Department of Insurance Responds to Impacts from Another Devastating Wildfire Season

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By Hannah Ohman

Starting in August 2020, the Department of Insurance (DOI) took the following actions to address consumer issues resulting from the 2020 wildfire season:

In an August 20, 2020 press release, DOI urged residents to keep all receipts accrued during evacuations due to wildfires in order to be eligible for cost reimbursement from their insurance company. The Commissioner noted that “thousands of residents across California who have been ordered to evacuate due to wildfires may have homeowners’ or renters’ insurance coverage to help with evacuation and relocation costs, even if their homes are not damaged or destroyed.”

In an August 21, 2020 notice, Commissioner Lara directed health insurers to guarantee health care access during wildfire emergencies and mail-order prescription drug delays. Lara noted that if mail-order prescription drugs cannot be provided within a medically appropriate time period, insurers must take steps to ensure access and arrange for insureds to obtain their drugs at network retail pharmacies or, if necessary, from out-of-network pharmacies.

According to a September 3, 2020 press release, DOI reported complaints from policyholders that their insurance companies are not covering adequate expenses resulting from the wildfires. The policyholders claim the insurers are terminating their Additional Living Expenses (ALE) benefits after two weeks unless the policyholder can prove the property damage due to fires makes their home uninhabitable. In some cases, ALE benefits are cut off due to the insurance companies’ delay in getting out to see the home and verify damage. In response to these complaints, Commissioner Lara released a notice on September 3, 2020, directing insurance companies to continue providing ALE benefits when insureds’ homes are inaccessible or uninhabitable or mandatory evacuations are still in effect as a result of wildfires.

In response to the size and severity of this wildfire season, DOI is taking various actions to stabilize the market for policyholders, according to a September 16, 2020 press release. Commissioner Lara stated these actions include: (1) developing home-hardening standards that are consistent, based in fire science, and apply to all insurance companies; (2) giving transparency to consumers about their wildfire risk score and what they can do to reduce it (insurance companies use wildfire risk scores to determine which homes they will write and the premium they charge); (3) creating insurance incentives recognizing home hardening, mitigation of properties, and community mitigation actions; and (4) requiring that insurance companies seek adequate and justifiable rates to protect the solvency of the market. The Commissioner stated that he will use his authority under California law and Proposition 103 to enact the regulations. DOI’s efforts come at a time when recent DOI data shows that insurance is continually harder to find and more expensive in high-risk fire areas due to more intense wildfire seasons.

The Commissioner will hold a public, virtual investigatory hearing on Monday, October 19, 2020, regarding possible regulatory changes to address the challenges that homeowners face when seeking and maintaining insurance in high wildfire risk regions of California.

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