What’s going on with regulating fire insurers?

Idyllwild is surrounded by the San Jacinto Ranger District in the San Bernardino National Forest. According to Cal Fire, this area is a very high fire hazard area. And with a history of wildfires — Mountain Fire (2013) and the Cranston Fire (2018) — fire insurance is important and good protection.
However, fire insurance companies view wildfires as huge risks, which can significantly reduce or eliminate profits. Consequently, in areas similar to Idyllwild, it is not uncommon to learn of a neighbor or friend who received a notice of cancellation from their fire insurer.
This situation is not limited to low- or middle-income residents or homeowners who refuse to create “defensible space” around their home for greater protection.
In the April 14 issue of the Los Angeles Times, former State Insurance Commissioner Steve Poizner wrote of his experience receiving a “notice of cancellation.”
“I’m one of hundreds of thousands of Californians who have lost coverage on their homes as insurers invoke the problem of wildfire risk. I’m a former insurance commissioner of California. If it happened to me, it can happen to you.
“… A few years ago, my insurance company assured me that if I took steps to protect my home, then my coverage would be renewed. I live in a hilly suburban area with lots of trees just 15 minutes from San Jose airport. At a cost of thousands of dollars, I put in state-of-the-art vents on all openings in my home where fire or wind-blown embers could enter; pruned trees to keep them away from a deck; and thinned foliage in my yard to create ‘defensible’ space. No wildfire has ever threatened my home in the 25 years I have lived in Silicon Valley. Satisfied with my efforts, the company insured me year after year,” Poizner wrote.
“Until this shocker hit my mailbox: My home is suddenly ‘ineligible due to the wildfire risk assessment of the dwelling location,’” he added.
Insurance Commissioner Ricardo Lara, a former legislator who has followed and written bills about this issue, took office in 2019. He began holding hearings on the issue of fire insurance for homes in high-risk zones in October 2020. And in February, the California Department of Insurance (CDI) issued draft regulations to help protect residents in these areas.
The proposed regulations, which have been presented in public hearings, require insurance companies to consider consumers’ and businesses’ wildfire safety actions when setting policy rates. Also, insurance companies will have to share the “wildfire risk score” assigned to the client’s properties.
Policy holders will have to demonstrate their efforts to improve the safety of the homes and structures. In cooperation with the CDI, California’s fire and emergency service agencies developed a list of critical actions.
The “Safer from Wildfires’ recommendations can be found on the CDI website at http://www.insurance.ca.gov/01-consumers/200-wrr/saferfromwildfires.cfm.
When the actions were released in February, CDI noted this was the first time that state agencies have been brought together to identify a common insurance framework for mitigation of wildfire threats to existing homes and businesses.
Companies would have to specify what were the reasons that influenced the consumer’s score, what the policyholder could do to lower their score, and how much their premium might be reduced if they take actions recommended by the company.
When setting prices, insurers would have to consider whether a homeowner or commercial property owner had taken steps, such as clearing vegetation or installing fire-resistant vents, that would reduce a property’s wildfire risk.
“By requiring insurance companies to utilize the Safer from Wildfires framework in their pricing for insurance, Lara is sending a strong signal to consumers about the need to better prepare for extreme wildfires — which will lead to a more competitive market for all California residents and businesses,” according to the department’s press release.
The needed actions are listed below the story.
Currently, 20 insurance companies have answered Lara’s call to offer discounts demonstrating greater options for consumers. Several companies offer both community-wide discounts (for example, a home in a Firewise or a Shelter-In-Place community) and home-specific discounts (for example, maintaining defensible space or home-safety measures against wind-blown embers). CDI advises contacting the company directly for how they price and market their policies.
View the list of insurance companies currently offering discounts at http://www.insurance.ca.gov/01-consumers/105-type/95-guides/03-res/Insurers-Currently-Offering-Discounts.cfm.
After the release of the proposed regulations, the American Property Casualty Insurers Association, the Personal Insurance Federation of California, and most California insurers issued a combined statement supporting the goal of consumers better preparing for extreme wildfires and that they will review the proposed regulations.
“Insurers have long advocated for similar mitigation steps recommended in the Safer from Wildfires framework,” the statement continued. “We look forward to continuing to work with the California Department of Insurance to better prepare Californians and mitigate damage from extreme wildfires.”
