Commissioner Lara Gives State Farm Green Light to Reduce Wildfire Mitigation Discounts and Avoid Explanation of How Homeowners’ Wildfire Risk is Determined

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Los Angeles, CA – 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. 

Carmen Balber
Carmen Balber
Consumer Watchdog executive director Carmen Balber has been with the organization for nearly two decades. She spent four years directing the group’s Washington, D.C. office where she advocated for key health insurance market reforms that were ultimately enacted into law as part of the Affordable Care Act.

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