Oregon's Bill Could Lower Home Insurance Rates through Wildfire Mitigation

A proposed legislative measure in Oregon could lead to property insurance rate reductions for homeowners who adopt wildfire prevention measures. Introduced by Senator Jeff Golden, D-Ashland, this bill draws inspiration from a similar law in Colorado. It addresses the rising property insurance premiums and policy challenges across the industry, especially in regions prone to wildfires.

Wildfire-related risks and reconstruction costs have significantly impacted insurance premiums in Oregon, increasing by over 27% since 2020, according to the Consumer Federation of America. Current regulatory compliance requirements state that insurers must inform policyholders how fire prevention efforts are considered in their underwriting and rating processes. However, carriers are not obliged to offer incentives for these efforts.

Wildfire Risk Mitigation and Insurance Integration

The proposed legislation mandates that insurance companies incorporate wildfire risk models that account for homeowners employing risk mitigation strategies. Dave Jones, former California insurance commissioner, informed Oregon lawmakers that many insurers fail to integrate these homeowner investments into their pricing models, despite significant efforts in home fortification and community-level mitigation.

Senator Golden's proposal requires providers to acknowledge qualified home-hardening and defensible space efforts in accordance with the standards set by the Insurance Institute for Business and Home Safety. Supported by major insurers like State Farm and Farmers Insurance, the State Fire Marshal of Oregon has partnered with the Institute to certify homeowners who pursue specific fire prevention actions, potentially leading to reduced insurance premiums.

Regulatory and Incentive Framework

Under the proposed bill, insurers must submit their rate-setting methodologies to the Oregon Department of Consumer and Business Services, ensuring these proprietary frameworks remain confidential. While the bill does not mandate catastrophic planning models, it compels insurers to offer discounts or other incentives for policyholders adopting recognized wildfire mitigation efforts.

Kenton Brine, president of the Northwest Insurance Council, shared a cautiously optimistic perspective on the legislation. He lauded Oregon's strides in enhancing policyholder rights, such as extended coverage options post-fire. Nonetheless, Brine pointed out the need to clarify the extent of premium adjustments and incentives resulting from specific prevention actions.

Brine's insights reflect a positive outlook on Oregon's insurance market stability. The industry has seen a decrease in non-renewals and cancellations, with premium increases aligning closely with inflation rates. This legislative proposal represents a strategic move towards balancing market stability with comprehensive risk management strategies.

For further inquiries, contact Editor Julia Shumway of the Oregon Capital Chronicle.