Proposed regulation mandating reductions on forest fireplace containment measures should additionally regulate objects covertly used to disclaim home insurance, shopper teams name for Insurance Commissioner – PRNewswire

LOS ANGELES, November 10, 2021 / PRNewswire / – Consumer groups said an ordinance proposed by California's insurance commissioner Ricardo Lara Requiring discounts for homeowners who take steps to reduce their risk of damage from forest fires must also apply to insurance companies' decisions about which properties to insure. California Homeowners, businesses and communities face unfair price hikes and non-renewals, and new forest fire containment rules must protect against both, the groups said at a public hearing convened by the Department of Insurance today, Consumer Watchdog says.

Consumer Watchdog, Consumer Federation of America and Consumer Federation of California Supported the Commissioner's proposal to encourage insurance companies to lower premiums for homeowners and business owners who take action to curb forest fires on their properties or in their communities, e.g. However, the groups urged the Commissioner to step up his proposal to prevent insurers from arbitrarily refusing to cover individual houses or entire neighborhoods, in violation of the anti-discrimination provisions of Proposition 103 Insurance Act.

The Groups also supported the provisions of the proposed regulation to enforce the transparency requirements of Proposition 103 by requiring disclosure of information on how forest fire risk models and "scores" are used to determine premiums. However, these provisions must also apply to insurers' decisions about which properties to refuse cover.

"Californians who invest in protecting their homes and communities from the destruction of forest fires must be protected from price gouging and loss of insurance," said Pamela Pressley, Senior Staff Attorney, on behalf of Consumer Watchdog. "To ensure that the premiums are not excessive or unfairly discriminatory, discounts must be requested for homeowners and communities that have been shown to reduce the risk of forest fires to a degree."

“This is a good first step in creating incentives that directly help consumers better protect their homes. However, there are a number of specific improvements that should be made to the ministry's proposal, ”said Robert Herrell, Managing Director of the Consumers' Association of California.

Consumer groups urge action

Today's workshop is the third in a series that the Commissioner has called since then October 2020 about rising premiums, withdrawal of coverage from the neighborhoods and non-renewal in California The forest fire home insurance market has shown that climate change has taken insurance companies by surprise. Insurance companies have falsely blamed Proposition 103 for their destabilizing actions by stating that if cover is denied and not renewed, they can be free from public oversight and use secret models and algorithms instead of making their tariffs and underwriting decisions based on available data justify. In joint comments presented to the Commissioner today, consumer groups stated the need for stronger consumer protection:

The key to reducing forest fire risk is taking action at the community level and at the individual property level to protect the property, but currently there is no financial incentive to undertake these expensive property upgrades. For far too long, many insurers have failed to recognize the significant expense homeowners, business owners and communities are spending to protect their properties from forest fires and instead have continued to inflate, refuse, or extend coverage without considering policyholder risk mitigation. Mitigation measures that often use privately created, unregulated algorithms and models to “rate” homeowners without their knowledge. As a result, millions of homeowners are arbitrarily denied coverage, not renewed, or faced with unfair premium surcharges, which in turn has destabilized California Home Insurance Market.

The proposed regulations would take steps to curb these arbitrary practices by:

  • Insurers must give premium discounts to property owners who take risk mitigation measures to reduce the risk of forest fires.
  • Provide clear standards to enforce Proposition 103 requirements, which require insurance companies to submit a full tariff application and publicly disclose all information submitted to the commissioner, including the models they use to assess forest fire risk and related documentation, which insurers often wish to keep confidential.
  • Insurance companies must inform consumers of their assigned forest fire risk assessment and steps they can take to reduce their risk and associated premium, as well as give consumers the right to object to their assessments.

“While these steps continue Proposition 103's goals of making insurance fairer and more affordable, some additional changes are needed to provide enforceable regulatory standards and prevent insurance companies from unfairly withholding or denying property owners who have mitigated forest fire risk do not extend. ”the groups indicated.

The consumer groups gave their recommendations on how to improve the proposed regulations by:

  • Strengthening the binding standards for mitigation factors with clearer terminology;
  • Require that all provisions – including the use of mandatory mitigation factors; public submission and disclosure of models; and the Notification and Appeal Process – also apply to forest fire risk models and assessments used to determine eligibility and non-renewal criteria;
  • Make it explicitly clear that forest fire risk models must not be used to forecast losses to determine overall rates under existing regulations;
  • Ensure that all forest fire risk models used by insurers are based on the best available scientific information and comply with actuarial standards of practice and applicable laws and regulations; and
  • Cleaned up and strengthened the Wildfire Score note and appointment requirements.

In adopting these changes, the groups called on the ministry to “move quickly, pass a regulation hearing and pass a final regulation so that homeowners and communities can get the savings they deserve from their efforts to contain forest fires ".

Read today's joint commentary from the Consumer Watchdog, Consumer Federation of America, and Consumer Federation of California Here.

Read the consumer watchdogs January 21, 2021 Letter to the insurance commissioner Lara, in which she urges insurance discounts for homeowners, protection against contract cancellations and withdrawals in forest fire areas.

Consumer Watchdog also testified in a virtual hearing last fall about the industry's measures.

Watch the video, Consumer Watchdog Presentation at 1:38:50

Read more about the voter-enacted Proposition 103 protections against unfair insurance premiums and practices here.

SOURCE Consumer Monitoring

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