California Insurance Commissioner Ricardo Lara submitted finalized regulations to allow insurers to use forward-looking wildfire catastrophe models. These regulations would also require insurers to increase coverage for properties in high-risk areas.
The proposal, sent to the state’s Office of Administrative Law on Nov. 14, has drawn mixed reactions. Industry groups welcomed it as a stabilizing measure for the market, while consumer advocates criticized it as a broken promise to policyholders.
Lara stated the new regulation aims to increase insurance availability across California, especially as the state faces more severe climate risks. He highlighted the role of technology in identifying risk areas and pricing policies more accurately, factoring in property and community-level mitigation efforts.
Under the new rules, insurers would need to boost their coverage in wildfire-prone areas to at least 85% of their statewide market share. Currently, no law mandates insurers to cover high-risk areas, according to the California Department of Insurance (CDI). The regulation would also require the CDI to hire an adviser to test the integrity of wildfire models to ensure compliance with state law.
If approved, the new regulations would take effect by the end of 2024, with the model review process starting on Jan. 1, 2025. The CDI partnered with Cal Poly Humboldt to create a strategy group to develop the nation’s first public wildfire model. Recommendations from this group, expected by April 2025, aim to support fair and accurate insurance rates.
The American Property Casualty Insurance Association (APCIA) praised the move. APCIA’s Vice President of State Government Relations, Mark Sektnan, highlighted the importance of the models in stabilizing California’s property insurance market.
Sektnan noted the regulation as one part of broader reform efforts to improve insurance access for consumers, drivers, and small businesses.
Consumer Watchdog took a more critical stance. The organization’s president, Jamie Court, argued that Lara’s claims about the 85% coverage requirement were misleading. According to Court, insurers could meet the requirement by covering just 5% more properties than they do now. He also pointed out that companies could opt for alternative arrangements instead of meeting the threshold.
Carmen Balber, executive director of Consumer Watchdog, criticized the regulation’s lack of transparency. She argued that it allows insurance companies to use opaque algorithms to increase rates while keeping the methodology hidden from the public.
The proposed changes aim to balance market stability, technology-driven risk assessment, and increased coverage in wildfire-prone areas. However, the debate highlights ongoing tensions between consumer protection and industry needs in California’s insurance market.
