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SB-1060 Property insurance underwriting: risk models.(2023-2024)



Current Version: 06/18/24 - Amended Assembly

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SB1060:v93#DOCUMENT

Amended  IN  Assembly  June 18, 2024
Amended  IN  Senate  May 16, 2024
Amended  IN  Senate  April 29, 2024
Amended  IN  Senate  April 17, 2024
Amended  IN  Senate  April 04, 2024
Amended  IN  Senate  March 12, 2024

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill
No. 1060

Introduced by Senator Becker
(Principal coauthor: Senator Dodd)

February 08, 2024

An act to add Article 5 (commencing with Section 3000) to Chapter 2 of Part 1 of Division 2 of, and to repeal Section 3002 of, the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


SB 1060, as amended, Becker. Property insurance underwriting: risk models.
Existing law creates the Department of Insurance and prescribes the department’s powers and duties. Existing law generally regulates the business of insurance in the state, including the underwriting and ongoing monitoring of insured risks. Existing law generally requires an insurer or insurance producer to have underwriting guidelines that establish the criteria and process under which an insurer makes its decision to provide or to deny coverage.
If a property insurer uses risk models for underwriting purposes, this bill would authorize the models to account for wildfire risk reduction associated with hazardous fuel reduction, home hardening, defensible space, and fire prevention activities. The bill would require an insurer using risk models for underwriting purposes, as specified, beginning January 15, 2026, and on or before each January 15 thereafter, to provide to the department information necessary to ensure compliance with those risk model requirements, as specified. report to the department the extent to which models used for underwriting purposes account for specified categories of risk mitigation, and other specified information. The bill would require the department to post the information contained in the report, excluding any confidential or proprietary information, on its internet website.
The bill would make related findings and declarations and would state the intent of the Legislature to do specified actions, including ensuring that actions taken to reduce wildfire risks and associated property losses are considered by property insurers in their underwriting evaluations by requiring that any models used for underwriting account for the identified categories of risk mitigation.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 (a) The Legislature finds and declares all of the following:
(1) The risk of catastrophic wildfires is increasing due to climate change and past management practices that have dramatically altered California’s forests and increased the density of trees vulnerable to drought and disease.
(2) Building California’s resilience to catastrophic wildfires means restoring the health of our forests and diverse landscapes across the state and strengthening wildfire preparation within our communities.
(3) It is the policy of the state to encourage science-based, landscape-scale forest management by increasing the pace and scale of hazardous fuel reduction through ecologically based thinning and the use of prescribed fire. The Governor and United States Forest Service established the Agreement for Shared Stewardship of California’s Forest and Rangelands in 2020, calling for 1,000,000 acres per year of forest treatments. Furthermore, the Governor created the Wildfire and Forest Resilience Task Force to bring together an unprecedented coalition of the best available resources for preventing severe wildfires by promoting landscape-scale forest management.
(4) Landscape-scale forest management and hazardous fuel reduction reduce the risk of severe wildfires to homes, properties, and communities in, and adjacent to, the wildland-urban interface (WUI).
(5) The state has made significant investments in hazardous fuel reduction in recent years to support wildfire resilience, forest health, and community safety.
(6) Hazardous fuel reduction can substantially reduce insurers’ average annual losses in, and adjacent to, the WUI and, as a result, reduce the cost of insurance or increase insurance availability, or both, to California consumers because of its ability to reduce catastrophic wildfire risk for homes, businesses, and communities in, and adjacent to, the WUI.
(7) Defensible space and home hardening help protect homes, businesses, and communities during wildfires, reducing the costs of wildfire disasters for property owners, communities, governments, and insurers.
(8) Community wildfire protection plans have been created by more than 550 communities in California and are important ways in which communities can identify and implement fire prevention activities needed to reduce their wildfire risk and losses.
(9) The Insurance Commissioner issued a regulation in 2022 that requires insurance companies to provide discounts to customers who implement wildfire safety measures, including home hardening and defensible space.
(10) Although insurance risk models can account for the wildfire risk reduction benefit of hazardous fuel reduction, home hardening, and defensible space, most risk models used for underwriting by property insurers do not incorporate these risk reduction benefits.
(b) It is the intent of the Legislature to do both of the following:
(1) Ensure that actions taken to reduce wildfire risks and associated property losses are considered by property insurers in their underwriting evaluations by requiring that any models used for underwriting account for the identified categories of risk mitigation.
(2) Retain property insurers’ discretion with regard to the use of those models and all underwriting decisions.

SEC. 2.

 Article 5 (commencing with Section 3000) is added to Chapter 2 of Part 1 of Division 2 of the Insurance Code, to read:
Article  5. Underwriting Risk Models and Hazardous Fuel Reduction, Home Hardening, and Defensible Space

3000.
 As used in this article:
(a) “Defensible space” has the same meaning as defined in Section 51177 of the Government Code.
(b) “Fire prevention activities” has the same meaning as defined in Section 4124 of the Public Resources Code.
(c) “Hazardous fuel reduction” has the same meaning as defined in Section 4464 of the Public Resources Code.
(d) “Home hardening” has the same meaning as defined in Section 4291.5 of the Public Resources Code.

3001.
 If a property insurer uses risk models for underwriting purposes, those models may account for wildfire risk reduction associated with hazardous fuel reduction, home hardening, defensible space, and fire prevention activities for properties, communities, and landscapes.

3002.
 (a) An insurer using risk models for underwriting purposes, as described in Section 3001, shall, beginning January 15, 2026, and on or before each January 15 thereafter, provide report to the department information necessary, as determined by the department, to ensure compliance with the extent to which models used for underwriting purposes account for the categories of risk mitigation identified in Section 3001, including the types and numbers of policy applications and renewals, by ZIP Code, that are evaluated by underwriting models that account for the categories of risk mitigation identified in Section 3001. 3001, and any other information the department deems necessary. The department shall post the information contained in the report, excluding any confidential or proprietary information, on the department’s internet website.
(b) This section shall remain in effect only until January 1, 2036, and as of that date is repealed.