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Good morning President Cleaver, Vice President Hill and members of the subcommittee. Thank you for giving me the opportunity to address this committee on an issue of national importance.
United Policyholders (“UP”) is a 501(c)(3) nonprofit organization based in
We help tenants and landlords protect their assets by shopping around and comparing options and not making small claims. We use lessons learned the hard way by underinsured disaster survivors to teach consumers not to just buy the cheapest policy.
But in recent years, we’ve had to focus on wildfire-prone areas to help people find any policy, let alone the best one. In many counties across
Just as insurers have drastically reduced the number of homes they are willing to cover voluntarily by
Together with our hard-working partners – including
As increased wildfire risk leads to insurance non-renewals and price increases, we strive to promote wildfire risk reduction through our Wildfire Risk Reduction and Asset initiative. Protection (WRAP). We support funding and technical assistance programs to help landowners clear brush and branches and meet new standards for home building and defensible space.
One of the most critical things we need to deal with this situation is for insurance companies to reward risk reduction with policy renewals and reduced rates for those who have invested time and effort. money in risk reduction, and whose neighbors do the same. Incentives and rewards are key to getting people on a tight budget to spend money on the equivalent of “infrastructure” repairs.
Why does this happen? Insurers are reacting to climate change forecasts and data by dropping long-time customers and sharply raising premiums. Reinsurers are responding by raising their rates and limiting the amount of catastrophic risks they are willing to reinsure. Insurance regulators do their best to monitor company reserves, assets and solvency. State lawmakers move to strengthen Citizens Property Insurance Corporations in
How did all this happen? The answer lies in an unfortunate confluence of events associated with climate change, an explosion of risk assessment and forecasting models and tools, granular satellite images, risk scores, inflated values for homes and construction, development in WUI1 areas, forest management practices and a lot of nervous investors.
Insurance companies are very sophisticated professional players. They will take risks in exchange for money (bounties) – this is their job, but only to a certain extent. When a drought-induced bark beetle infestation and tree mortality crisis made headlines in
Similar to the factors that made
When it comes to risk modeling technology, some would say the genie is out of the bottle, but we believe reasonable limits should remain in place for scoring models. Unlike traditional pricing based on real events, predictive pricing models are very likely to overestimate risk. When it comes to risk scores, consumers should have the right to understand what went into their home’s score and a process to challenge incorrect information – just as we provide consumers as part of a score credit.
To find solutions to the affordability and availability issues plaguing the property insurance market, consumers and stakeholders, UP looked to history, firefighters, scientists and the people who live and work in areas that insurers avoid.
History: Dozens of homeowners sought UP’s help in the early ’90s after insurance companies failed to renew them following the costly and destructive 1991 Oakland/
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1 The WUI (Wildland Urban Interface) is the transition zone between unoccupied land and human development. It is the line, area or area where structures and other human developments meet or intertwine with undeveloped wild land or plant fuels. https://www.usfa.fema.gov/wui/what-is-the-wui.html
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Fast forward to today, we’re hosting free shopping assistance webinars with proactive expert panels of insurance agents and directing consumers to tools to find an insurer who might be willing to offer them a policy. We are coordinating with community risk reduction programs and resilience experts to get as many people as possible in wildfire-prone communities on board with home hardening and brush clearing.
We don’t expect things to return to normal anytime soon.
While climate change is making it difficult for people in wildfire-prone regions to find affordable insurance for their homes and businesses in wildfire-prone regions, their problems are our problems, and not just these. regions.
Painfully high premiums and drastically reduced insurance options have hit residents of areas prone to hurricanes, hail, floods, tornadoes and derechos hard, and there is a ripple effect on the pain: repercussions include:
* An increase in the number of people abandoning their insurance (“going naked”) or having much less coverage than they need
* A worsening of the financial strain that inflation and stagnating wages are placing on so many households
* Increase in debt when people let their insurance expire and their lender forces expensive coverage
* Higher demands on
* Underinsured mortgage security
The impact of the insurance industry’s waning willingness to sell catastrophe protection for real estate at a reasonable price is not only being felt on home and business owners. Local, state and federal officials and agencies and programs, as well as the banking, real estate and lending industries are feeling the impact as are home and business owners.
In conclusion, we cannot solve this problem here today, but we know the pieces to put in place in the long term:
* Funding and technical assistance for home hardening and defensible space
* Renewal rewards and premium discounts for those who reduce wildfire risk
* Strengthened and well-managed insurers of last resort
* Assistance with residual market property insurance programs similar to the
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