The Legislature is in the second and final year of the 2023-2024 legislative session. This year, a total of 2,124 bills were introduced by the February 16 bill introduction deadline. Bills are now being heard in their first house policy and fiscal committees. PIFC is tracking dozens of bills that could potentially impact the insurance industry for better or worse.
Wildfire Insurance Underwriting and Modeling Legislation
Wildfire mitigation and forest management remains a top priority, particularly for lawmakers in high fire risk areas. While many bills are focused on risk reduction projects and grant programs, very few have been identified as new threats to the industry. However, there are some exceptions.
SB 1060 (Becker) Property insurance underwriting: risk models – Oppose
SB 1060 requires a property insurer to use risk models for underwriting purposes and ensure the model accounts for numerous wildfire risk reduction activities. The bill also provides new authority for the California Department of Insurance (CDI) to examine underwriting to ensure compliance with that risk model requirement.
SB 1060 undermines the Sustainable Insurance Strategy, which was introduced by the Commissioner, and supported by the Governor, to address the current insurance availability crisis in a thoughtful and comprehensive manner. Further, SB 1060 inappropriately attempts to seize control over insurer underwriting, which will worsen the current insurance availability crisis as it forces more insurers to reconsider their ability to do business in California.
Recently, nearly 100 State Farm agents descended upon the Capitol to meet with lawmakers and discuss the insurance market and bills of concern, such as SB 1060. PIFC staff has also been having ongoing meetings with Senator Becker, committee members and staff to educate policymakers on the problems with the bill. To Senator Becker’s credit, he has been open to hearing the industry’s concerns. However, he believes SB 1060 does not mandate coverage and does not attempt to control insurance underwriting. He believes this bill is complementary to the regulations that will be implemented from the Sustainable Insurance Strategy. Yet, even with recent amendments, the language of the bill is clear, SB 1060 attempts to assert new powers over insurer underwriting and provides authority for CDI to demand unlimited information to ensure compliance.
SB 1060 recently passed out of the Senate Insurance Committee on a 4-2 vote. It will be heard next in the Senate Appropriations Committee.
AB 2416 (Connolly) Residential property insurance: wildfire risk – Oppose
AB 2416 seeks to include noncombustible construction materials included by the Office of the State Fire Marshal on the Building Materials Listing as part of the newly adopted Safer from Wildfire regulations.
However, the Safer from Wildfire regulations are not intended to be a place for listing products approved by the State Fire Marshal – it is supposed to reflect a system of parcel-level mitigation that has been demonstrated by fire science to result in a meaningful reduction in risk and loss that can be actuarially justified.
PIFC is concerned that AB 2416 would open the door for many products that will seek to be added, regardless of their efficacy in reducing wildfire losses, or an insurer’s ability to assess their worth. This will significantly diminish the value of the mitigation regulations and undermine the consistent approach to risk reduction that is critical for success.
Further, we are concerned that any additions to the regulations will result in the current wildfire risk models being subject to a lengthy and complex model review process under the newly proposed CDI Catastrophe Risk Modeling regulations. This will negatively impact an insurer’s ability to use the models and interfere with their capacity to make timely rate filings that increase insurance availability.
AB 2416 passed out of the Assembly Insurance Committee on a 12-2 vote. It will be heard next in the Assembly Appropriations Committee.
Killed Bills
AB 3040 (Boerner) Liability policies: lawsuits – Oppose (Died in Assembly)
The bill expands the definition of what qualifies as a “suit” for a liability policy to include an “order, directive, mandate, requirement, or other regulatory enforcement action or agreement by any federal, state, or local agency” as it relates to environmental contamination.
The bill is sponsored by the Port of San Diego, they have stated that it is intended to revert to insurance business practices in the 1980’s which covered the cost of environmental mitigation and site clean ups.
After extensive discussions with the author’s office and committee members, this bill was pulled from the Assembly Insurance Committee and will not be moving forward this year.
AB 3067 (Gipson). Residential property insurance: firearms – Oppose (Died in Assembly)
AB 3067 creates new obligations on insurers to collect information from policyholders regarding ownership of firearms, and the manner in which any firearms are stored. Insurers would be required to report the information annually to the California Department of Insurance (CDI) and the Legislature.
In order to comply with the requirements of this bill, insures will have to re-program their internal processes and applications. The new administrative burden with no known public policy benefit would come at a time when access to the admitted market is already challenging.
After extensive outreach and education by PIFC staff and stakeholders, AB 3067 was pulled from the Assembly Insurance Committee by the author and will not be moving forward this year.
SB 1229 (Nguyen) Insurance disclosures – Oppose (Died in Senate)
SB 1229 would require a property and casualty insurer to disclose to an applicant or insured when it has used artificial intelligence (AI) to make decisions on, or make decisions that affect, applications and claims review.
This bill would not result in any greater consumer protection and would burden an already struggling market.
After extensive outreach and education to committee members and staff, SB 1229 died in the Senate Insurance Committee.
