"Protecting Californians from deadly wildfires requires everyone to do their part," said Commissioner Lara. "This includes insurance companies rewarding consumers for being safer from wildfires." "The reality of climate change fuels my determination to help communities better prepare, our firefighters save lives, and more Californians find affordable insurance." My Department will work hard to increase discounts to recognize California consumers' efforts to protect their families, homes, businesses, and communities."
Commissioner Lara's regulation requires insurance companies to submit new rate filings that incorporate the Department's wildfire safety standards, as well as to establish a process for providing wildfire risk determinations to residents and businesses within 180 days. This regulation promotes transparency by requiring insurance companies to provide consumers with their property's "wildfire risk score" and establishing a right to appeal that score.
This regulation is part of a comprehensive solution that Commissioner Lara initiated shortly after taking office to protect consumers from the increased severity of wildfires caused by climate change. Insurance companies representing 7% of the residential market provided insurance discounts when Commissioner Lara took office in 2019, and that figure has grown to 40% under his leadership. When this regulation is fully implemented, the residential and commercial markets will be completely aligned with the Safer from Wildfires framework.
After hearing firsthand from consumers and business owners about their frustration with insurance companies that did not consider mitigation in their rating plans, Commissioner Lara directed the Department to write the regulation to protect consumers and improve market competition. Many consumers testified during town hall meetings in more than 38 counties and an extensive Department investigatory wildfire hearing in 2020 that their homes and businesses were subject to "wildfire risk scores" that many were unaware of and had no right to appeal if inaccurate.
Regulation resulted from extensive public input and a collaboration with Governor Gavin Newsom's administration.
Commissioner Lara used what he learned from Californians to develop this rule that promotes a fair, transparent, and competitive insurance market. Commissioner Lara shared an early draft of the regulation text in October 2021. Following additional public input, Commissioner Lara formally proposed his regulations in February 2022 and held a public hearing to receive verbal and written comments before submitting the final regulation for approval by the California Office of Administrative Law on September 1, 2022, which approval has now been received.
The regulation incorporates the Safer from Wildfires framework, which was developed in February 2022 through a first-of-its-kind collaboration between the Department of Insurance and 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, in conjunction with Defensible Space, significantly increase a home's chances of surviving a wildfire," said Chief Daniel Berlant, CAL FIRE's Deputy Director of Community Wildfire Preparedness & Mitigation. "Using the most recent wildfire data and fire science, these retrofits and landscaping requirements provide a strong path to structure survivability." CAL FIRE is currently investing over $300 million in local wildfire prevention projects to better prepare communities for wildfires, but we know it will take everyone's help to ensure California is fully protected."
Regulations will reduce costs and increase consumer transparency.
The regulation requires insurance companies to submit new rates that recognize the value of safety measures like upgraded roofs and windows, defensible space, and community-wide programs like 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.
"I applaud and welcome Commissioner Lara's new insurance pricing regulation," said Los Angeles County Supervisor Kathryn Barger, who represents approximately 2 million residents, many of whom own property in the county's wildland urban interface. "Over the years, I've met with many wildfire survivors who were underinsured and, as a result, were financially ruined - left with an uninhabitable home that they can't afford to repair while still obligated to make mortgage payments." Discounts are being offered to property owners who harden their homes and take action to mitigate wildfire threats, which I believe will be welcomed by many. This is a significant step toward encouraging community-driven preparedness and resilience."
"Commissioner Lara's proposed regulation will transform the insurance landscape by rewarding wildfire risk reduction, creating safer communities, and restoring access to affordable coverage," Amy Bach, Executive Director of United Policyholders, a 31-year-old non-profit assisting California insurance consumers, said. "Providing financial incentives for people to do their part is a critical and fair step toward getting 'all hands on deck' to save homes and lives." United Policyholders strongly supports this common-sense and long-term solution to the property insurance issues that millions of Californians face."
"For two decades, communities have participated in wildfire risk reduction through the national Firewise USA program," said Michele Steinberg, wildfire division director for the National Fire Protection Association (NFPA). "The Firewise USA process necessitates annual neighborhood preparedness work as well as a long-term commitment." This ongoing effort has proven to reduce wildfire property losses and should be considered in risk assessments and insurance rates."
"My regulation is the result of carefully listening to the needs of consumers and businesses and crafting common-sense, long-term solutions that strengthen our ability to protect Californians from the threat of climate-change-exacerbated wildfires," said Commissioner Lara.
The Safer from Wildfires regulation is part of a larger solution for consumers and wildfire survivors that includes increasing insurance protections and market competition to help protect consumers. Among the actions taken by Commissioner Lara since taking office in 2019 are:
To accelerate community recovery, more than 4 million homeowners are being protected from non-renewal or cancellation of insurance following declared wildfire emergencies.
Despite insurance industry opposition, Governor Newsom signed new insurance protections into law, which will result in higher payouts for some consumer claims, less red tape from insurance companies, and more assistance for people under evacuation orders.
Ordering the state's insurer of last resort, the FAIR Plan, to offer a more comprehensive homeowners policy as an option, which a judge upheld, as well as expanding residential and commercial coverage limits for the first time in 25 years to keep up with rising costs.