California institutes Safer from Wildfires framework requiring insurance discounts
Insurance companies have 180 days to submit new rate filings that take the new regulations into account.
Insurance companies operating in California must now recognize and reward homeowners and businesses that undertake wildfire mitigation efforts as part of the state’s Safer from Wildfires framework. As part of the regulations, insurers must provide discounts for mitigation efforts and provide wildfire risk scores to policyholders. The framework also includes a process for policyholders to appeal the risk score.
The regulations are the first of their kind in the U.S., according to California Insurance Commissioner Ricardo Lara. Insurance companies have 180 days to submit new rate filings that incorporate the wildfire safety standards established by the new regulations and develop a process for releasing wildfire risk determinations for residential and commercial policyholders.
Insurance companies must take into account community-wide mitigation efforts such as meeting requirements of the Fire Risk Reduction Community program from the Board of Forestry and Firewise USA Site in Good Standing designation, according to ZestyAI, which put together a 180-day playbook to help the insurance industry comply with the new regulations.
The following property-level efforts and home-hardening steps must also be considered:
Property Level:
- Clearing of vegetation and debris from under decks.
- Clearing of vegetation, debris, mulch, stored combustible materials, and any movable combustible objects from within five feet of the building.
- Incorporation of only noncombustible materials within five feet of the building.
- Removal or absence of combustible structures within 30 feet of the building.
- Compliance with Section 4291 of the Public Resources Code (requires 100 feet of fuel-cleared defensible space around homes in certain land classes) or other local ordinances governing defensible space.
Home hardening:
- Class-A fire-rated roof.
- Enclosed eaves.
- Fire-resistant vents.
- Multipane windows or functional shutters.
- Six inches of noncombustible vertical clearance from the ground.
There are also optional factors that insurers can consider. According to ZestyAI’s playbook, these include structural characteristics such as the materials used and design of the building, ease of access for firefighting efforts, direction and slope upon which the building faces and other mitigation efforts not included in the regulations.
“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. 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.”
Time is not on your side
The biggest challenge insurance companies are going to face from the new regulations is the time crunch to implement them, according to Attila Toth, founder and CEO of ZestyAI.
To comply, Toth said carriers must choose between attempting to develop a rate plan using in-house resources that takes all the 12 mandatory factors into account, many of which will require manual collection, or leveraging an existing wildfire model with proven risk segmentation that already complies with the regulations.
“We commend the CDI (California Department of Insurance) for calling on insurers to implement better ways to prevent and mitigate risk,” Toth told PropertyCasualty360.com. “We have always believed in this and we will continue to work with the CDI and individual insurance carriers to ensure we are providing the highest quality tools required for carriers to be able to provide sound, risk-adjusted pricing in a way that brings increased transparency to the market and to individual policyholders. A healthy insurance ecosystem is paramount to keeping insurance widely available in California and providing transparency around wildfire risk supports that goal.”
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