California wildfire insurance laws have changed this year. Insurance Commissioner Lara has focused on establishing laws to help homeowners and businesses face the difficulties of living and working in a wildfire-prone area. To accomplish this goal, he implemented the Safer from Wildfires framework designed to lower insurance costs for policyholders who follow wildfire safety guidelines at their homes and businesses.
Currently, fewer than half of the insurance companies that write in California offer discounts to consumers who mitigate their fire risk. The legislation focuses on changing this, especially as wildfires have become larger and faster-moving in recent years and corresponding insurance costs have skyrocketed.
Learn more about the changes here.
Safer From Wildfires Framework Changes California Wildfire Insurance Laws
In October, California made history as the first state to enforce a wildfire safety framework to reduce insurance costs. Commissioner Lara, along with the California Department of Insurance and other state emergency management agencies, wrote the pricing regulation, which will save consumers money when they take proactive measures to protect their property from the threat of wildfires.
Commissioner Lara said in a press release announcing the regulation, “Protecting Californians from deadly wildfires means everyone doing their part, including insurance companies by rewarding consumers for being safer from wildfires. The reality of climate change is driving my determination to help communities better prepare, help our firefighters save lives, and help more Californians find insurance they can afford. My Department will work diligently to increase discounts to reward the hard work that California consumers do to protect their families, homes, businesses, and communities.”
Insurance companies writing in California must submit new rating filings within 180 days to the insurance department. They also must develop a process to provide policyholders with their wildfire risk assessment score and an appeals process to handle concerns about inaccurate scores. An important part of the Safer from Wildfires framework is transparency and helping consumers understand what affects their rating and how they can be more proactive.
Some of the momenta for enacting the Safer from Wildfires framework came directly from consumers. Commissioner Lara held a series of town hall meetings around the state to discuss concerns with consumers. Many consumers spoke about their difficulties understanding and accessing their wildfire risk score, and others mentioned frustrations over not receiving insurance discounts even after mitigating their wildfire risk.
Regulations require insurance carriers to introduce new rates
The regulations require carriers to submit updated rates to the insurance department reflecting the benefit of wildfire safety measures. Homeowners and business owners taking proactive steps to mitigate risk should benefit from these measures. Risk mitigation measures that insurance companies should recognize include:
- Home hardening measures such as updated roofs and upgraded windows
- A defensible space established around the home and structures free of vegetation, dried brush, and other flammable materials
- Participation in community-wide programs like Firewise USA and the Fire Risk Reduction Community designation
Community programs like the national Firewise USA program help communities become more resilient through its long-term commitments and neighborhood readiness preparations. And homeowners who invest in fire-resistant building materials, landscaping, and defensible zones around the perimeter of their homes can also reduce their wildfire risk.
The Safer from Wildfires framework is one example of how government legislation and insurance carriers can incentivize policyholders to become safer and more resilient.
What’s Next for Californians
Insurance companies have 180 days to file new rates that consider the benefits of wildfire safety measures. This could be a challenge for many carriers. Some may decide to partner with vendors that can provide the risk assessment framework immediately, while others will develop their process in-house. Carriers will need to focus on transparency to consumers as they establish workflows and procedures to acknowledge risk mitigation efforts by policyholders.
Insurance agents and brokers may need to prepare to answer questions from their clients about this new regulation. And the first question from many insureds will likely be how much money they will save. This answer will depend on several factors. Agents can help their policyholders understand the risk mitigation measures that carriers will measure for discounts. But the ultimate answer of how much an insured will save must wait until carriers file rates.
Agents can be proactive and communicate early and often with their clients about these changes. Since many homeowners and business owners in California have performed some level of wildfire risk mitigation, many consumers will have questions about their rates and whether they have done enough to qualify for this benefit.
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