LOS
ANGELES, May 1, 2024 /PRNewswire/ -- Consumer
Watchdog challenged State Farm's failure to properly disclose or
explain to consumers the basis for their wildfire risk
classifications. The group filed a Petition for Hearing on the
company's wildfire mitigation discount filing required by
California Department of Insurance rules. The Petition also
challenged the amount of the proposed mitigation discounts as too
low.
Consumer Watchdog's challenge follows prior challenges to
Farmers' and CSAA's pending mitigation discount filings. Under
those pending filings, policyholders would be required to pay a
nonrefundable fee for a home inspection to verify any discounts.
Under Farmers' filing, many homeowners' discounts would be negated
by the inspection fee.
Additionally, Consumer Watchdog challenged State Farm's failure
to disclose the models it uses to classify homes based on their
wildfire risk. Without access to the models, it is impossible to
properly assess State Farm's wildfire risk classifications, or for
policyholders to meaningfully contest their classifications.
"When homeowners mitigate their properties, everyone benefits,"
said Consumer Watchdog staff attorney Ryan Mellino. "The
Commissioner must require State Farm to follow the law and explain
in detail a homeowner's wildfire risk classification, what they can
do to protect their homes, and offer meaningful discounts when
homeowners act to reduce their risk."
Voter-approved Proposition 103 authorized public participation
in rate oversight, which allowed Consumer Watchdog to scrutinize
and challenge the filings.
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, 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.
Most insurance companies' discount filings have not yet been
approved by the Department of Insurance. Despite substantial
efforts made by homeowners across the state to harden their
properties against wildfires and clear brush to reduce risk, many
homeowners continue to see drastic rate increases without
commensurate, or any, recognition of their mitigation efforts.
Policyholders are also being nonrenewed with no specific
explanation aside from general statements about wildfire risk. For
example, Deborah, a State Farm policyholder in Santa Cruz, recently received a nonrenewal
notice with no option to take any action that would allow her to
keep her policy.
The only specific reference to Deborah's property's wildfire
risk in the nonrenewal notice stated: "The range of available
premium adjustments is currently -41.7% to 376.9%, and [based on
your address,] your adjustment is 25.9%."
A range of numbers is essentially meaningless, said Consumer
Watchdog, as it gives homeowners no information about why a
property was assigned a certain wildfire risk. Deborah's story is
unfortunately familiar to too many homeowners across the
state.
In the Petitions for Hearing, Consumer Watchdog also challenged
the amount of the mitigation discounts offered by State Farm and
Farmers as insufficient. State Farm currently offers up to a
maximum 5% discount for completing five property-level mitigation
efforts; in its new filing, the company proposes to reduce its
maximum discount to 4.3% for completing ten property-level
mitigation efforts. In other words, State Farm wants policyholders
to do more work for less savings.
State Farm's filing would also require homeowners to pay
$125 for an inspection by the
Insurance Institute for Business & Home Safety ("IBHS") to
potentially qualify for a larger mitigation discount.
Farmers and CSAA go even further. Their filings seek to
require all homeowners to pay for an IBHS inspection to qualify for
any mitigation discounts, including those required by law. The
average proposed discount for Farmers SmartPlan Home policyholders
living in a high fire risk area is approximately $125 over three years, equal to the $125 IBHS fee which is paid every three
years.
In fact, Farmers is currently threatening to non-renew some
homeowners unless they meet the IBHS requirements within three
months. Jennifer, a Farmers policyholder in Calabasas, was given that ultimatum in
December 2023.
IBHS promotes its product to insurance companies as placing the
burden of verification on consumers. It offers no guidance to
consumers beyond a one-size-fits-all checklist of steps to take.
And the short time frame imposed by Farmers leaves homeowners
little time to get necessary approvals from HOAs or government
entities for the potentially extensive changes to their properties
the IBHS standards require, let alone get the work done. Consumers
must pay for the inspection whether or not they are ultimately
certified.
Since IBHS offers no individualized assistance, Jennifer
was left to struggle to figure out what was actually required for
her to meet the certification. Then she had to pay the $125 nonrefundable fee to IBHS to have an
inspector visit the property. Her insurance agent had to repeatedly
contact the company to act on her application, which they barely
certified in time.
Download and read the State Farm, Farmers,
and CSAA Petitions for Hearing.
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SOURCE Consumer Watchdog