Oregon's Novel Insurance Bill: Incentivizing Wildfire Prevention in Rates

A proposal by State Senator Jeff Golden from Ashland, Oregon, seeks to reform insurance rate-setting practices by requiring insurers to consider homeowner wildfire prevention efforts. Inspired by a statute in Colorado, the bill addresses escalating insurance premiums and policy nonrenewals in wildfire-prone areas across the U.S. West. Data from the Consumer Federation of America shows a 27% increase in Oregon insurance premiums since 2020, driven by heightened wildfire risk and reconstruction costs.

Regulatory Compliance and Incentives

Currently, Oregon law mandates insurers to inform policyholders about the consideration of wildfire prevention in underwriting and rating processes, but lacks incentives for such efforts. Senator Golden's proposal would compel insurers using catastrophic risk models to factor homeowners' wildfire prevention measures into their premium calculations. This aligns with standards set by the Insurance Institute for Business and Home Safety, ensuring industry-backed evidence supports this legislative move.

Implementation and Industry Response

The Oregon State Fire Marshal has partnered with the Insurance Institute to certify homeowners who adopt wildfire prevention strategies, allowing them to qualify for reduced insurance rates. The proposed legislation requires insurers to submit rate-setting methodologies confidentially to the Oregon Department of Consumer and Business Services. If insurers opt out of using catastrophic planning models, they must still offer discounts or incentives for wildfire mitigation activities.

Kenton Brine, president of the Northwest Insurance Council, acknowledges the state's progress in enhancing policyholder rights. However, he points out the need for clear definitions of premium reductions related to prevention measures. Brine remains cautiously optimistic about the bill's potential to stabilize Oregon's insurance market amid ongoing challenges. In summary, this legislation aims to incorporate homeowner mitigation efforts into insurance pricing, promoting a more stable insurance landscape as wildfires become increasingly prevalent.