California Approves New Rules to Address Home Insurance Crisis in Fire-Prone Areas

The regulations allow insurers to use advanced wildfire risk models and mandate expanded coverage in high-risk regions starting January 2025.

California's Department of Insurance has approved regulations enabling insurers to use computer models to assess wildfire risks when setting rates, moving beyond reliance on historical loss data.
The new rules require insurers to provide coverage for 85% of homes in wildfire-prone areas, tied to their statewide market share, to stabilize insurance availability.
Homeowners' mitigation efforts, such as fireproofing measures, must be factored into the models, with state oversight to ensure accuracy and fairness.
Consumer advocates have raised concerns about potential rate hikes and lack of transparency in the proprietary risk models used by insurers.
The reforms are part of Insurance Commissioner Ricardo Lara's Sustainable Insurance Strategy, aimed at tackling California's growing insurance challenges due to climate change and increasing wildfire risks.