California Insurance Commissioner’s plan for managing climate change risks draws criticism

Burnt house in Alpine
A house burns down in Alpine during a forest fire in July 2018. Courtesy of OnScene.TV

Given a period of rapid climate change, wouldn’t you like to know what the chances are that your home is in the way of a wildfire?

This is a question that most homeowners would like to answer, just like the California insurance industry. To this end, the State Insurance Commissioner formed the Climate Insurance Working Group to “make recommendations to reduce the threat of forest fires, floods, mudslides, high urban heat , sea level rise ”and other impacts of climate change.

But the group’s draft report sparked controversy. Critics argue that the resulting 67-page document strongly favors the insurance industry.

“The report was hijacked,” said Carmen Balber of Consumer Watchdog, a longtime expert in the California insurance industry. She notes that the task force included two insurance industry executives and an industry lobbyist, “but not a single consumer representative.”

Deputy Insurance Commissioner Michael Soller retorts that his boss Ricardo Lara is a member of the task force and that the commissioner is “the main advocate for insurance consumers in the state”.

Balber notes that much of the report focuses on the effects of climate change, something that those inside and outside of the insurance industry can agree on. But there is one key element in the report that worries consumer advocates like Balber. This is how insurance companies will set their rates in the future. How exactly will these rates be determined, she asks?

Under California Proposition 103, transparency is part of the process when insurance companies set rates. Where you live and the materials used to build your home are among the factors used to determine your rate, and consumers have a right to know what those factors are.

But the task force includes a suggestion for how the rates would be set. This is called a “disaster model” – an algorithm that includes a wide range of risk factors. It’s unclear how the factors would be weighed now, and if the task force was successful, it would never be known, Balber said.

If new regulations on the climate crisis were created, the weight given to these factors would remain confidential under the proposal. Only the insurance industry and the third party that created the algorithm would know.

Using Commissioner Lara’s office, the model is just one of many recommendations and Lara will review the model ultimately chosen to ensure it meets her goals of reducing costs and improving access. to insurance coverage for Californians. He did not endorse the model of disaster.

Balber said the group’s findings are “really disappointing.” She fears the industry sees an opportunity “to use the climate crisis as a backdoor around the transparency of Proposition 103”.

JW August is a San Diego-based digital and broadcast journalist.


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