However, consumer organizations thought the proposed regulations failed to eliminate a significant loophole, which would negate their benefits and still leave homeowners in the worst situation.
In April, the Consumer Watchdog, Consumer Federation of America and Consumer Federation of California wrote to CDI about this issue.
“We strongly support mandating that insurance companies give premium discounts for homeowners who take steps to reduce their wildfire risk and requiring transparency in how companies use models and scores to determine that risk.
“However, it’s not enough to require premiums to reflect mitigation efforts. To effectively protect homeowners who are reducing fire risk, we continue to advocate that the regulation must be amended to apply to insurers’ decisions about whether to sell and renew coverage. Without these amendments, insurance companies can avoid giving premium discounts to property owners who undertake costly mitigation measures simply by nonrenewing them,” the statement continued.
When a policy is canceled and the property owner cannot afford a higher premium, the state offers the option of the FAIR Plan (Fair Access to Insurance Requirements). Premiums and limits are controlled by a consortium of insurance companies.
Previously, it offered only limited coverage for fire and smoke damage requiring consumers to purchase another policy at a higher cost for water damage, liability and other risks, with traditional homeowner features, such as coverage for water damage and personal liability.
In October 2019, Lara ordered the FAIR Plan to increase coverage limits and to offer a no-fee monthly payment plan as well as allow for policyholders to pay by credit card or electronic funds transfer without any fees. Also, it was ordered to offer a comprehensive homeowners’ policy, known as HO-3 coverage. This would save consumers from having to purchase a second companion policy to cover other hazards such as liability, water damage and theft.
Although the insurance industry challenged Lara’s order in court, a July 2021 court order upheld Lara’s directive for broader coverage options for policy holders.

The needed actions are listed below the story.
Currently, 20 insurance companies have answered Lara’s call to offer discounts demonstrating greater options for consumers. Several companies offer both community-wide discounts (for example, a home in a Firewise or a Shelter-In-Place community) and home-specific discounts (for example, maintaining defensible space or home-safety measures against wind-blown embers). CDI advises contacting the company directly for how they price and market their policies.
View the list of insurance companies currently offering discounts at http://www.insurance.ca.gov/01-consumers/105-type/95-guides/03-res/Insurers-Currently-Offering-Discounts.cfm.
After the release of the proposed regulations, the American Property Casualty Insurers Association, the Personal Insurance Federation of California, and most California insurers issued a combined statement supporting the goal of consumers better preparing for extreme wildfires and that they will review the proposed regulations.
“Insurers have long advocated for similar mitigation steps recommended in the Safer from Wildfires framework,” the statement continued. “We look forward to continuing to work with the California Department of Insurance to better prepare Californians and mitigate damage from extreme wildfires.”
However, consumer organizations thought the proposed regulations failed to eliminate a significant loophole, which would negate their benefits and still leave homeowners in the worst situation.
In April, the Consumer Watchdog, Consumer Federation of America and Consumer Federation of California wrote to CDI about this issue.
“We strongly support mandating that insurance companies give premium discounts for homeowners who take steps to reduce their wildfire risk and requiring transparency in how companies use models and scores to determine that risk.
“However, it’s not enough to require premiums to reflect mitigation efforts. To effectively protect homeowners who are reducing fire risk, we continue to advocate that the regulation must be amended to apply to insurers’ decisions about whether to sell and renew coverage. Without these amendments, insurance companies can avoid giving premium discounts to property owners who undertake costly mitigation measures simply by nonrenewing them,” the statement continued.
When a policy is canceled and the property owner cannot afford a higher premium, the state offers the option of the FAIR Plan (Fair Access to Insurance Requirements). Premiums and limits are controlled by a consortium of insurance companies.
Previously, it offered only limited coverage for fire and smoke damage requiring consumers to purchase another policy at a higher cost for water damage, liability and other risks, with traditional homeowner features, such as coverage for water damage and personal liability.
In October 2019, Lara ordered the FAIR Plan to increase coverage limits and to offer a no-fee monthly payment plan as well as allow for policyholders to pay by credit card or electronic funds transfer without any fees. Also, it was ordered to offer a comprehensive homeowners’ policy, known as HO-3 coverage. This would save consumers from having to purchase a second companion policy to cover other hazards such as liability, water damage and theft.
Although the insurance industry challenged Lara’s order in court, a July 2021 court order upheld Lara’s directive for broader coverage options for policy holders.