Mercury to seek new home insurance rates using California’s risk modeling system

Mercury Insurance is preparing to file updated home strategy rates in California using a new catastrophic modeling system designed to give property owners a lifeline to more affordable coverage in wildfire-prone areas The company announced it is looking to offer homeowners an alternative to the California Fair Access to Insurance Requirements or FAIR Plan an insurer of last resort The policies rates would apply to anyone who wants Mercury Insurance coverage even in designated wildfire areas So far other insurance providers have yet to announce if they will follow Mercury s lead RELATED California s property insurance apocalypse Specific progress no immediate relief FAIR Plan policies have skyrocketed in up-to-date years after traditional insurers stopped writing new policies while canceling others as wildfire damages mounted As of June the FAIR Plan s total exposure was billion reflecting a increase since September and a increase since September The coverage Mercury will offer is based on a new jeopardy modeling formula adopted last week by the California Department of Insurance As yet no rates are available from Mercury because its filing with CDI hasn t been submitted The modeling formula called the Verisk Wildfire Model was adopted July by the CDI to push more insurance companies to write policies in wildfire-distressed areas The system relies on evidence analytics and application tools designed to help businesses primarily within the insurance industry assess and manage various types of risks It uses wildfire science engineering and atmosphere figures to provide a forward-looking view of danger This closes one of the biggest coverage gaps across the state disclosed CDI Commissioner Ricardo Lara in announcing the Verisk Wildfire Model adoption RELATED New map shows Bay Area locations with highest jeopardy of ember-driven wildfires In coming weeks the CDI expects to consider two other risk-managing programs offered by Karen Clark Co and Moody s RMS for wildfire-distressed areas in order to stimulate underwriting by insurers As of Tuesday July Mercury is the only homeowners insurance provider in California making its way through the approval process to get new rates approved according to Jeff Schroeder Mercury s vice president and chief product officer The rate filing is expected to be submitted to the CDI in the next minimal weeks and could go into effect in the first half of he disclosed CDI spokesman Michael Soller could not promptly confirm this timeline but did say that Mercury s announcement represents a substantial sign of future expansion in the arena On a go-forward basis as we get these rates we are going to be in a position to be profitable writing in those areas That s our goal Schroeder commented The rates he mentioned will vary significantly across different areas and customer types There are different factors that are utilized to price the premium on an individual home including hardening homes in wildfire-prone areas The company s last rate increase in March totaled a little bit more than million or a hike of about in premiums in California according to Schroeder whose company operates in other states The company isn t saying whether the rates are cheaper than FAIR or if they offer more coverage because the rate development hasn t yet been filed It s the goal of the commissioner and the CDI to get more carriers with the right rates in the right areas and give customers another region to utilize as opposed to the FAIR Plan he mentioned We would anticipate that we would be taking customers and hopefully other companies can get in there and do the same that otherwise would go to the FAIR Plan Mercury says it has been carrying its own exposure by underwriting policies in the area of wildfire distressed areas On Jan the same day as the L A wildfires erupted Mercury became the first company to begin writing new homeowners insurance policies in Paradise after it was destroyed by the Camp fire in November The fire burned more than acres and claimed lives Ever since the company commented it s been building a atmosphere science squad to tackle the impact of extreme weather events It in recent times appointed Steve Bennett who previously ran the Institute for Danger Management and Insurance Innovation with the University of North Carolina at Chapel Hill to head up the band A FAIR spokesman declined to speculate on probable impacts the new CDI procedures might have on the insurer of last resort The property insurance area has been reeling after a series of devastating wildfires over the last decade Earlier this year the state s insurer of last resort charged a billion special assessment to private insurance providers after a record number of FAIR Plan suggests were filed For its part Mercury paid million Schroeder announced Multiple insurers either halted or slowed writing policies long before the January wildfires There were residential policies held by the FAIR Plan as of September only four months before the January wildfires in the Pacific Palisades and Altadena areas By June the FAIR Plan recorded policies a increase since the fall and a increase since September when the insurer of last resort held policies according to statistics published by the FAIR Plan Skeptics disagree with Mercury Critics are casting doubt that the CDI s new procedures will slow the pace of FAIR Plan sign-ups What we ll see playing out in the next meager months is that the promise of affordable insurance was false commented Carmen Balber executive director of the Santa Monica-based advocacy group Consumer Watchdog The significance is that there won t be a big dramatic change in insurance the coming day but consumers will continue to see rates rise and access go down She expects a flood of insurance companies to file new ratemaking cases based on the new modeling formula for California s million homeowners in wildfire distressed areas Balber s concern is that the catastrophe models were written behind closed doors and little is known about what variables go into them There s a lack of transparency Balber commented The insurance and pitfall modeling companies don t open up the algorithm for populace or regulatory verification There is a list of things that the model will have to disclose and there also is a bunch of stuff they will not have to disclose We still need reforms in the field that would make sure if you meet all the state fireproofing guidelines then you can buy insurance in California she reported But there s nothing in what the CDI has done that provides homeowners that kind of protection We ve just given the insurance industry new tools to raise rates Related Articles California s property insurance apocalypse Particular progress no immediate relief Opinion Inmate firefighters jeopardy their lives saving California They deserve better pay Day-to-day road safety tools at odds with evacuation times new Berkeley evaluation finds Moss Landing fire Vistra and EPA reach battery cleanup agreement of Californians are concerned home insurance will rise due to atmosphere change Balber couldn t right now say if her organization would challenge in court the Verisk or other risk-modeling formulas In April Consumer Watchdog filed a lawsuit against CDI and Lara to stop potentially hundreds of millions of dollars in surcharges State Farm wants to charge homeowners in order to cover insists from January s fires The suit challenges a plan approved by Lara in that permits insurance companies to pass through costs to policyholders for their share of an assessment issued by the FAIR Plan The January firestorms in the Pacific Palisades and Altadena killed at least people destroyed buildings homes and structures and burned acres