New regulation increasing Wildfire Coverage may be a ‘bad deal’

SAN DIEGO (KGTV) – The State is ready to expand insurance access to Californians in wildfire-prone areas, so more homeowners can have coverage.

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However, Consumer Watchdog, a non-profit that has been working on insurance issues since the 1980s, said that would eventually make wildfire coverage too expensive for homeowners to afford; even calling it a ‘bad deal’.

The state of California is taking steps to expanding coverage to protect homeowners in wildfire-prone areas from getting dropped by their insurance companies.

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. Under to the proposed rule, insurers will have to start increasing their coverage by five percent every two years until they hit the equivalent of 85% of their market share.

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Lara believes his new regulation will do a number of positive things for insurance reform in the state, from giving homeowners more options to limiting costs. He also believes the regulation will hold insurers accountable and promote a consistent approach to assessing risks for consumers.
However, Jamie Court, President of Consumer Watchdogsaid the regulation will hike up insurance premiums for wildfire coverage by 40 percent and called Lara’s promises misleading.

“Companies only have to increase coverage by five percent from what they have now, every two years,” Court said. “That means if there’s zero percent coverage in the wildfire area now, it will take 34 years to get to 85% coverage in wildfire areas, which is what the commissioner promised initially.”

Court said Florida adopted a similar change to insurance coverage like the plan Commissioner Lara proposed.

According to the insurance commissioner’s office, in exchange for increasing coverage, the state will let insurance companies pass on the costs of what’s known as reinsurance to California consumers.

“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%, 40% more for insurance at the same time, as it’s not going to guarantee people on high-risk wildfire areas the coverage they want.

Court said the average California homeowner living in canyons in wildfire-prone areas is paying on average between $20,000-$30,000 dollars a year. The average California homeowner pays around $2,000, but in due time Court said the regulation could have Californians paying $4,500 a year, the same rate as Florida homeowners.

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Court not only believes this plan will make wildfire insurance too expensive for homeowners to afford, but he also claims the rate hikes are 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. We have a law that 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 that shows that they need to raise rates on these unproven factors.”

Court feels the state should be taking a different path forward.

“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 Watchdog is planning to put a stop to the new regulations and take them to the superior court on the basis that insurance companies are being allowed to increase rates without being fully transparent with policyholders.