Regulators identify wildfire-hit neighborhoods for insurance help

California regulators revealed Wednesday which areas state insurers will need to cover if they want to take advantage of financial incentives intended to solve the home insurance crisis.

In Los Angeles County, these areas include ZIP codes in the Santa Monica Mountains, San Gabriel Mountains and parts of the Santa Clarita Valley, according to a proposed regulation released by the Department of Insurance.

Last fall, as insurers retreated from wildfire-hit neighborhoods, state Insurance Commissioner Ricardo Lara announced his sustainable insurance strategy. It is the largest regulatory overhaul of the industry since the 1988 passage of Proposition 103, which gave an elected insurance commissioner the power to review and reject requests for rate hikes. insurers offering home, automobile and other coverage. The new regulations are expected to be in place by the end of the year.

“We are on track to implement the largest insurance reform in the state,” Lara said Wednesday. “We are guided by the data and by the meetings we have held with thousands of Californians across the state.”

Elements of the reform rely on a deal he struck with the industry that would allow insurers to include in their premiums the cost of reinsurance they buy to protect against catastrophes – and to use computer models that project future disaster risks, a concern due to massive wildfires caused by drought and climate change. Currently, historical claims data is used to prepare rate increase requests.

This agreement requires large insurers to provide coverage in wildfire risk areas that is equivalent to 85% of their statewide market share. This means, in theory, that if an insurer has a 20 percent statewide market share, it should insure 17 out of every 100 homes in those neighborhoods.

Small insurers are also targeted by the regulations, but instead of having to increase their market share in distressed areas by 85%, they would have to increase the number of policies they write by 5%. All companies should also increase their commercial policy in these areas by 5%.

The regulations released Wednesday detail how that goal would be achieved and take a three-part “hybrid” approach aimed at maximizing coverage and accounting for the state's geographic diversity, which includes mountainous rural areas, coastal areas and suburban neighborhoods.

One set of regulations would apply the 85 percent threshold to entire counties if 20 percent or more of properties are in “high” risk areas, as defined by maps created by the Department of Forestry and Conservation. fires.

Another set would apply the threshold to “high” and “very high” fire risk ZIP codes if 15 percent or more of policyholders are covered by the state's FAIR plan, an insurer of last resort that offers policies with minimum benefits. ZIP codes would also be included if coverage is found to be unaffordable based on a calculation of median income or cost of premiums. The idea is to protect those on limited or fixed incomes.

The regulations also aim to capture high-fire-risk neighborhoods spread across nearly every county that aren't covered by the other rules.

The department plans to review coverage for insurers seeking to include the cost of reinsurance and use the new computer models to ensure they write insurance in distressed areas. Those who aren't could face rate cuts and have to reduce their premiums.

“Insurance companies need to commit to writing more policies, and my department will need to verify those commitments to hold companies accountable,” Lara said.

Carmen Balber, executive director of Consumer Watchdog, a Los Angeles consumer advocacy group, said in a statement that the proposed regulations give insurers too much time to meet coverage goals and provide affordable insurance, while giving regulators have too much latitude to provide for exceptions.

“Insurance Commissioner Lara's plan gives insurance companies two years to comply, but they can start charging more immediately. After two years, insurance companies can say they can't meet their targets and the commissioner can simply move the targets. This was the only benefit to the consumer in Lara's proposal, but the exceptions negate the rule,” she said.

Rex Frazier, president of the Personal Insurance Federation of California, a trade group for property and casualty insurers, welcomed the move.

“We are encouraged to see continued progress in the Commissioner’s sustainable insurance strategy. This proposal is complex and involves many compromises, including commitments from insurers that no other state requires. However, we remain committed to working with all stakeholders to increase the availability of insurance and restore health to the insurance market,” he said in his written remarks.

The department released a map of the state and a list of ZIP codes affected by the proposed regulations. He also scheduled a hearing for June 26 to hear testimony from insurers, consumer advocates, policyholders and others.

ZIP codes include the Malibu, Beverly Hills, Topanga, Bel-Air, Beverly Glen, Duarte, Castaic and Catalina Island neighborhoods.