LOS ANGELES (CN) — California’s Insurance Commissioner Ricardo Lara unveiled significant regulatory reforms on Wednesday aimed at increasing the availability of insurance policies in wildfire-prone areas. These changes mandate that insurance companies must write more policies in high-risk areas if they wish to use advanced catastrophe models for rate setting, and they must also account for wildfire risk mitigation efforts by policyholders.
Under the new regulations, insurers are required to clearly identify the areas where they offer policies in their rate filings. The California Department of Insurance will leverage its enforcement authority to ensure compliance.
“Californians across the state are frustrated with outdated regulations and are in dire need of change,” Lara said in a statement. “From the Sierra to the coast, and in our cities, California’s diverse landscape requires inclusive and adaptive insurance solutions. Our reform will lead to more policies being written, providing much-needed relief to those currently reliant on the FAIR Plan due to unique wildfire risks.”
The FAIR Plan, originally designed as a last-resort insurance option, has become the sole insurance choice for many as premiums have soared. Under an agreement enacted last year, insurers must now provide coverage for at least 85% of properties in distressed areas. Major insurers have two years to meet this threshold upon adopting new rates, and those already meeting it must maintain their coverage for three years. Smaller and newer insurers, as well as those with limited exposure in fire-prone areas, must increase their coverage by at least 5%.
“Enhancing competition is crucial to aligning market prices with the wildfire mitigation efforts undertaken by Californians, including farmers and ranchers who work to reduce fire risks and protect their properties,” said Shannon Douglass, president of the California Farm Bureau.
The Insurance Department also released a new map highlighting California regions with significant wildfire risk and concentrations of FAIR Plan policies. This tool will aid insurance companies in expanding their coverage while utilizing catastrophe modeling for rate determination. The map, created with assistance from Cal Fire, identifies ZIP codes and counties with high percentages of FAIR Plan policies and high-risk designations.
Regions with dense FAIR Plan coverage and high wildfire risk include much of the North State and the Sierra. Conversely, areas with lower risk and fewer FAIR Plan policies encompass much of the Bay Area and the urban regions surrounding Sacramento, Fresno, Bakersfield, Los Angeles, and San Diego.
“This collaboration between state agencies is essential for preparing communities for wildfires,” said State Fire Marshal Daniel Berlant. “Commissioner Lara’s initiatives complement Cal Fire’s mitigation efforts and build on substantial state investments to protect residents.”
Lara’s announcement is part of a broader year-long effort to overhaul California’s insurance regulations. Governor Gavin Newsom has also advocated for increased transparency and expedited rate approval processes, as outlined in a budget trailer bill.
“As the climate crisis accelerates, our insurance system, unchanged for three decades, needs urgent reform. This initiative is a crucial part of our strategy to fortify the marketplace and ensure Californians receive the coverage they need,” Newsom said in a statement.
[inline_related_posts title=”You Might Be Interested In” title_align=”left” style=”list” number=”6″ align=”none” ids=”2411,2409,2407″ by=”categories” orderby=”rand” order=”DESC” hide_thumb=”no” thumb_right=”no” views=”no” date=”yes” grid_columns=”2″ post_type=”” tax=””]
