California insurance commissioner approves State Farm discount reduction
Beginning September 1, the insurer will offer a total 6.3% discount to insureds whose homes meet all of the state’s Safer from Wildfires regulations.
California Insurance Commissioner Ricardo Lara has approved a request from State Farm to reduce the discounts that it offers homeowners for implementing wildfire mitigation measures. Beginning September 1, 2024, the insurer will offer a total 6.3% discount to insureds whose homes meet all of the state’s Safer from Wildfires regulations. Currently, State Farm offers a 7% discount to these policyholders.
According to the California Department of Insurance, the requirements to qualify for discounts under the Safer from Wildfires regulations include:
- Class-A fire rated roof
- Five foot ember resistant zone, including fencing
- Ember- and fire-resistant vents
- Non-combustible six inches at the bottom of exterior walls
- Enclosed eaves
- Upgraded windows
- Cleared vegetation, weeds and debris from under decks
- Removal of combustible sheds and other outbuildings to at least a distance of 30 feet
- Defensible space compliance
A full breakdown of the Safer from Wildfires regulations can be found here.
Commissioner Lara informed the Assembly Insurance Committee of his next steps toward California’s “Sustainable Insurance Strategy” in prepared remarks on May 15. He said the components of his plan include incorporating catastrophe modeling into rate making, incorporating reinsurance into rate making, modernizing the FAIR plan, improving rate filing efficiency, and increasing transparency and accountability for intervenors. Lara expects the regulatory work of his insurance strategy to be completed this year.
“We are on our way to enacting the state’s largest insurance reform in 30 years since the passage of Prop. 103 in 1988. Prop. 103 was less than two pages of text. It took years of regulatory work, dozens of rulemakings, and even scores of litigation to make that landmark initiative a reality,” Lara told the assembly. “Now we are facing the accumulated stress of decades of long-needed reforms and neglected decisions. For years, insurance companies submitted rate requests less than what they need largely because of the stagnant intervenor process. We are compressing decades of this deferral and delay into a one-year timeline of action. We have been surviving with 20th-century regulations for 21st-century problems. That cannot continue.”
Advocacy group Consumer Watchdog denounced the commissioner’s decision to allow State Farm’s discount decrease and filed a petition asking for larger discounts for insureds who meet the Safer from Wildfires guidelines and more transparency in how insurers determine a property’s wildfire risk factors that are used to rate or non-renew policies. This petition was denied by Commissioner Lara.
The group also notes in the statement that State Farm will offer homeowners an additional 2%-3.8% discount if they seek certification from the Insurance Institute for Business and Home Safety, but that this requires insureds to pay a $125 inspection fee to determine if they’re eligible for the discount – effectively wiping out most of the savings homeowners would see from this in their first year.
“The commissioner’s failure to ensure that consumers are given the information necessary to understand their wildfire risk and sufficient incentives to mitigate their properties is disappointing,” Consumer Watchdog staff attorney Ryan Mellino said in a release. “Discounts this small don’t incentivize mitigation and won’t make our state safer from wildfires.”