The availability of insurance markets continues to tighten for California business and property owners primarily due to three issues: 1) the delay of rate approval requests being issued by the Department of Insurance, 2) the rapidly increasing costs of re-insurance available to carriers and 3) the increased cost and availability of supplies necessary to cover claims. These issues have forced many carriers to stop doing business in California altogether or severely limiting the amount of new business they are willing to write. We are seeing a large increase in non-renewals being issued by carriers along with increased inspections and underwriting document requests to ensure policies meet current guidelines.
We continue to write property insurance with a number of carriers but as a result of the limited market, more policies are being pushed to the California FAIR Plan. The FAIR Plan is NOT a state agency nor a public entity but rather an insurance pool comprised of insurers licensed to conduct business in California. The FAIR plan was established in 1968 by state statute as a last resort for California residents to obtain basic fire insurance.
However, considering the tough insurance market we are seeing right now, California has become the first state in the nation to mandate insurance companies to reward consumers who take wildfire and safety mitigations actions under the state’s “Safer for Wildfires framework.” Under the new rules, insurance companies are required to submit rate filings that incentivize wildfire safety standards and establish procedures of releasing wildfire risk determinations to residents and businesses. Companies must provide consumers with their properties’ “wildfire risk score” and create a right to appeal process.
We are at the front end of these “fire hardening discounts” being offered by California insurance carriers. The California FAIR Plan as recently as August 22, 2023, has provided two discounts available to policy holders which could potentially save up to a combined total of 14.5% off the wildfire portion of the annual premium. The insured must apply for these discounts and an inspection process will be completed to verify. Shown below is the detail of the offered discounts:
Protecting the Structure Discount: Reduces the wildfire portion of the policy’s premium by 10%.
• Dwelling must have a Class-A Fire Rated Roof (composition shingle,
stone, concrete/clay tile, or Metal).
• Six inches at the bottom of all exterior walls must be made of non-
combustible material.
• Vents must be ember and fire resistant (wire mesh covering).
• Windows must be double paned.
• Eaves must be enclosed.
Protecting the Immediate Surroundings Discount: Reduces the wildfire portion of the policy’s premium by 5%.
• Vegetation and debris must be cleared from under the decks.
• There must be an ember resistant zone maintained within five feet of
the home.
• There must be no combustible sheds or outbuildings within 30 feet of the dwelling.
• Defensible space compliance (including trimming trees, removal
of brush and debris from yard in compliance with California Public
Resources Code 4291).
These measures are GOOD NEWS for California residents and by encouraging widespread adoption of fire mitigation measures, we should in time reduce the overall risk associated with insuring properties in high wildfire prone areas. A step in the right direction!