Heads up about big changes with Insurance Commissioner Lara!

Just got this from fellow Firewise Leader Chris Norton. Thought you all might be interested in his take on what may be coming down the pike…

Date: Sun, 14 Nov 2021 12:34:02 PST

The following is NOT a report summarizing Commissioner Lara’s zoom meeting on Nov. 10. I see no takers for my request for fellow Firewisers here who have insurance experience to comment or for anyone who did attend and took notes to summarize. Therefore, as I am hitting a very busy spell starting tomorrow, I am going to post my thoughts on the meeting now instead of letting it go stale. See below the double lines. Please fire away: correct and critique.

I was only able to watch the first hour and a half of the insurance commissioner’s meeting. If someone watched the entire thing and can give us a summary, that would be great.

While I did not see all of yesterday’s zoom, I have followed Commissioner Lara’s efforts even before we lost our insurance the month before the CZU fire. We are in luck to have a young proactive but politically astute Commissioner who is also a great listener. He has held many dozens of hearings across the rural areas of the state since he was elected.

I am convinced we will see major changes in California insurance; Lara has proceeded methodically through the regulatory steps with only one hiccup. The timing is good for fire policy changes, and changes are in full swing well beyond the revamp of insurance regulations. Lara’s changes will (eventually) bring CA in line with other states dealing with major catastrophes. These changes will impact us all, some negatively (but we can mitigate that); most will benefit.

Here is an example of one of the smaller changes. The insurance companies use models to score each of us for fire risk. These models are “black boxes” meaning we and others generally don’t get a chance to see how the score is calculated. Lara is close to opening up these black boxes and if he does, then you get a look inside. I had a chance to see inside. I wasn’t able to take notes, so this is from memory and I could have it wrong here and there. But overall, I think I am describing in general how the ratings work.

[Do we have anyone with insurance experience who can set me straight here if I have this wrong?]

What I saw was a two column spreadsheet. In column one was a list of twenty of so of parcel features that added or reduced fire risk. Examples: distances to fire station, type of roof, siding, fire severity zone, aspect, slope, vegetation. The second column had numbers, a ranking of importance of each item. So - and here I am just throwing out guesses - roof type got a 10, siding a 7, distance to the fire house a 5 and slope got a 3. Each of the twenty features had a ranking number.

At the bottom of these columns was a single number, your “score”. This is the sum of the ranked parcel features apparently but I have no idea what algorithms were hiding in between the score and the two columns above it. I think the scores change year to year and your score will go up or down as the company tweaks their models, or they simply change the level of the passing score. (Some carriers simply cancel entire areas like zip codes regardless of individual scores as some upper west siders in Santa Cruz City know.)

Most of the big carriers use and modify a model called Fireline, supplied by an industry consultant. I think it is old, out of date and it does not capture enough detail. There is no credit given for mitigation measure taken by homeowners that I have seen. Fireline has competition now with better tech; these competitors were on the zoom yesterday concerned that the incumbent combo of big insurance and their favored model vendor will get protection from the new regulations due to lobbying from various groups who were also well represented on the zoom.

[Think about the absurdity of this model in context of CZU. Distance to fire house? Completely irrelevant to saving homes in a extreme fire event. And frankly, at this point, from the insurers’ perspective, structure fires losses are rounding error buried under wildland fire losses.]

In summary, the small change here is for Lara to open the black box for us, so you can see how your carrier rates your property. Lara will attempt to force the carriers to allow us to challenge the score on at least the basis of incorrect information. If he can go further, then carriers will have to respond to “what if?” requests for score adjustments, i.e., if I put on a new roof, will I pass?, etc.) Do we get mandated Firewise discounts? Do we get credit for doing all the right steps around our homes? Probably only in a watered down form on the first pass. But Lara has momentum now.

