Latest news with #SustainableInsuranceStrategy
San Francisco Chronicle
3 days ago
- Business
- San Francisco Chronicle
California's major home insurers are likely to raise rates soon. Here's why
California home insurance companies could begin requesting rate increases within weeks, after state regulators approved a key step that will undergird new rate filings. Insurance rates have soared in California in recent years, but insurers say they still don't reflect the cost of doing business in the expensive, wildfire-prone state. To prevent insurers from further pulling back coverage or leaving the state, the California Department of Insurance recently enacted a set of reforms, called the Sustainable Insurance Strategy, that will make it easier for insurers to justify rate increases — though the state plans to ensure that the carriers continue to cover, and even expand, in parts of the state considered at risk for wildfires. A key step in the reform process occurred last week, when the Department of Insurance said it would allow insurers to use a catastrophe model to evaluate future risks. Previously, insurers have only been allowed to use backwards-looking information as the basis for rate increase requests — and thus could not take global warming or other predicted future changes into account. Insurers and regulators have long said that a more accurate assessment of future risks is critical for them to remain viable in California. California is an outlier: Other states already allow carriers to forecast risks using catastrophe models. The newly approved model was created by the New Jersey company Verisk. Two other catastrophe models, made by Moody's and Karen Clark, are now under review, according to Deputy Insurance Commissioner Michael Soller. 'I'm expecting (that) within a matter of weeks we could have our first filing from a major carrier,' Soller said in an interview Thursday. Exactly how much rates are likely to rise in the immediate future is unknown, and will undoubtedly vary by insurer. Mercury, a Los Angeles-based insurer that is one of California's largest carriers, said it is currently preparing a rate change request for homeowners insurance using the Verisk model. 'The move is a direct result of the ongoing implementation of (Insurance Commissioner Ricardo Lara's) Sustainable Insurance Strategy, which the company believes will provide California homeowners with more insurance options and lead to a more resilient insurance marketplace,' the company said. The use of catastrophe models is one of several key changes made by Lara under his Sustainable Insurance Strategy. Another key change is allowing insurers to partially pass on the cost of reinsurance (insurance for insurance companies) to policyholders — something not previously allowed in California, though it is common in other states. As soon as they file for updated rates, insurance companies will be required to tell regulators if they plan to write new policies, and if so, how many new policies. Insurers will also be asked to describe how they'll be seeking new policies to write — for example, if they'll offer full coverage to customers whom they partially cover under a companion policy to California's FAIR plan. (The FAIR Plan is California's insurer of last resort and covers only damage from wildfires, whereas traditional insurers include other risks such as liability and plumbing problems.) There have been virtually no rate increase requests filed after the devastating Los Angeles wildfires in January. In prior years, large rate increase requests tended to flow in after major fires, Soller said. But this time, insurers have been waiting for the catastrophe models to be approved. 'It's why we are doing this,' Soller said, noting that really large rate increases after wildfires are 'not a sustainable path for us.'
