$1.5M for California Homeowners Overcharged Under Wildfire Risk Score

March 29, 2023

Kemper Independence Insurance Co. has issued more than $1.5 million in refunds to thousands of California homeowners after the California Department of Insurance found the carrier overcharged policyholders for wildfire risk.

Kemper and its affiliate insurance company, Unitrin Auto and Home Insurance Co., have also agreed to a combined penalty of $617,200 to the state’s general fund as part of the settlement.

At issue were the companies’ use of wildfire risk scores to establish how much policyholders paid for insurance. In 2015, the companies introduced new wildfire surcharges based on the property’s Fireline wildfire risk score. Properties with a higher Fireline score paid higher premiums.

The companies reportedly changed the pricing system in 2018 without the CDI approval, resulting in thousands of policyholders being overcharged for insurance.

Since that time, California Insurance Commissioner Ricardo Lara enforced a new regulation requiring insurers to provide policyholders with their property’s risk score and the factors behind it, including a right of appeal for consumers that have hardened their home against wildfire.

The commissioner’s new regulation also requires insurers to offer wildfire safety discounts based on the new Safer from Wildfires framework created with other state emergency preparedness agencies.

The companies reported that 2,402 Kemper homeowners were impacted by the unapproved surcharges and some of those policyholders were overcharged over successive policy terms. Kemper has now refunded all of the overcharges with 10% interest compounded annually for a total refund amount of $1.5 million. No Unitrin policyholders were overcharged.

As part of the agreed penalty, Kemper is to pay $542,200, and Unitrin is to pay $75,000.