Home burns in Alpine
A home burns in Alpine during a wildfire in July 2018. Courtesy OnScene.TV

Given a time of fast-moving climate change, wouldn’t you like to know what the chances are of your house being in the path of a wildfire?

It’s a question most homeowners would like answered and so too would California’s insurance industry. Toward that end, the state insurance commissioner formed the Climate Insurance Working Group to “make recommendations to reduce the threat from wildfires, floods, mudflows, urban high heat, sea-level rise” and other impacts from climate change.

But the group’s draft report has drawn controversy. Critics contend the resulting 67-page document heavily favors the insurance industry.

“The report has been hijacked,” said Consumer Watchdog‘s Carmen Balber, a longtime expert on the insurance industry in California.  She notes that the working group included two insurance industry executives and an industry lobbyist, “but not a single consumer representative.”

Deputy Insurance Commissioner Michael Soller counters saying his boss Ricardo Lara is a member of the working group and the commissioner is “the state’s top insurance consumer advocate.”

Balber notes that much of the report is about the effects of climate change, something that those inside and outside the insurance industry can agree on. But there is one key element in the report that is causing concern for consumer advocates like Balber.  It’s how insurance companies will be setting their rates in the future. How exactly will these rates be determined, she asks?

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

But the working group includes a suggestion to determine how rates would be set. It is called a “catastrophe model” — an algorithm that includes a wide range of risk factors. How the factors would be weighed is unknown now, and if the working group has its way, it would never be known, said Balber.

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

Commissioner Lara’s office aid the model is only one of several recommendations and Lara will review whatever model is finally chosen to make “sure it meets his goals of reducing costs and increasing access to insurance coverage for Californians.” He has not endorsed the catastrophe model.

Balber said these findings of the group are “really disappointing.” She worries the industry sees an opportunity “to use the climate crisis as a back door around Proposition 103 transparency.”

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