San Francisco Chronicle
10-07-2025
- Business
- San Francisco Chronicle
Map: Here's how much the California FAIR Plan costs in every ZIP code
For the first time, data released by the California FAIR Plan shows just how much Californians in every ZIP code are paying for coverage from the state's insurer of last resort — numbers that could rise in the future as the insurer's president warns of a substantial rate increase. The new data shows the full range stretches from just $91 a year for one customer in downtown Los Angeles to an average of over $21,000 per year for two homeowners in a high-risk part of San Jose. The statewide average is about $2,800 per year, according to recent state legislative testimony from FAIR Plan President Victoria Roach. The FAIR Plan is a state-created but privately-run insurer designed to offer fire coverage to those who can't find it anywhere on the private market. Over the course of California's insurance crisis, the FAIR Plan has rapidly risen to become one of the largest insurers in the state, now covering approximately 5% of all insured residences. Reforming the FAIR Plan has been one of the major tenets of Insurance Commissioner Ricardo Lara's Sustainable Insurance Strategy, his plan to end California's insurance crisis. Part of that included calling for the FAIR Plan to be more transparent by sharing data on its number of policies and the amount of premium collected across the state by July 1. The Chronicle divided the total number of premiums collected in each ZIP code by the number of policies to calculate an average premium overall. The average premium in the 94563 ZIP code covering Orinda is just under $5,200. Homeowners with the FAIR Plan in the 95441 ZIP code, overlapping Geyserville north of Santa Rosa, pay an average of $11,900 a year. In the 93920 ZIP code along Big Sur, the average FAIR Plan premium is just over $11,000 a year. These averages are greatly impacted by two factors: the wildfire risk of the homes and how much an insurer would be on the hook for if the home was destroyed. That's why some areas, such as the 94074 ZIP code running along the coast of San Mateo County, have high average premiums despite low-risk policies — because the homes themselves are more expensive. You can select a ZIP code to see the average exposure in that ZIP code and the average premium in different risk categories calculated by the FAIR Plan. Premiums are also influenced by other factors, including the deductible a homeowner chooses and any discounts they may get for doing wildfire mitigation work on their home. These premiums in this dataset represent only a portion of what most FAIR Plan policyholders pay for insurance overall. That's because the FAIR Plan only covers damage from fire; to be insured for anything else, from burst pipes to liability payments, policyholders must purchase a second policy from a different insurer. As of 2023, roughly two-thirds of FAIR Plan policy holders also bought one of these secondary policies, according to the Department of Insurance. Four years ago, the average FAIR Plan premium was about $1,800, Roach said at the May hearing — about 50% lower than it is today. Surprisingly, the increase is not because the FAIR Plan has been raising insurer actually hasn't increased its prices since 2023, when rates rose by an average of 15.7%. But it has begun to take on hundreds of thousands of new homes, many of them much more expensive to insure. In 2021, the average coverage limit for a FAIR Plan customer was about $680,000, according to Roach. Today, it is greater than $1 million. Up until 2020, the FAIR Plan capped coverage limits at $1.5 million per home, but now it insures up to $3 million per policy. The FAIR Plan isn't set up to be profitable, but it is mandated to be actuarially sound. That means it should ideally collect enough premiums each year to pay for its operation costs and anticipated claims. For over a year, Roach has been warning that the FAIR Plan's rates aren't high enough to support all of the new customers it's taken on, putting the insurer at risk of running out of money in the event of a large wildfire. That's exactly what happened earlier this year, when claims from the Eaton and Palisades fires quickly overwhelmed the FAIR Plan's limited reserves. The FAIR Plan then turned to its reinsurance, insurance for insurers, and to an infrequently used state statute that allows it to collect money from all of the private insurers in the state to cover the cost of claims. Some of those costs are expected to trickle down to consumers, unless an ongoing lawsuit prevents that. So far, the FAIR Plan has not filed for any new rate increase. A spokesperson for the FAIR Plan said the insurer plans to submit a new filing 'as soon as this year.' Its last residential rate filing was submitted in 2021 as a request for a 48.8% increase, though it was approved in 2023 at just 15.7%. (As part of his quest to get insurance companies to write more policies in the state, Lara has pledged his department will work to process filings more quickly.) Roach said in May that the FAIR Plan's rates are so low it can sometimes be cheaper to sign up for the FAIR Plan than private market insurance, though private insurance policies include more types of coverage and at times higher limits. She said a rate hike would both bolster the FAIR Plan's finances and hopefully motivate some FAIR Plan policyholders to renew their efforts to get back on the private market. 'We are working with the department today to talk about our next dwelling filing to try to get to an actuarially sound rate,' she told the committee. 'The closer we can get to that, the better we're all going to be when that next catastrophe hits.'
