Keeping property insurers in California and providing a safety net for consumers can’t be done without stability in the insurance industry.
This key issue is being addressed in a series of public hearings across the state at a time when homeowners are experiencing double-digit premium increases during the fourth quarter of the year.
The California State Assembly Committee on Insurance and the Select Committee on Wildfire Prevention held their first joint hearing on 9 October in the Santa Rosa City Council Chambers to discuss wildfire risk and the escalating number of insurers that have left the state or are no longer writing new policies or renewals.
Assemblyman Jim Wood, D-Santa Rosa, who attended the hearing, said, “More people need access to affordable insurance. Insurance practices from the 1980s no longer work. We need to consider new options for a sustainable insurance future”.
The agenda included a review of the risks associated with California’s wildfires over the past six years, how the state can become more resilient to such disasters, and whether increased resilience and risk reduction will convince former insurers to return.
“We are focused on finding actions that can be taken with input from consumers and property owners by identifying best practices and strategies to stabilise the market,” said Assemblyman Damon Connolly, Chair of the Select Committee on Wildfire Prevention.
An expert at the hearing discussed reducing wildfire risk through better forest management practices. Dr Brandon Collins is an adjunct professor in the Department of Environmental Science, Policy and Management at UC Berkeley and senior scientist at Berkeley Forests.
“Wildfires are climate-driven, but they can also be fuel-driven. Long hot spells lead to drought, with huge fuel loads on the ground and standing trees drying out. This creates a highly volatile situation unless trees are thinned and separated to prevent crown fires. We should be modelling forest behaviour in real time, not relying on data that is 40 years old,” said Collins.
Fire Chief Dave Winnacker, Moraga-Orinda Fire District, noted: “We use fire to fight fire through controlled prescribed burns. However, the EPA and the California Air Resources Board have reduced the number of safe burning days we are allowed to use this process. Every year we lose prescribed fire days in urban areas.
Winnacker noted that wildfire risk reduction should address conditions in the Wildland Urban Interface, a transition zone between uninhabited land and human development. He noted that wildfire risk could be reduced by building resilient communities and not just focusing on the threat of urban fires.
“The challenge is to get communities to adopt hardening practices on a large scale. These risk reduction efforts can help lower insurance rates if such efforts are validated and verified with annual updates to ensure they have been implemented,” Winnacker said.
“A catastrophe model designed to include wildfire mitigation could take into account preparedness. Studies show a two-thirds reduction in losses in communities that implement defences. Such a model would take into account the topography, weather history, changing and current ground conditions, fuels and other factors,” he said.
Mr Wood said a critical mass of at least 30% of homes in an area with fire defences in place could also reduce losses. “Those communities should be able to get (insurance) rate relief.”
Mike Peterson, deputy commissioner for climate and sustainability at the California Department of Insurance, commented on how the state can become more fire resilient.
“Insurance Commissioner Ricardo Lara is prioritising risk reduction and looking for new risk management tools, including finding ways to make insurance more available through home retrofits, community mitigation, and by incentivising those who take risk reduction measures before fires occur.”
Peterson said the state’s insurance department is working with the University of California to develop strategies to reduce fire risk by establishing a “Safer From Wildfires” framework based on fire science. He said the proposed plan supports structural hardening, working outward from the home to clear vegetation – especially under decks – removing trees, replacing vents and keeping sheds or outbuildings 30 feet away from a home.
“CDI is also proposing a certification process for communities that reduce fire hazards and is considering administrative action to require insurance companies to issue risk scores that evaluate home risk reduction efforts,” Peterson said.
Seren Taylor, a vice president with the Personal Insurance Federation of California said “The wildfire crisis pushed the cost of insurance claims out of bounds with $15 billion in losses, but we are optimistic. In the past, it has taken years for rate increases submitted to the state insurance commission to be approved,” Taylor said.
In August, Gov. Gavin Newsom announced an executive order strengthening the property insurance market and calling for Lara to stabilize and strengthen the state’s home insurance network.
One of the broad goals included improving the efficiency, speed and transparency of the Department of Insurance rate approval process.
