As Californians mitigate wildfire threats, why is there still an insurance crisis? – Orange County Register

Spend any time thinking or talking about insurance in California these days and you’re sure to hear the word “mitigation.”

Firefighters, lawmakers, insurance agents and others are asking homeowners to help reduce the risk of devastating wildfires by making improvements to their properties — in some cases at great expense — and often by trying to preserve their insurance policies. The state has spent about $3.7 billion on forest management over the past seven years. Communities, fire districts and others are also doing their part.

But some insurance companies, citing growing risks and costs, have suspended or stopped writing new policies in California, causing a crisis in the affordability and availability of home insurance. Some homeowners have seen their premiums climb or see their prices rise, while others have been forced to turn to the ever-changing FAIR plan, the insurer of last resort that offers less coverage but lower insurance premiums. still higher.

As Insurance Commissioner Ricardo Lara outlines his plan to try to reverse that trend, three state lawmakers are pushing for mitigation measures to be considered when insurers set premiums or when they decide whether to offer or not fonts. Or they want mitigation measures to be monitored and developed more effectively.

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“We think if you do your homework, you should get the credit,” said Sen. Josh Becker, a Democrat representing Menlo Park. “As a state, we are doing this work.”

Becker’s team cites the billions of dollars the state has spent on fuel reduction and vegetation management since 2017, when wildfires ravaged many parts of California. The sum does not include other expenses related to fire engines, air tankers and increased staffing at Cal Fire, which has added about 4,500 positions over the past decade.

A bill authored by Becker seeks to incorporate mitigation measures into insurance companies’ underwriting decisions when considering whether to write or renew policies. Senate Bill 1060 is awaiting a hearing in the Senate Appropriations Committee.

One of the regulations Lara unveiled as part of his plan to try to fix the state’s insurance market is allowing insurers to use catastrophe models in setting rates, which which includes consideration of mitigation measures. But some believe that this is not enough to answer the question of insurance availability.

Former state Insurance Commissioner Dave Jones recently told CalMatters that Becker’s bill was needed specifically for underwriting, because the insurance commissioner’s power is limited to setting rates.

“Local, state and federal governments spend billions of dollars treating forests, so landowners should benefit,” Jones said. “It’s not happening now, but it should happen.”

Wildfire Mitigation and Risks

Studies show that mitigation reduces the risk of wildfires. A recent study by the National Association of Insurance Commissioners found that structural modifications can reduce wildfire risk by 40% and, when combined with vegetation modifications, can reduce the risk by 75%. A subsequent Moody’s study found that steps taken by utility Southern California Edison to strengthen its power grid reduced the risk of catastrophic losses from wildfires by 75 to 80 percent.

But insurance industry experts are concerned about Becker’s bill. On the one hand, they argue that integrating mitigation measures into underwriting places more financial risks on insurers.

Additionally, they claim they already use models that account for mitigation.

Sheri Lee Scott, an actuary for a firm Milliman Property & Casualty in Orange County, said the bill is yet another regulation that could “exacerbate” the insurance crisis.

“Insurance companies are already doing their best to incorporate (mitigation),” Scott said, pointing to a recent state regulation ordering insurers to incorporate mitigation into premium determinations — which, writes Scott in a report, “presents enormous challenges for insurers in terms of compliance and the potential erosion of adequate rates for wildfire risk.

The insurance commissioner said his office began enforcing the mitigation rule last year, but homeowners, insurance agents, fire chiefs and other lawmakers say the different ways everyone trying to reduce the risk of wildfires isn’t making enough of a dent in the state’s insurance. crisis.

Murrieta Fire Chief Bernard Molloy said at a public workshop hosted by the Department of Insurance last week that “residents are not getting credit” for the “enormous amount of work” they put in to try to reduce the risk of forest fires. Jorge Escobar, a Bay Area resident, said at the same workshop that he had just asked the Moraga Fire District if insurance companies took mitigation into account. “Surprisingly the answer was no… Why isn’t this required? He asked.

Tina Purwin, an insurance agent in Northridge, told CalMatters that her clients are receiving notices that they are not being renewed despite taking steps to avoid wildfire risk.

“Carriers are super picky,” Purwin said. “They are looking for a way not to take risks.”

At another public hearing on insurance issues last week — by the Little Hoover Commission, the state’s independent watchdog agency — Nevada County Supervisor Heidi Hall said residents of the Sierra Nevada region she represents were spending “tens of thousands of dollars” to reinforce their homes. and that “the county itself has invested millions of dollars, with help from Cal Fire, to install firebreaks.”

Still, she said, “we’re not seeing reductions from insurance companies. They always leave.

Assembly member Freddie Rodriguez, a Democrat representing Chino, is the author of another mitigation-related bill. Assembly Bill 2983 calls for the Department of Insurance and the California Office of Emergency Services to work together to determine whether investments in mitigation contribute to the availability of insurance.

Project evaluations should be published on state websites. And a representative from the Department of Insurance would be added to the board of directors of the California Wildfire Mitigation Program.

“Some people think (mitigation is already taken into account), some people don’t,” Rodriguez said. “We need to bring everyone together. We need to talk about it.

Rodriguez’s staff said the insurance department and the mitigation program appear open to the idea of ​​a representative board. The Insurance Department did not respond to questions and the Emergency Services Agency did not respond to questions in time for publication.

Earlier this month, the Assembly Insurance Committee approved AB 2983 and referred it to the Assembly Appropriations Committee.

“They shouldn’t lose their confidence”

Another bill would require the Department of Insurance to evaluate every three years whether to update its Safer Wildfire regulations, which identify steps homeowners and officials can take to protect their homes and their communities. Steps include installing fire roofs, upgrading windows, removing combustible sheds and much more. The department adopted the regulation in 2022 and says on its website that taking these steps “can help you save money on your insurance.”

Assemblyman Damon Connolly, a Democrat representing San Rafael, authored AB 2416, which he said would “lock in periodic updates to the program so that it most effectively serves consumers.”

Connolly said his staff was in talks with the Department of Insurance, which he said was open to discussing his bill. He also said he made amendments to address the insurance industry’s concerns. The Insurance Department did not respond to questions about the bill.

The assemblyman also said that not only should homeowners receive discounts when they take the steps outlined in the regulation, “I would say if consumers take these steps, they shouldn’t lose their insurance.” »

The Assembly Insurance Committee referred its bill to the Assembly Appropriations Committee.

Lawmakers representing California in Congress are also trying to give prominence to mitigation measures. U.S. Rep. Mike Thompson, the Democrat who represents Napa and other counties, said at a news conference last week in Santa Rosa that his bill, H.R. 7849, would establish a program allowing individual owners of certain regions to receive grants of up to $10,000. as well as tax credits for homeowners and businesses, for mitigation purposes.

The legislation, co-authored by U.S. Rep. Doug LaMalfa, the Republican who represents rural Northern California, was introduced in March and referred to the House Ways and Means Committee and the Transportation and Infrastructure Committee.

Thompson said that as he and his colleagues tried to figure out how they could help on a national level, “what we heard repeatedly from insurance companies was: make sure buildings are resilient disasters, that homeowners (do) whatever is necessary to protect their homes.”