California mulls requiring premium discounts for wildfire mitigation efforts

Consumer advocates claim the proposed law doesn’t go far enough in protecting policyholders from nonrenewal.

If approved, insurance companies will need to submit new rates that take into account safety measures including upgraded roofs and windows, and creating defensible space, or a buffer zone between a building and grass, trees, shrubs and other wildland areas. (Credit: David Paul Morris)

California Insurance Commissioner Ricardo Lara is proposing pricing regulations that would require insurance companies to provide discounts to policyholders that take steps to mitigate their wildfire risks, according to the state’s insurance department. The updated regulations would also require insurance companies provide consumers with property risk scores and creates a right to appeal that score.

The regulation would be the first in the nation that mandate discounts for policyholders that take wildfire mitigation steps that are in line with the Safer from Wildfires framework, according to the commissioner’s office. The framework was developed by the California Department of Insurance and state emergency preparedness agencies.

In a release, Commissioner Lara said: “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 regulations were submitted on September 7, 2022, and the agency has 30 working days to determine if they meet the state’s Administrative Procedure Act requirements. If approved, insurance companies will need to submit new rates that take into account safety measures. Mitigation efforts that would be considered include upgrades to roofs and windows and creating “defensible space,” a buffer zone between a building and grass, trees, shrubs and other wildland areas.

Further, community-wide programs, such as Firewise USA and Fire Risk Reduction Community designation, must also be taken into account.

“Home hardening retrofits, along with defensible space significantly increase a home’s chance of surviving a wildfire,” Chief Daniel Berlant, CAL FIRE deputy director of community wildfire preparedness & mitigation, said in a release. “Using the latest fire science and recent wildfire data, these retrofits and landscaping requirements provide a strong path to structure survivability.”

Keeping a building’s perimeter clear of vegetation can nearly double the likelihood of surviving a wildfire, according to the Insurance Institute for Business & Home Safety.

As it stands, more than a dozen insurance companies offer discounts to California policyholders for wildfire mitigation efforts taken at a community or property level, according to the state’s insurance department.

While consumer advocate groups championed the premium discounts for wildfire mitigation efforts, some organizations allege the proposed changes don’t go far enough in protecting consumers from nonrenewal.

Pam Pressley, senior staff attorney for Consumer Watchdog, said in a release: “Unless the regulation requires companies to take mitigation into account when deciding who to insure, they will avoid giving premium discounts to property owners who undertake costly mitigation measures by nonrenewing them without accountability.”

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