California Commissioner Wants Rate Transparency Rules for Wildfire Risk

California Insurance Commissioner Ricardo Lara has proposed new rules to give homeowners and businesses open access to their properties’ wildfire risk scores.

The new rules would require insurance companies to provide a consumer with their property’s wildfire risk score, which must recognize a consumer’s mitigation actions that could improve their rating, such as creating defensible space and fire-hardening, and allow time for the consumer to reduce their score.

The new regulations will incentivize mitigation and help consumers make better-informed decisions when they buy, sell or build a home, according to Lara.

In community meetings and town halls that Lara held across California in person and virtually, he heard from consumers who said they took action to protect their homes but still saw their insurance dropped or their premiums increased based on wildfire risk scores.

“I have consistently heard from consumers that many insurance companies keep them in the dark about their property’s risk profile, leading people to spend thousands of dollars cutting down trees or hardening their homes without truly knowing how it will affect their insurance,” Lara said in a statement. “Giving consumers their wildfire risk scores and the ability to lower them will incentivize the home-hardening and community mitigation efforts already underway to better prepare us for future wildfires.”

Lara’s action builds on his Feb. 8 announcement of a wildfire resilience partnership with Gov. Gavin Newsom’s Administration to establish fire-hardening measures for insurance companies. The partnership and this proposed regulation will lead to more incentives for homeowners and communities to bring down wildfire risk.

In addition to the wildfire risk score regulations, Lara announced rules to strengthen his ability to protect consumers through review of insurance company rate filings. These proposed regulation changes make clear that insurers are required to submit the complete information they use to determine which properties to underwrite or renew. Additionally, these changes will provide insurance companies with more upfront certainty regarding what materials and information that Lara requires in filed rate applications with the California Department of Insurance, eliminating delays caused by incomplete initial rate filings from insurance companies, he said.

Lara plans to hold public prenotice workshops on March 30 on the wildfire risk score regulations, and on April 6 on the complete rate filing regulations. Following input from the public, he will begin a formal regulatory process leading to adoption of new rules.