Residential property insurance: Wildfire risk reporting penalties.
The increased penalties under AB 905 are intended to ensure that insurers take fire risk reporting seriously, promoting better compliance. This legislative action reflects California's recognition of wildfire risks and underscores the importance of accurate reporting in managing those risks. Consistent reporting is essential for effective state oversight and potentially for insurance policy pricing that accurately reflects the risks associated with wildfires, benefiting both insurers and consumers.
Assembly Bill No. 905, introduced by Assembly Member Essayli on February 14, 2023, aims to amend Section 929.3 of the Insurance Code by increasing civil penalties for admitted insurers who fail to report specified wildfire risk information. Under current law, insurers with written premiums over $10 million must provide the California Department of Insurance with fire risk data on their residential property policies. The bill proposes to raise the penalty for willful failures to submit these reports from $10,000 to $15,000, thereby strengthening enforcement against non-compliance.
The bill’s progress through the legislature will be closely monitored as stakeholders, including insurers and consumer advocacy groups, weigh in on the implications of stronger penalties. Should AB 905 pass, it will reinforce the state's commitment to managing wildfire risks through more stringent reporting requirements and enforcement mechanisms.
The primary debate surrounding AB 905 focuses on the balance between rigorous oversight by the Department of Insurance and the operational realities of insurance companies. Critics may argue that higher penalties could disproportionately impact smaller insurers who might struggle with compliance due to resource limitations. Proponents contend that the increased penalties are necessary to encourage thorough reporting and to mitigate the risks associated with wildfires that have become more prevalent in California.