By Levi Sumagaysay, CAL MATTERS
Insurers in California are currently allowed to use only historical catastrophe data when setting their homeowner premiums. Catastrophe modeling would incorporate both historical data as well as projected losses based on scientific information that take into account frequency, severity, damage and loss from wildfires, according to the draft regulation.
Insurance Commissioner Ricardo Lara told reporters Thursday that the regulation will bring more reliable rates; “greater availability” of insurance; and allow mitigation efforts to be rewarded through rates.
Insurance department staff said greater availability of insurance would mean seeing a reduction in enrollments in the FAIR Plan, which is supposed to be an insurer of last resort but which for many state homeowners has become the only option for fire insurance. This week, FAIR Plan President Victoria Roach told lawmakers that the plan wrote a record 15,000 policiesin February.
Mark Sektnan, vice president of State Government Relations for the American Property Casualty Insurance Association, in an emailed statement: “More accurate ratemaking will help restore balance to the insurance market and ensure all Californians have access to the coverage they need.”
Lara also said the new regulation will allow the insurance department to look at insurers’ catastrophe models and allow for public review. Any member of the public who’s allowed to look at the models, however, will have to sign nondisclosure agreements — a policy advocates oppose.
Carmen Balber, executive director of Consumer Watchdog: “If an NDA prevents public interest organizations from sharing their analysis of a model with the public, public participation in a review is meaningless.”
The public has until April 23 to comment on the regulation, when there will be a hearing to discuss it before it’s finalized. The insurance department will hold a public hearing on the first regulation it released, about rate filings, on March 26.