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Rule to Require Discounts for Wildfire Mitigation Measures Must Also Regulate Scores Secretly Used to Deny Home Insurance, Consumer Watchdog Urges Insurance Commissioner

Fri, 02/25/2022 - 14:15
Posted in:
Wildfires

Los Angeles, CA – Consumer Watchdog said a regulation proposed by California Insurance Commissioner Ricardo Lara to require discounts for homeowners who protect their homes from fires is necessary and long overdue -- but falls short when it comes to insurance companies’ non-renewal decisions. As written, the regulation would not require insurance companies to consider home or community mitigation steps when making nonrenewal decisions. As a result, insurers could non-renew whole communities without considering their implementation of the home and community-level “Safer From Wildfires” recommendations released by Commissioner Lara and state emergency officials last week.

“California homeowners face two crises in insuring their homes – excessive prices and nonrenewals. Consumers who protect their homes from fires deserve the discounts proposed in this rule, but homeowners facing nonrenewal must have their efforts recognized as well,” said Carmen Balber executive director of Consumer Watchdog.

The rules follow the release last week of a new state wildfire protection framework, “Safer from Wildfires,” that Consumer Watchdog warned last week was: “an empty promise for homeowners if the Insurance Commissioner does not also require that insurance companies give discounts to policyholders who take its recommended prevention measures.” If enacted, the proposed discounts will mean real savings for some home and business owners who do the right thing, said Consumer Watchdog today, but not home and business owners facing nonrenewal.

Click here to see the rules, proposed today.

In October, several consumer groups voiced support for the Commissioner's proposal to require insurance companies to reduce premiums for home and business owners who take wildfire mitigation steps on their properties, or in their communities, such as by modernizing roofing and building materials, installing sprinklers, and clearing brush around their properties. However, the groups urged the Commissioner to strengthen his proposal to prevent insurers’ from arbitrarily refusing to cover individual homes or whole neighborhoods, in violation of anti-discrimination provisions under insurance law Proposition 103.

“Californians who invest in protecting their homes and their communities from the devastation of wildfires must be protected against price gouging and losing insurance coverage,” said Pamela Pressley, Senior Staff Attorney, on behalf of Consumer Watchdog. “Requiring discounts for homeowner and community mitigation efforts proven to lower wildfire risk is necessary to ensure that premiums aren’t excessive or unfairly discriminatory. But more protections are needed to prevent insurance companies from denying or nonrenewing coverage to homeowners who invest in home-hardening measures.”

The proposed rule would also provide greater transparency for homeowners about how wildfire risk models and  “scores” impact premiums, an important step to incentivize homeowner mitigation that will reduce fire risk.

The Department of Insurance will hold a formal rulemaking hearing on April 13, and public comment is invited. Consumer Watchdog urged homeowners who have been nonrenewed to reach out to the department to require their mitigation efforts also be considered before they lose their coverage.

Read the October joint comments of Consumer Watchdog, Consumer Federation of America, and Consumer Federation of California here: https://consumerwatchdog.org/sites/default/files/2021-11/2021-11-10%20CWD%20CFA%20CFC%20Comments%20REG-2020-00015.pdf

Read Consumer Watchdog's January 21, 2021 letter to Insurance Commissioner Lara urging insurance discounts for homeowners, protections against policy cancellations and withdrawals in wildfire areas: https://www.consumerwatchdog.org/sites/default/files/2021-01/2021-01-21%20CWD%20Letter%20to%20Lara.pdf

Consumer Watchdog also testified on the industry’s actions in a virtual hearing last Fall: https://www.consumerwatchdog.org/insurance/insurance-companies-created-home-insurance-crisis-consumer-watchdog-testifies-department

Watch the video, Consumer Watchdog presentation at 1:38:50: https://www.youtube.com/watch?v=vYtFqWo_qek

Read about voter-enacted Proposition 103’s protections against unfair insurance premiums and practices here: https://www.consumerwatchdog.org/prop-103-california-insurance-reform

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