San Francisco Chronicle
03-07-2025
- General
- San Francisco Chronicle
California, four other Western states launch probe into underinsurance following Chronicle investigation
A coalition of five states is investigating underinsurance among wildfire survivors after years of costly megablazes across the West, most recently in Los Angeles, and in the wake of a San Francisco Chronicle investigation that laid bare the depth of the issue. The states' goals are to share data and explore the possibility of either a national law or state-based regulatory reforms to address underinsurance, Lara told the state Assembly Insurance Committee at a Wednesday hearing. The group includes representatives from New Mexico, Colorado, Oregon and Washington state. It will also explore what types of information regulators could collect from insurance companies to determine how many people might be underinsured. 'We are gathering data and building our understanding of insurance gaps and how to reduce the prevalence of policyholders being underinsured after severe fire, something that all these states and their consumers have experienced after their fires,' Lara said. Underinsurance refers to the phenomenon where a policyholder's coverage limit — the maximum amount their policy will pay out — falls short of the total cost of rebuilding their home. While some people may choose to underinsure their home, studies show most policyholders believe they are fully insured and want to be adequately covered in the event of a disaster that destroys their dwelling. The Chronicle's investigation found that, for decades, insurance companies have relied on faulty algorithms to estimate how much their customers' homes would cost to rebuild from the ground up, then used those flawed figures to set policy limits for their customers. The most common tool, 360Value, is used by insurers representing at least 40% of California policyholders as well as across the country. Millions of homeowners across California are likely underinsured due in large part to the widespread adoption of these tools, which insurance agents often over-rely on and do not fill out carefully, the Chronicle investigation found. The Chronicle also found that nearly every state in the coalition had identified widespread underinsurance following at least one wildfire. In Colorado, researchers at the University of Colorado Boulder estimated that three-quarters of Marshall Fire survivors were underinsured; more than a third of those had policies that were short by 25% or more. It is the fifth time Lara has appeared before the committee since his Sustainable Insurance Strategy, a package of reforms aimed at making insurance more available, was announced more than a year ago. Assembly Member Dawn Addis, citing the Chronicle's reporting, asked Lara how he would make certain that insurance was both available and sufficient to protect policyholders against disaster. 'My big concern around underinsurance is right now we're having the very important conversation around can people get insurance or not. My big fear, and what I've heard from folks on the Central Coast is, I can get insurance but it's simply not enough insurance,' Addis told Lara. "That's part of our investigation,' Lara replied. He encouraged any consumers who have found out they're underinsured to submit a complaint to the California Department of Insurance to be used in the investigation. In response to the Chronicle's findings, California also began collaborating with researchers with the RAND Corporation and Ken Klein, a professor of law at California Western School of Law, to explore what data could be used to study underinsurance. After the hearing, Addis told the Chronicle she is encouraged to hear multiple states are looking into the issue but also concerned at how widespread underinsurance is across the West. 'To me it's a compelling reason to bring statewide legislation forward, the sooner the better. We know we're going to have more disasters. It's a piece we absolutely need to have our arms wrapped around as we try to stabilize the market,' Addis said. The coalition's formation is the latest in a series of actions taken in response to the Chronicle's reporting on underinsurance. In May, the California Board of Equalization — the state's agency tasked with property tax oversight — held an informational hearing into underinsurance inspired by the Chronicle's investigation. It then issued a slate of recommendations for potential regulatory or legislative action, including requiring insurance companies to provide stronger warnings to customers that their recommended coverage limits may not fully cover the cost of rebuilding. Plaintiffs attorneys have also filed major lawsuits against at least four insurance companies on behalf of underinsured policyholders in Altadena and Pacific Palisades. Many of the plaintiffs in these lawsuits had homeowners' policies that underestimated their rebuilding costs by $1 million or more. Lara said members of the nascent coalition had been meeting for several months prior to the announcement.
