LOS ANGELES, May 20, 2024 /PRNewswire/
-- Insurance Commissioner Ricardo Lara approved State Farm's
reduction of the discounts it offers homeowners for wildfire
mitigation and freed the company from detailing to consumers in
writing the wildfire risk factors that are used to rate or
non-renew their property. The Commissioner denied Consumer
Watchdog's petition challenging these failures in the company's
filing implementing the "Safer from Wildfires"
regulations.
Beginning on September 1st, State Farm will offer a total 6.3%
discount to policyholders who meet all of the "Safer from
Wildfires" individual home hardening and brush clearance standards,
and also live in a Firewise USA or Fire Risk Reduction
Community, resulting in an average policyholder savings of $113 a
year. That discount is lower than the 7% discount State Farm
currently offers to homeowners for doing less to protect their
homes from wildfire. Seven of the ten individual "Safer from
Wildfires" mitigation standards – for example the removal of
combustible structures from within 30 feet of the property, or
installing multi-pane windows that withstand heat – will only
qualify homeowners for a 0.1% reduction in their premium. Consumer
Watchdog's petition sought larger discounts, or a justification
from State Farm for reducing them.
The company will also offer an additional 2-3.8% discount to
homeowners who do more and seek certification from the Insurance
Institute for Business and Home Safety ("IBHS"). However, consumers
will have to pay a $125 inspection fee to find out if they qualify
for those discounts. That means that in the first year, the fee
will wipe out any savings from the IBHS discount. A homeowner at
State Farm's average premium level who pays for and receives the
highest IBHS certification would see their total mitigation
discount reduced from $113 to $55.
"The Commissioner's failure to ensure that consumers are given
the information necessary to understand their wildfire risk and
sufficient incentives to mitigate their properties is
disappointing," said Consumer Watchdog staff attorney
Ryan Mellino. "Discounts this small don't incentivize
mitigation and won't make our state safer from wildfires."
Consumer Watchdog's petition also sought to enforce the
regulation's requirement that insurance companies explain in
writing to consumers what their wildfire risk classification is and
in detail why they have received that classification. Other
insurance companies are providing consumers a form that explains
what wildfire risk information – such as detail about their
individual home characteristics, local fire station access, local
vegetation, or past fire activity – impacted their premium
or nonrenewal. State Farm will not provide a detailed
explanation to homeowners of why their property received the
assigned premium adjustment due to wildfire risk. Statewide,
consumers have complained about the insufficient notifications and
explanations provided by State Farm and other insurers.
Just one week after the Commissioner granted Consumer Watchdog's
petition, he approved State Farm's filing and rejected the petition
without requiring either improved disclosures or more significant
discounts.
By giving State Farm the green light, the Commissioner is also
failing to enforce the "Safer from Wildfires" regulation
requirement that insurance companies publicly disclose their
wildfire risk models. Without access to the models, it is
impossible to fully assess an insurer's wildfire risk
classifications and associated premium charges, or for
policyholders to meaningfully contest their classifications.
Voter-approved Proposition 103 authorizes public participation
in rate oversight, which allowed Consumer Watchdog to scrutinize
and challenge the filing. Consumer Watchdog's challenges to home
insurance rate applications have saved homeowners $2.2 billion
since 2002.
Consumer Watchdog has called for legislation to require
home insurance companies to offer coverage to any consumer who
meets the "Safer from Wildfire" home hardening and wildfire
mitigation standards approved by the Department of Insurance in
2022.
The "Safer from Wildfire" regulations require insurers to
recognize property and community level wildfire mitigation efforts
with discounts that properly reflect their reduced risk, to provide
policyholders a detailed written explanation of why a policyholder
received a certain wildfire risk classification – including by
referencing specific features of the property, and to inform
consumers of steps they can take to reduce their risk and lower
their premiums.
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SOURCE Consumer Watchdog