California to require insurance discounts for property owners who reduce wildfire risk
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If you’d like to join the growing chorus of Californians denouncing proposed legislation to force insurance companies to pay for reductions in fire risk, here’s a brief look at the controversy.
State Senator Scott Wiener (D) is sponsoring AB 2771, which would require insurers to pay the state for reductions in fire risk for all homeowners and renters. There have been calls from the insurance industry and from environmentalists to kill this bill, but there is a “no” vote until the bill reaches the Senate floor.
California’s wildfire risk is currently so low that the Department of Fire Prevention and Control believes the state can spend $858 million in 2017 to mitigate risk, including $1 billion in grants, according to the Los Angeles Times.
The legislation would require insurers to pay the state $50,000 per year for each household in a multi-family home and $2,500 per household in a single-family home, with an annual cap.
The bill also includes a provision to give cities the right to waive this insurance requirement on a case-by-case basis, but cities will be able to do so only for new construction. The insurance industry is claiming that requiring insurance companies to reimburse the state for reduced fire risk will only make the state more money, because the state will be making the fire risk reduction decisions, and insurers will make money on the resulting billings.
The insurance industry is also worried that the bill will encourage residents to engage in low-risk behavior. The insurance industry will also be charged for state-mandated fire risk reduction efforts.
The insurance industry’s response to California’s wildfires that are burning through the state since the beginning of the year has been to increase its rates.
In May, one of California’s major insurers, Swiss Re, filed a petition with the California Department of Managed Health Care alleging that insurance plans with which Swiss Re did business had been cancelled or otherwise modified in response to the wildfires. In this petition, Swiss Re claimed that “these changes were triggered by, or related to, the events or losses related to the 2017 and 2018 fires,” and that “each insured, as well as affected entities, continue to experience material losses for losses caused by the 2017 and 2018 wildfires.”