Business Wire
12-05-2025
- Business
- Business Wire
Triple-I Report: Lower-Risk Parcels Can Be Found in Wildfire-Prone California Communities
SAN DIEGO--(BUSINESS WIRE)--The Insurance Information Institute (Triple-I) today published a whitepaper addressing wildfire insurance access in underserved areas of California, one of the most pressing challenges facing the Golden State's volatile property insurance market. Triple-I's research shows that with more detailed, property-level analysis, insurers can confidently offer property insurance coverage in areas of California previously deemed too risky. The study, G etting Granular to Find Lower-Risk Properties Amid Wildfire Perils, comes at a critical time as California continues to grapple with regulatory obstacles related to actuarially sound underwriting and pricing. Using Guidewire HazardHub predictive Wildfire Score methodology, Triple-I's research demonstrated how granular geospatial data analysis can identify lower-risk properties, even in areas traditionally considered high-risk. 'The traditional approach to wildfire risk assessment has left many Californians without access to affordable property insurance coverage,' said Dale Porfilio, FCAS, MAAA, Chief Insurance Officer, Triple-I. "Our research shows that with more detailed, property-level analysis, insurers can confidently offer coverage in areas previously deemed too risky." The report examines three ZIP codes identified by the California Department of Insurance (CDI) as 'undermarketed' by insurers: Los Angeles (90210), Mendocino (95490) and El Dorado (95667). The Triple-I analysis of HazardHub insights reveals strong fire-suppression success rates of 90%, 95% and 97%, respectively, in these areas, suggesting many properties are less risky than previously thought. 'To sustainably write insurance in California and other wildfire-prone states, insurers need access to granular property-level data, modern wildfire risk models and a regulatory environment that embraces innovation,' said Leo Tenenblat, Senior Vice President and General Manager, Data and Analytics at Guidewire. 'The Triple-I analysis highlights how next-generation tools and data can uncover lower-risk properties – even in high-risk areas – empowering insurers to expand coverage confidently and responsibly.' Key findings from the Triple-I study include: California's insurance availability challenges stem largely from Proposition 103, regulatory interpretation of which has restricted insurers' ability to offer coverage at actuarially sound rates, which are sufficient to pay expected future losses. Wildfire mitigation and home hardening can reduce the risk of wildfire damage by up to 70%. Granular risk assessment incorporates all vegetation types, drought conditions and fire-suppression success rates in addition to more traditional variables like fuel density, slope and aspect. The California FAIR Plan, the state's insurer of last resort, has become increasingly important but is not a sustainable long-term solution. Triple-I's research supports the CDI's Sustainable Insurance Strategy, which requires insurance companies to offer homeowners coverage in California's under-served areas if they want to use advanced, forward-looking wildfire models in their rate filings. To meet this requirement, insurers must write policies in those areas equal to at least 85% of their total market share across the state. If a carrier has 10% market share in the state, they must have 8.5% of the 'under-marketed' area, which makes up about 15% of properties in the state for a 1.275% share of the market, less than 1.3% of their portfolio. The report concludes that addressing insurance availability/affordability challenges in California requires a multi-pronged approach with a focus on high-quality, reliable data that allows for targeted risk assessment at the property level. About the Insurance Information Institute (Triple-I) Since 1960, the Insurance Information Institute (Triple-I) has been the trusted voice of risk and insurance, delivering unique, data-driven insights to educate, elevate and connect consumers, industry professionals, policymakers and the media. An affiliate of The Institutes, Triple-I represents a diverse membership accounting for nearly 50% of all U.S. property/casualty premiums written. Our members include mutual and stock companies, personal and commercial lines, primary insurers and reinsurers – serving regional, national and global markets. About The Institutes The Institutes® are a not-for-profit comprised of diverse affiliates that educate, elevate, and connect people in the essential disciplines of risk management and insurance. Through products and services offered by The Institutes and nearly 20 affiliated business units, people and organizations are empowered to help those in need with a focus on understanding, predicting, and preventing losses to create a more resilient world. The Institutes is a registered trademark of The Institutes. All rights reserved.
