Experts tell Board of Equalization most wildfire-hit homeowners are underinsured; blame point-of-sale algorithms

Vice Chair Lieber convened the Board of Equalization for an informational hearing on wildfire disaster relief and recovery, where experts told the board that a substantial share of homeowners who lost houses to recent wildfires did not have enough insurance to rebuild.

The hearing brought consumer advocates, construction valuation specialists, an academic researcher and insurance professionals to describe why underinsurance persists, how far short typical policies fall and what policy and market remedies the panelists recommend. No formal action was taken during the hearing; board members said they will continue work on the issue.

Two-thirds of wildfire victims shorted on reconstruction costs, experts said. Kenneth R. Klein, Lewis and Hermione Brown Professor of Law at California Western School of Law, summarized Department of Insurance claims data he analyzed: "Over these four years...roughly 6,000 of [losses]...were still [underinsured] — 65% of the time," he said, adding that the average shortfall, including extended replacement cost endorsements, was roughly 35 percent. Klein told the board that demand surge and post‑loss price increases amplify the problem but are not the root cause: instead, algorithms used to produce point‑of‑sale replacement estimates are systematically low. "My research finds that these algorithms are the heart of the problem," he said.

Consumer advocate Amy Bach, executive director and…