First-term Washington Insurance Commissioner Patty Kuderer admits she's still learning about the insurance industry eight months after taking over from a six-term incumbent, Mike Kreidler.
On Wednesday night, she visited Spokane to hold a town hall to answer insurance-related questions. Medicare and a tax credit that subsidizes individual health coverage were the headline items. But Kuderer also came prepared to talk about insurance that covers homeowners from natural disasters, including wildfires. That’s a topic that became important to the hundreds of people whose homes were destroyed by the Gray and Oregon Road wildfires in 2023.
SPR's Doug Nadvornick talked with Kuderer before she headed into a session to brief health care leaders about Medicare.
This interview has been lightly edited for length and clarity.
DN: Let's talk about wildfires. It's that time of year for us and it's been a fairly robust year. What are you hearing? Are you getting more and more folks who are calling with questions about wildfire and what coverage should I have?
Patty Kuderer: Actually we get calls from people who've been non-renewed or canceled and a lot of times they're not getting an actual reason for why this is happening. And we're seeing right now small pockets around the state of non-renewals.
This is something that my office is following very closely. Last session, a law was passed that established a work study group to look at wildfire mitigation and a potential grant program. I co-chair that study group along with [Lands] Commissioner [Dave] Upthegrove from [the Department of Natural Resources]. We are going to be looking at what recommendations we can make in order for people to be better prepared for the wildfire risk in our state. I want to reassure people that we are not like California. We still have a fairly robust property casualty market. We'd like to keep it that way.
Right now we have a FAIR plan, which a lot of states have, which is the insurer of last resort. We'd like to keep it that way. We only have about 300 policies on the FAIR plan right now. And what we are seeing statistically is that people stay on maybe 30 to 90 days and then they're able to find alternate coverage. So we are actively working on how we can help people prepare for wildfire.
Here's something that I want your listeners to know, and that is that, again, the federal administration is working to gut FEMA and NOAA and the National Flood Insurance Program. And what that means is that those costs are going to have to be borne by the taxpayers of individual states. Rather than FEMA coming in and helping us fortify our infrastructure, we are now going to have to find the money to do that ourselves. So we're already thinking outside the box how are we going to create a revenue stream for local governments to invest in strengthening and hardening their infrastructure, and especially for perimeter homes in the wildland urban interface area.
DN: What does the market look like for homeowner's insurance, especially folks in those urban interfaces? Is it a robust market? Can people buy policies easily? How have the rates been over the last several years?
PK: Well, the rates have been going up, and it is in direct response to the changes that we're seeing from our climate. Climate change is real, whether the federal administration wants to believe it or not, and the insurance industry has been taking it seriously for a long time, and they have very sophisticated catastrophic models that they look at when they're looking at insuring a home.
And just to give your listeners some history, in the past, insurance companies would look backwards in time at what they had paid out in claims and do an average and submit applications for rates based on that. Now they're looking prospectively, and interestingly, in the Palisades fire in California, six months before that fire hit, State Farm non-renewed about 1,400 policies. They saw something happening there and decided to pull back from the risk.
So when we're working on our mitigation grant program, I want to focus on where we're seeing the pockets of non-renewals right now. The good news is that the insurers do not all have the same definition of what constitutes a wildfire risk, but they all use wildfire risk scores. And this is something that is not really transparent and readily accessible to homeowners, and our office wants to make that more accessible to them.
DN: So when you talk about the pockets that you're referring to, are these areas that the insurance companies feel are especially vulnerable to wildfire, where they might see their exposure to be greater than in other areas?
PK: Yes, that's how they're viewing it, and they're basing that off their catastrophic modeling. And there have been attempts in the past to look at public catastrophic modeling.
Oregon just had a very interesting experience with a public catastrophic map, and I think that we need to be thinking along those lines because I think people need to have this information, but I do think that they need to understand what it's being used for and what it's not being used for.
DN: The state has been much more aggressive the last few years in treating areas, especially DNR land, to try to reduce the wildfire. Does that trickle down then and lead to, I don't know, better rates for folks when the insurance company recognizes there are areas that may be safer than they would have been if the state had not acted?
PK: Yeah, it should. I mean, that seems logical, doesn't it? It doesn't always happen that way, and I think that is something that really troubles consumers. This is why in the previous insurance commissioner administration they passed a transparency rule, which requires in property casualty insurance policies, requires the insurers to give the reasons for why there's been an increase in the rate. That rule has not been fully implemented yet, but we're working toward an end result that I think will be helpful for insurers to know when they get an increase what's the reason behind it.
I also would like to see insurance companies working with us proactively to give insurers information on how they can reduce their risk before they get a renewal so that they can take those steps ahead of time and maintain their insurability. I think it's really important. You're talking about peace of mind for people, and I think it's really critical that they have that information and that it's not siloed with the insurance industry.
DN: I was going to ask you about that. Does your office offer advice to folks who might ask, what can I do on my property in order to be able to lower my rates? And I guess you're saying that the insurance companies haven't told us that yet.
PK: Yeah, they don't really talk about it, but there are things we can look at.
So, for example, the IBHS standards, the wildfire prepared homes standards, we'd like to see those brought to Washington state, especially for perimeter homes in a wildland interface. We think it would be very, very important. I think just educating the public about the dangers of wildfires and how they spread I think is really important.
Same with flooding. A lot of people think that they're going to have flood coverage on their homeowners and they do not. That's through the National Flood Insurance Program. There are private insurers that operate through the National Flood Insurance Program and we don't have a lot of people on that program right now. But it looks like we may need to have more, especially since the grant money we were supposed to get from the federal government hasn't yet arrived and I think it's really important that people know that we no longer have a partner in the federal government. And so resiliency and mitigation on the front end is on the taxpayer, and recovery on the back end will be on the taxpayer as well. I don't think that's fair. I don't think that's right. But that's the consequence of the last election, and it's not a decision that I would ever make, but that's what we're living with, and so we have to be more nimble. We have to be more creative. We have to envision how we can approach these problems differently now, right, especially given we don't have a partner anymore.
