assigned.”
—Susan Frommer, a resident of Murrieta in Riverside County
What does the insurance industry say?
According to NBC Bay Area, American Property Casualty Insurance Association Vice President Mark Sektnan said the regulations “send a strong signal” to property owners to better prepare for wildfires, “but more needs to be done to manage the increasing climate-induced wildfire risk in California while also protecting the accessibility and affordability of insurance.”
Seren Taylor, senior lobbyist for the Personal Insurance Federation of California, said the discounts “must be based on data that aligns the cost savings with the actual risk reduction.” He said the state must also allow insurers “to use the most advanced technology to more accurately model California’s evolving climate risk, instead of depending on existing rules that require insurers to only look backward at historical data.”