SAN DIEGO (KGTV) - The State is ready to expand insurance access to Californians in wildfire-prone areas so more homeowners can have coverage.
However, Consumer Watchdog, a non-profit that authored Prop 103 and has been holding the insurance industry accountable since the 1980s, called the regulation a 'bad deal' because it would eventually make wildfire coverage too expensive for homeowners to afford.
On December 30th, 2024, Insurance Commissioner Ricardo Lara announced that final steps were being taken to expand insurance access for Californians amid growing climate risks.
According to the Insurance Commission office, the state's new regulation would require insurance companies to increase coverage in high-risk areas. In exchange for increasing coverage, the state will let insurance companies help each other cover portions of the risk, otherwise known as reinsurance.
Under the proposed rule, insurance companies will have to start increasing their coverage in wildfire-prone areas by five percent every two years until they've reached 85 percent of their statewide market share.
The rule also states that insurance companies can raise rates on their policyholders based on their rates of reinsurance and the climate risks it assesses.
Lara believes this new regulation will do a number of positive things for insurance reform in the state, from giving homeowners more options to stopping homeowners from getting dropped from their policies.
Lara also believes this new regulation will limit costs and hold insurers accountable by promoting a consistent approach to assessing risks for consumers.
However, Jamie Court, President of Consumer Watchdog, said the regulation will eventually hike up insurance premiums for wildfire coverage by up to 40 percent, and it's going to affect everyone, not just homeowners.
"This is a bait and switch," Court said. "This is a terrible deal for consumers, and it's one that's going to leave us all paying more for insurance, 30 percent, 40 percent more for insurance, and at the same time, it's not going to guarantee people in high-risk wildfire areas the coverage they want."
Court also believes consumers will be taken advantage of by rate hikes because he said they will be based on intangible factors, like climate risks.
"San Diego was a model for wildfire prevention," Court said. "There's no reason these companies should be asking for these types of rate increases or getting these types of concessions because we are taking precautions as a state. [This] law says companies can raise rates based on the cost of their reinsurance, which is this unregulated market, and the cost of climate modeling, which is a black box raising rates on unproven factors."
Court used Florida as an example and said the state adopted a change to insurance coverage similar to the plan Commissioner Lara proposed. Now, the average Florida homeowner is paying $4,500 a year for coverage. Court said that's where California homeowners are headed. He said the average California homeowner pays around $2,000 a year for wildfire coverage, but a California homeowner living in canyons in wildfire-prone areas is paying between $20,000-$30,000 dollars a year. Court said the regulation's impact would almost double those costs, making it too expensive to afford.
Court also called Lara's promises misleading because while the regulation promises that coverage will be offered to 85-percent of California homeowners in wildfire-prone areas, in the fine print, Court said insurance companies are only required to start expanding their coverage by five percent every two years.
"That means if there's zero percent coverage in the wildfire area now, it will take 34 years to get to 85 percent coverage in wildfire areas," Court said.
Court feels the state should be taking a different path forward in insuring homeowners in wildfire-prone areas.
"The solution is simple," Court said. "It's requiring companies that want to do business in the state of California to issue insurance policies to people who take the time and the money to fireproof their homes and harden their homes against fire."
Court said Consumer Watchdog is planning to go to court and put a stop to the new regulations. He said it will be done on the basis that insurance companies are being allowed to increase rates, without being fully transparent with its policyholders.
