On Monday, October 9, the Assembly Insurance Committee held a joint hearing with the Assembly Select Committee on Wildfire Prevention. The hearing was held in Santa Rosa, CA. The purpose of the hearing was to focus on wildfire risk and resiliency, and whether those two factors can lead to insurance market recovery. Assembly Insurance Committee Chair Lisa Calderon hoped that the hearing would help to educate consumers on how they can participate to reduce risk and increase the likelihood of getting coverage.
How Risky are California Wildfires?
Committee members heard from Dr. Brandon Collins (UC Berkeley) and Dave Winnacker (Fire Chief, Moraga-Orinda Fire District) who discussed some of the factors that have caused the devastating fires California has experienced in recent years. The theme during this portion of the event focused on ways the state can better manage its forests by engaging in more prescribed burns. Both advocated for additional resources for prescribed burns, which is a more effective way to clear brush than mechanical forest thinning,
Members were informed that the Insurance Commissioner’s recent announcements on the inclusion of forward-looking models in ratemaking will be critically important. The current backwards looking models do not allow homeowners to be credited for the work they had done to mitigate their homes. It was also emphasized that in order to bend the curve of modeled wildfire risk, at least thirty percent of homes on a contiguous block (about 100 homes) must adopt mitigation measures.
Can consideration of risk and resiliency lead to property insurance market recovery?
It was important for the committee members to hear from insurers about how the use of new tools and receiving adequate rates would have an impact on the current availability crisis. PIFC Vice President, Seren Taylor, noted that when paired with fair rates and timely regulatory processes, the California market can restore insurance availability and reliability. Under the current prior-approval rate system in California, there is tremendous uncertainty about when, or even if, an insurer will receive approval of their rates.
The pathway being urged by the Governor, and developed by the Insurance Commissioner, is intended to address these complex issues. The goal is to provide consumers with greater insurance availability, appropriate discounts, and increased transparency while stabilizing the insurance market with new risk assessment tools and improved processes.