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Wildfire Insurance Options May Improve

The past few years have seen multiple insurance carriers either stop offering new wildfire policies, or leave the State of California entirely. A combination of losses and requirements established by California Proposition 103 (1988) which allowed the State Insurance Commissioner to reject proposed rate increases and other refunds to consumers. The dramatic and deadly losses from huge wildfires during the past decade have made it increasingly challenging for insurance providers and homeowners to find an appropriate middle ground relative to protecting property and buildings.

Because of these challenges, many homeowners have been forced to rely on a “last case” option for fire insurance, the California FAIR Plan. The FAIR Plan is designed as a temporary solution for people who’ve been rejected by mainstream insurance providers. You can learn more about the FAIR Plan on the MySafe:Riverside website.

Now, following a new mandate by the Governor, some light may be shining on new options for California homeowners. State Insurance Commissioner Ricard Lara announced that a new agreement with a series of wildfire insurance providers will make insurance coverage and policies more available, and hopefully, at reasonable rates. 

Under the terms of the agreement, insurance firms that wish to operate in California will be required to increase their footprint in disaster-prone areas to a minimum of 85 percent of their overall State marketshare when they file to update their rates. 

In exchange, these insurers will be allowed to use forward-looking catastrophe modeling when setting rates, a process that has met with opposition from consumer advocates based on the assumption that such models will lead to extreme rate hikes and costs to consumers.

“We are in really uncharted territory, and we must make difficult choices,” said Lara, who did not provide a direct answer on whether the new models would lead to sharp rate increases.

“It’s going to allow us to modernize the way we look at risk,” he said, adding that the advanced models, which he previously resisted, will reflect a more accurate picture of risk and incorporate steps that homeowners have taken to harden their homes against fire. “It works both ways.”

Having agreed to the new plan, there is no guarantee that all insurance companies that have ceased to offer policies in California will come rushing back, but the door is now open, and following failures by the California Legislature to lock in insurance firms, an executive order from Governor Gavin Newsom make the Insurance Commissioner’s ability to make a deal possible. 

The plan must be in place by the end of December 2024, and also includes a provision to help people on the FAIR Plan off of that temporary policy offering, and back into the customer logs of mainstream insurance providers. 

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