California Insurance Commissioner Ricardo Lara announced new regulations in an effort to expand insurers’ coverage to more wildfire-prone areas of the state.
Under the new regulations, insurance companies will be able to use computer modeling, with input from a range of weather and geographic data, when writing their policies rather than simply relying on historical losses. In exchange, they will have to offer coverage to most homes located in fire-risk ZIP codes.
California is hit by thousands of wildfires each year that can cause significant property damage and, in some cases, death. According to the California Department of Forestry and Fire Protection, in 2022 the state recorded 7,477 wildfires, which burned 307,501 acres. As a result, some Californians, particularly those living in rural or mountainous areas, have found it difficult to obtain homeowners insurance beyond that offered by the FAIR Plan, the state’s insurer of last resort.
Lara said Friday that his proposal had been approved by the Office of Administrative Law and would take effect on January 2, 2025.
In a statement, the commissioner said, “With our changing climate, we can no longer look to the past. We are innovative and forward-looking to protect Californians’ access to insurance.”
Speaking to CBS News, California Deputy Insurance Commissioner Michael Soller said: “This is the first time in California that it is mandatory for insurance companies to write policies and we are going to enforce that.”
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Soller said the new rules would require insurance companies to try to provide coverage for 85 percent of homes in fire-risk ZIP codes.
News week contacted the California Department of Insurance for comment Saturday via email outside of normal business hours.
In a statement, the American Property Casualty Insurance Association, which represents insurance companies, said: “California will continue to have a robust regulatory and rate approval process that ensures rates reflect the cost actual claims coverage. We look forward to working with [the department] to implement these new regulations and ensure that they are effective and workable.
Carmen Balber, executive director of Consumer Watchdog, criticized the new regulations, commenting: “Full transparency is what keeps insurance rates honest, but Commissioner Lara’s rule removes that protection.” The rule will allow insurance companies to raise rates based on secret algorithms, but will not expand them. cover as promised.”
In August, it was reported that thousands of people under Liberty Mutual Fire Insurance Company would lose their fire coverage due to the insurer’s non-renewal policy for people living in fire-prone areas.
According to a report released in October by the California Association of Realtors, based on a survey of 96,000 real estate agents in the state, over the past year, 13.4 percent of sales that fell through in the Golden State were due to the difficulty of finding affordable insurance.