So there are small changes like this black box opening, which are great indeed, but the big change we are headed towards is to drop the current pricing model in CA and adapt a CAT (catastrophic) event model. For example, in Florida if you live on the beach your rates are higher than 4 blocks inland as the hurricane model accurately sets risk. California insurance rates are throttled by Prop 103, voted in in 1988. This basically restricts rate increases to a formula based on carrier losses over the past 30 years. (Again, any insurance experts, please correct me here if I have this mischaracterized.) I am pretty sure the CAT model approach is where Lara was headed, but I don’t think he could overcome the consumer lobbyists on it for this round.

Nevertheless, we will end up with CAT modeling at some point and rates then can - not saying they will - more closely reflect the risk on the ground… BUT, here is where Firewise communities can literally change the rules of the game - by changing the risk on the ground, literally.

CALFIRE is not going to modify their ratings of fire risk zones much in the SC Mountains, but we definitely can make our own Firiewise communities much more fire resilient. I am now convinced that there are almost no hopeless areas; some will require significant fuel reduction, well beyond what can be addressed by current practices of trimming and chipping. We can influence the fire CAT model and thus insurance pricing.

Think this through:

  • we have Firewise communities in Southern California which I am told can shrug off wildfires. We can do that here. Let’s get those Firewise leaders on zoom to teach us. How far out do we need to go in fuel reduction for extreme risk zones? 1,000 feet? Half a mile? That would open the door to many changes. In some of the most advanced communities, shelter-in-place may now be safer than driving on a poorly maintained evacuation route. Etc.

  • should we assume that extreme fires are inevitable around our communities? They are if we continue the same policy of fire suppression as over the last 100+ years. But what if extreme fires don’t get near our communities? Then the risk models can be adjusted down, possibly way down. How do we do this here? We reduce fuels to a point where a wildfire is not extreme, where wildfire is low intensity and periodic and our homes are no longer threatened. But, if we can’t chip our way out of our fuel load built up by 100 years of fire suppression and past land management practices, what do we do? We can use fire as our tool to reduce fuel. Native tribes did this for thousands of years before we arrived. Good fire. Bad fire. Take your pick. Native tribes burned 4 - 5 million acres a year in California - good fire. Planned, slow, low intensity. Extreme wildfire burned that amount in 2020 - bad fire. Unplanned, fast, high intensity.

Good fire. How do you do that? There is a renaissance across the west in returning to the use of fire as a tool. Our CCPBA crew (the Central Coast Prescribed Burn Association) trained on a prescribed burn in Santa Lucia Preserve last week - to remove invasive species and for studies on how to restore our beleaguered native coastal prairie. We trained with 50 others in Happy Camp on the Klamath River for a week in October as part of a seven week TREX (Training for Prescribed Burning) with participants from local tribes, federal and state agencies, volunteer and private fire departments, academics, the press and political staffers. One third of homes in Happy Camp were lost in recent fires. Their response? Reduce fuels around Happy Camp, in a big way. Our crew made a small dent in the 1,000 acres of burn piles surrounding Happy Camp. Piles on 70 degree slopes, piles under canopy, piles made where cutting was done. This can and is being done safely and the science and management knowhow is spreading worldwide from the innovation epicenter in Northern California. We can do this here - and we are starting to actually. See the burn piles next to Graham Hill Road. State Parks did that.

Back to insurance.

If we create fire resilient communities, and we show Commissioner Lara that science backs our us, I think he will ensure that insurance rates reflect the lowered risk. He and others at the state and federal level are well aware of the good fire renaissance; political staffers are regulars on prescribed burns and we have seen significant legislative changes already.

So, in summary on the related topics of insurance and fire policy and practice:

We can live here in the mountains with low intensity fire passing through on a periodic basis without losing homes. Tribes before us managed the land with fire and we can adapt their practices and reap the benefits of healthier wildlands and freedom from fear of extreme wildfire. With that, we can have reasonable insurance rates too.

These are most interesting times with very big changes afoot. Fire now touches all of us, our ecosystems and even the economy. Good fire is a very big investment but one that will crowd out bad fire. To get there requires a lot of change. Be proud that you have stepped forward as a Firewise leader. We will bring our most special place in a troubled world back to the secure and healthy home we all love.

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