Expect important regulatory updates aimed at providing homeowners insurance options to consumers by year-end. A July forum on "California's Insurance Landscape: From Risk to Resilience," hosted by the Center for California Real Estate, offered homeowners important tips on specific actions to take now to better protect their home and increase their chances of keeping their policies or improve eligibility for coverage.
Moderated by California Association of Realtors president Melanie Barker, the forum featured a progress update from Insurance Commissioner Ricardo Lara, and panelists Amy Bach, executive director of United Policyholders; Rex Frazier, president of Personal Insurance Federation of California; and Nancy E. Wallace, professor and co-chair of the UC Berkeley Fisher Center for Real Estate and Urban Economics.
Lara announced that proposed changes to Proposition 103, expected to take effect December 2024, could potentially resolve key issues that have led to sky-high rate increases, non-renewal notices and some large carriers leaving the state. The deal would loosen decades-old rate-increase caps, allowing insurance companies more freedom to set their own market-driven rates, and apply modern risk-modeling systems rather than relying solely on historical data that does not recognize modern wildfire mitigation.
In exchange, insurance companies must agree to write 85% of new business in wildfire prone areas and offer discounts for hardened homes that meet certain criteria in reducing wildfire risk.
"We're hearing about some companies opening up again," said Bach. "They're obviously waiting for the regulations to take effect, but some of them are [getting ready to] turn the tap on and get those premiums flowing again."
The return of insurers to the marketplace would reduce strain on the state-run FAIR Plan, which holds the largest share of high-risk policies and has grown far beyond its intent. The impact of a once-in-a-decade event could be catastrophic to the entire industry.
Lara advised homebuyers and sellers to shop early. Assessing the home's wildfire risk and potential upgrades to more firewise features will be important considerations on both the selling side and buying side. "Start hardening your home now. Once the changes come in, the homes that are fully hardened are going to be the first to get off a FAIR Plan."
Bach advised homeowners to pay more attention to their home insurance to ensure they keep their policies. Homeowners can access resources at uphelp.org/preparedness. "You've got to find a professional agent in this market; trying to shop on your own is really hard. And then the home hardening is pretty critical."
Wallace, a survivor of the 1991 Oakland Hills fire, is working with her team at UC Berkeley's Fisher Center and cross-sector academics and industry experts to build a comprehensive data store with climate, housing, topography and mortgage market information for better predictive modeling systems. FireBreak, a new app developed by one of her students, is designed to compile a homeowner's mitigation efforts into a report that can be shared with insurance brokers.
The panelists advocated for a long-term solution, not just for homes, but for entire communities. "Community-level mitigation is what is going to dramatically change our situation," said Frazier.
However, funding for both individual and community-wide mitigations remains a challenge. Frazier favors property tax assessments, which Barker and C.A.R. oppose. PACE loans, which helped restore Wallace's neighborhood, are widely used in commercial real estate, but cost prohibitive for homeowners.
Hardening efforts cannot be piecemeal, said Frazier. "Science says when you make a suite of improvements, not just one à la carte, that's where the risk reduction comes. That ember is going to exploit every weakness. Once the regulations are changed to say, 'if you want significant discounts, you have to do everything,' you'll see a difference in result."
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