As Californians retrofit homes against wildfires, state demands insurers cut them a break [The Sacramento Bee]

Feb. 25—As an insurance crisis persists in California wildfire country, state regulators are preparing to order companies to offer discounts to homeowners who install double-pane windows, fire-safe roofs or take other steps to reduce the danger to properties.

Insurance Commissioner Ricardo Lara outlined a proposal Friday to require insurers to incorporate his just-announced "Safer from Wildfire" program into their premiums rates.

Insurers wouldn't be required to sell policies to anyone. But when they do, they'd have to provide discounts to residents and business owners who follow Lara's safety suggestions by retrofitting their properties with fire-resilient materials, diligently clearing their yards of flammable debris and participating in community-wide "hardening" programs.

While the Department of Insurance can't order insurers where to sell coverage, it does have broad authority over how much companies can charge policyholders.

The shortage of affordable insurance coverage has become a major issue in the Sierra foothills and other fire-prone regions of the state. After the mega-fires of 2017 and 2018 cost insurers billions of dollars, many carriers began dropping homeowners in high-risk areas, forcing tens of thousands to get bare-bones fire coverage from the state's "insurer of last resort," the California FAIR Plan.

Between their FAIR Plan policies and insurance they have to buy for burglary and other perils, most homeowners have seen their total premiums double or triple, costing them thousands of dollars a year.

In the past two years, the crisis has eased somewhat, as property losses from wildfires have fallen and some insurers have taken tentative steps to move back into wildfire-prone areas. In fact, 17 insurers representing 40% of the California market have begun offering some type of discounts to customers who've "hardened" their homes against fire danger, according to the Department of Insurance.

But Lara is trying to force the industry to move more quickly.

"The department has received many consumer complaints from policyholders advising that insurance companies have failed to recognize steps that policyholders have taken to reduce the risk of wildfire for their properties," the department's staff wrote in a 99-page report outlining the new proposal. "For example, some policyholders have reported to the department that insurance companies have sometimes disregarded a homeowner's effort to clear vegetation or make other improvements to 'harden' a home against wildfire risk."

Strong roofs, siding spared homes from Camp Fire

The department's report cites a 2019 investigation by McClatchy that showed the benefits of stronger roofs, siding, windows and other materials. McClatchy's reporting revealed that homes built since 2008, when strict building codes took effect requiring fire-safe roofing and the like, were far more likely to survive the 2018 Camp Fire than older homes.

The Camp Fire destroyed more than 12,000 homes in Paradise and nearby Magalia, or about 80% of the housing stock. But it only destroyed half of the 350 homes built since 2008.

The new regulations, which are expected to be finalized this summer, don't spell out how much the companies are supposed to charge — but they will require insurers to take risk-reduction measures into account. Once the companies submit their new rate structures, the department will decide whether they're fair.

In general, the department estimates that the discounts would save homeowners an average of about $100 a year, a savings of about 8%.

A coalition of insurers known as Stronger California said it supports Lara's plan "to send a strong signal to consumers about the need to better prepare for extreme wildfires."

But the coalition stopped short of endorsing his proposed regulations on premium rates, saying it has to review his recommendations for making homes safer. "We want to ensure they are grounded in the latest science and technology, support increased access to comprehensive property coverage in wildfire zones and have been shown to reduce risk and the individual property and community levels."

The industry has resisted efforts to force carriers to return to fire-prone regions of the state. In 2020, the industry successfully fended off a bill Lara introduced, AB 2367, that would have forced them to sell policies in areas where owners and communities had worked to improve wildfire safety.

A critical unknown is how quickly homeowners could complete the needed retrofits to make their properties safer — and qualify for discounts. The department estimated that 17,900 homeowners could qualify each year. That means that just under 90,000 homeowners would be getting discounts by Year 5 under the new rate-making system.

But that would still be just a small fraction of the estimated 957,000 homeowners who live in areas with at least moderate fire danger.

Paying for these retrofits won't come easily. A fire-safe roof alone can run $10,000 or more, which can be out of reach for many rural property owners. The state is making more than $100 million in "Prepare California" grants available to communities helping residents with retrofit projects and other measures, although the grant money isn't limited to safeguarding against wildfire risks.

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