A new policy blueprint for state lawmakers argues that insurers should no longer treat home hardening as a source of optional premium discounts, but instead as a required input into catastrophe models and underwriting systems used to price homeowners insurance.
The recommendation comes in a report released yesterday by Climate Cabinet Education and Public Citizen, which calls on states to require insurers to incorporate household and community mitigation investments directly into catastrophe and wildfire risk models so policyholders receive the full economic benefit of avoided losses rather than leaving those savings with insurers.
The proposal reflects a broader shift underway across insurance markets as regulators increasingly scrutinize how catastrophe models recognize property-level mitigation and whether homeowners actually receive premium reductions that match declining physical risk.
Moving beyond voluntary discounts
The report recommends that states establish mandatory baseline insurance discounts for resilience upgrades such as fortified roofs and wildfire hardening while also requiring insurers to update their catastrophe models to reflect mitigation completed by homeowners and communities.
The authors argue that voluntary discounts have become increasingly common, demonstrating that insurers already recognize the underwriting value of mitigation. However, allowing each carrier to determine discount levels independently creates inconsistent pricing and uncertainty for homeowners considering expensive retrofit investments.
Instead, insurance departments should establish actuarially supported benchmark discounts that serve as a minimum standard while allowing insurers to compete by offering larger reductions.
More fundamentally, the report argues that insurers should be required to recognize mitigation directly within catastrophe and wildfire models.
"Without a requirement to do so," the report says, insurers may continue to overestimate property risk and charge premiums that fail to reflect completed resilience investments.
From engineering improvements to financial assets
Historically, roof fortification or wildfire mitigation has often been treated as an engineering improvement eligible for grant funding or modest insurance discounts.
The report instead frames those investments as measurable reductions in expected loss that should flow through the entire underwriting process—from catastrophe models and pricing algorithms to policy availability.
That approach effectively treats resilience improvements as information that changes modeled risk rather than as optional credits layered onto existing pricing.
For catastrophe model vendors and risk analytics firms, that would increase pressure to capture increasingly granular information about mitigation at both the household and community level.
Colorado provides an early template
The report points to Colorado as the first state to require insurers to incorporate household and community mitigation investments into pricing and underwriting models.
According to the report, seven additional states have since introduced legislation modeled on Colorado's approach, while New Mexico has proposed requiring regulators to establish benchmark discount ranges tied to IBHS resilience standards.
The report also recommends extending insurance non-renewal notice periods beyond 90 days to give homeowners sufficient time to complete resilience upgrades before losing coverage, requiring low-cost resilience endorsements following insured losses, and integrating retrofit grant programs with state FAIR Plans to improve insurance availability in higher-risk markets.
RMN: Catastrophe models become the transmission mechanism
The report’s recommendation also mirrors a central issue in California’s insurance commissioner race.
In separate Risky Science Podcast interviews, candidates Ben Allen and Jane Kim argued that wildfire mitigation must be reflected more consistently in catastrophe models and insurer pricing so homeowners and communities receive measurable insurance benefits from risk-reduction investments.
