Insurance could return to these high risk areas in San Diego under new CA policy

Cal Fire crews work a flare up near the Barrett Mobile Home and RV Park as they fight the Border Fire Thursday, Sept. 1, 2022, in Dulzura, Calif. California wildfires chewed through rural areas north of Los Angeles and east of San Diego on Thursday, racing through bone-dry brush and prompting evacuations as the state sweltered under a heat wave that could last through Labor Day. (AP Photo/Gregory Bull)

Editor’s Note: This story has been updated to correct the name of the state’s Department of Insurance Commissioner. We apologize for the error.

SAN DIEGO (FOX 5/KUSI) — California is looking at ways to intervene in the burgeoning insurance crisis gripping homeowners in neighborhoods with high wildfire risk.

Earlier this month, the California Department of Insurance released new details about a plan that is part of a yearlong effort to overhaul California’s insurance code in hopes of bolstering coverage of communities impacted by the recent exodus of private home insurers from the state.

California Department of Insurance Commissioner Ricardo Lara has billed the multi-pronged plan, which was first announced last fall, as “the most significant insurance reform” in three decades.

The latest initiative would span dozens of high-risk zip codes across California, including 19 in San Diego County, who have been left with just the state’s FAIR Plan — or another last-ditch, bare-bones policy with hefty premiums — to cover their home.

The adjustment addresses what Lara described as a shortcoming in the state’s insurance code that allows insurers significant leeway to write their own policies — something he says has contributed to companies pulling out of areas they deem too risky.

Under the new regulations, large insurance companies would be required to write new policies that would allow a minimum of 85% of residents in wildfire distressed areas, which were identified based on concentrations of the state’s FAIR plan, to move back to their coverage.

Smaller companies, new entrants and commercial insurance companies would need to increase insurance coverage by 5% in these areas, according to the policy.

Much of San Diego’s inland and desert areas would be impacted by this change, state officials say. A map of all areas in the state impacted by this change can be found below.

In turn, insurance companies will be able to begin utilizing computerized catastrophe models to calculate its rates based on potential future risks, as they do in other states. California’s policies have historically been shaped by wildfire records within 20 year periods.

Insurance companies using these models would also be required to take into account how a policyholder might be mitigating wildfire risk at their property, state officials said.

Lara said utilizing this technology would help stabilize insurance in the state and make it more affordable — a sentiment echoed by insurers. However, critics argue catastrophe modeling can still contribute to unnecessary rate hikes, evidenced by hurricane-prone Florida’s exorbitantly high insurance prices.

According to state officials, all of the measures included in the latest policy, like the ability to use catastrophe models, would be subject to oversight by existing mechanisms.