Wildfires and Computers in California

According to the California Insurance Commissioner Ricardo Lara, a revised system for premium determination will become effective on January 2, 2025. Insurance Companies that sell Property Coverage will be basing the premium charged on the information provided by their computers (also known as AI) that will analyze weather and location facts.

To understand the implications of this new decision the following information was provided by The National Institute of Biomedical Imaging:

“Computational modeling is the use of computers to simulate and study complex systems using mathematics, physics, and computer science. A computational model contains numerous variables that characterize the system being studied. Simulation is done by adjusting the variables alone or in combination and observing the outcomes. Computer modeling allows scientists to conduct thousands of simulated experiments by computer. The thousands of computer experiments identify the handful of laboratory experiments that are most likely to solve the problem being studied.”

Under these new regulations, Insurance companies will be able to use computer modeling with input from a range of meteorological and geographical data when writing their premiums rather than simply relying on historical losses. In exchange, they will be expected to offer coverage to most homes situated in fire-risk zip codes.

This latest information has not been met with complete approval by Consumer specialists, as we have a quote from Carmen Balber of Consumer Watchdog, who stated the following:

"Full transparency is what keeps insurance rates honest, but Commissioner Lara's rule does away with that protection. The rule will let insurance companies raise rates based on secret algorithms but not expand coverage as promised."

The new premium determinations will be made by the California Department of Insurance via computer analysis rather than the historical data of a prospective insured.

Artificial Intelligence and the Problems to come.

Having spent most of my working life as an analyzer of Property Coverage, when coverage was applied to a property loss, I believe the best job that could be done was done. At the present time a serious fire is burning through sections of Malibu, California, and I know that it will take more than a computer program to ensure that the residents who have damage will be able to have an affordable policy in effect for when the next fire occurs. I believe the problems that have led to the Malibu fire as well as others in California, are not going to be solved with a Department of Insurance computer program.

Just three of the issues that need examination and immediate action I believe are the following:

A. Allow Property Insurance Companies the right to invest premium dollars from their insureds in the businesses that will prove profitable, and not be prohibited from investments by a State Insurance Commissioner.

B. Proper care of forests under the State of California’s control to eliminate excessive debris accumulation that will aid in the destructive nature of fires.

C. Continuing to abide by the principles of premium limits provided by Proposition 103 which was passed by the California voters in 1988; most importantly is the percentage increase controls.

Respectfully Submitted,

Norman Lambe

nwlambe@gmail.com