Yahoo
12-05-2025
- Business
- Yahoo
Triple-I Report: Lower-Risk Parcels Can Be Found in Wildfire-Prone California Communities
SAN DIEGO, May 12, 2025--(BUSINESS WIRE)--The Insurance Information Institute (Triple-I) today published a whitepaper addressing wildfire insurance access in underserved areas of California, one of the most pressing challenges facing the Golden State's volatile property insurance market. The study, Getting Granular to Find Lower-Risk Properties Amid Wildfire Perils, comes at a critical time as California continues to grapple with regulatory obstacles related to actuarially sound underwriting and pricing. Using Guidewire HazardHub predictive Wildfire Score methodology, Triple-I's research demonstrated how granular geospatial data analysis can identify lower-risk properties, even in areas traditionally considered high-risk. "The traditional approach to wildfire risk assessment has left many Californians without access to affordable property insurance coverage," said Dale Porfilio, FCAS, MAAA, Chief Insurance Officer, Triple-I. "Our research shows that with more detailed, property-level analysis, insurers can confidently offer coverage in areas previously deemed too risky." The report examines three ZIP codes identified by the California Department of Insurance (CDI) as "undermarketed" by insurers: Los Angeles (90210), Mendocino (95490) and El Dorado (95667). The Triple-I analysis of HazardHub insights reveals strong fire-suppression success rates of 90%, 95% and 97%, respectively, in these areas, suggesting many properties are less risky than previously thought. "To sustainably write insurance in California and other wildfire-prone states, insurers need access to granular property-level data, modern wildfire risk models and a regulatory environment that embraces innovation," said Leo Tenenblat, Senior Vice President and General Manager, Data and Analytics at Guidewire. "The Triple-I analysis highlights how next-generation tools and data can uncover lower-risk properties – even in high-risk areas – empowering insurers to expand coverage confidently and responsibly." Key findings from the Triple-I study include: California's insurance availability challenges stem largely from Proposition 103, regulatory interpretation of which has restricted insurers' ability to offer coverage at actuarially sound rates, which are sufficient to pay expected future losses. Wildfire mitigation and home hardening can reduce the risk of wildfire damage by up to 70%. Granular risk assessment incorporates all vegetation types, drought conditions and fire-suppression success rates in addition to more traditional variables like fuel density, slope and aspect. The California FAIR Plan, the state's insurer of last resort, has become increasingly important but is not a sustainable long-term solution. Triple-I's research supports the CDI's Sustainable Insurance Strategy, which requires insurance companies to offer homeowners coverage in California's under-served areas if they want to use advanced, forward-looking wildfire models in their rate filings. To meet this requirement, insurers must write policies in those areas equal to at least 85% of their total market share across the state. If a carrier has 10% market share in the state, they must have 8.5% of the "under-marketed" area, which makes up about 15% of properties in the state for a 1.275% share of the market, less than 1.3% of their portfolio. The report concludes that addressing insurance availability/affordability challenges in California requires a multi-pronged approach with a focus on high-quality, reliable data that allows for targeted risk assessment at the property level. About the Insurance Information Institute (Triple-I) Since 1960, the Insurance Information Institute (Triple-I) has been the trusted voice of risk and insurance, delivering unique, data-driven insights to educate, elevate and connect consumers, industry professionals, policymakers and the media. An affiliate of The Institutes, Triple-I represents a diverse membership accounting for nearly 50% of all U.S. property/casualty premiums written. Our members include mutual and stock companies, personal and commercial lines, primary insurers and reinsurers – serving regional, national and global markets. About The Institutes The Institutes® are a not-for-profit comprised of diverse affiliates that educate, elevate, and connect people in the essential disciplines of risk management and insurance. Through products and services offered by The Institutes and nearly 20 affiliated business units, people and organizations are empowered to help those in need with a focus on understanding, predicting, and preventing losses to create a more resilient world. The Institutes is a registered trademark of The Institutes. All rights reserved. View source version on Contacts California Press Office Janet Ruiz 707-490-9365 JanetR@
