Mercury Insurance, a California-based provider of auto and home insurance, has submitted a rate filing for its California Homeowners program, based on the State’s Sustainable Insurance Strategy, to expand coverage in high-risk wildfire zones.
Once approved, this filing could allow the Mercury to grow its footprint in higher wildfire risk areas, where insurance options are currently limited.
The insurer’s new rating plan will provide a vital alternative for Californians in fire-prone areas who have been limited to the California FAIR Plan.
The FAIR Plan has historically been the insurance plan of last resort provided for homeowners living in these high risk areas, offering limited high cost coverage.
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Gabriel Tirador, Mercury’s CEO, said: “Commissioner Lara’s Sustainable Insurance Strategy (SIS) will help stabilize the California homeowner’s insurance market. Our filing is the first step toward Mercury’s goal of expanding insurance options for California homeowners and underscores our 60-year commitment to California customers and agents.
“As other companies scaled back their California operations, Mercury stepped up to provide more options for our agents and customers, and we are committed to continuing our efforts to help protect our California neighbours well into the future.”
Mercury’s new plan aims to provide more comprehensive coverage, eliminating the need for homeowners to purchase additional “Difference in Condition” policies to fill gaps for events like water damage, theft, or personal liability.
The rate filing seeks an overall average rate increase of 6.9%, reflecting increased inflationary cost pressures and exposure related to catastrophic events such as wildfires.
However, this rate increase will not be allocated evenly across all policyholders. Residents in higher risk areas could see larger increases, while customers in lower risk areas could see a decrease in their rates.
To combat increases for customers in higher risk areas, Mercury is implementing a number of discounts that could mitigate the increase while making homes and communities safer.
These discounts will be tied to individual mitigation efforts, such as clearing vegetation, upgrading vents, or using fire-resistant building materials.
The insurer will also offer an additional discount for homeowners living in communities that have taken collective steps to reduce wildfire risk, such as managing surrounding brush, mandating specific home hardening requirements – along with a range of other infrastructural requirements.
“Beyond these discounts – which could save up to a third on the wildfire portion of their premium – FAIR Plan policyholders will be provided with more options for coverage and will not have to consider additional insurance (such as a Difference in Condition policies that cover events other than wildfires, including water damage, personal liability, and theft) to fill the gaps of their FAIR Plan policy,” Mercury concluded.
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