Cancelled: Insurers Bailing on Fire-Risk Areas

October 31, 2019

This is going to be expensive.

Fox News:

Insurance has become a serious problem in California as wildfires — past and present — wreak havoc on the state.

After last year’s devastating wildfires, insurance companies are balking at fire coverage policy renewals for more than 350,000 residents in high-risk areas.

“We are seeing an increasing trend across California where people at risk of wildfires are being non-renewed by their insurer,” state Insurance Commissioner Ricardo Lara said in a statement.

The California Department of Insurance “has seen cases where homeowners were paying an annual premium of $800-$1,000 but, upon renewal, saw increases to as high as $2,500-$5,000,” a staggering rise of more than 300 percent in most cases.

Plumas News – Quincy, CA:

Graeagle’s fire hall was packed with close to 200 community members on the evening of Sept. 20. Everyone had one thing in mind: How to make sense of the recent spate of refusals and non-renewals by their home insurance companies, triggered by recent wildfires. Many looked worriedly at the cancellation or non-renewal notices they brought with them; many were angry.

Chuck Bowman, the Graeagle Firewise Community coordinator, welcomed Ted Dobbs, a commercial and personal insurance underwriter for 40 years. He’d given this same talk two years prior to an audience of 50, he said, but recent, devastating California fires had insurers bailing out of the market where, as Dobbs put it, “people are living near trees.”

Dobbs comes from the “company side,” and he gave the perspective of someone who made assessing risk a career. He wanted to help people understand what they were up against, and why.

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Insurers were kept from raising their rates by the Dept. of Insurance. Insurers couldn’t continue, at present rates, to insure entire areas which, as the fire in Paradise proved, could go up in flames.

In the meantime, getting out of the business was the safest way for insurers to avoid the possibility of tremendous losses. They were taking entire zip codes out of their portfolio. “Insurance company methodology,” said Dobbs, “is by zip code.”

“Isn’t this redlining?” asked one member of the audience. Dobbs stopped for a moment before he said, essentially, yes.

Redlining, historically used to target minority neighborhoods, draws a red line around an entire area and says the risk to do business there is too high. This, if true, is a frightening prospect for homeowners.

Tahoe Daily Tribune:

Fear and anger were palpable in the room as an estimated crowd of 500 people attended a forum on fire insurance held by Assemblyman Kevin Kiley Thursday night at the Cameron Park Community Center.

Joining Kiley in providing information and answering questions were State Insurance Commissioner Ricardo Lara, El Dorado County Supervisors John Hidahl, Lori Parlin and Shiva Frentzen and staff from Lara’s office.

Reporting that 10 of the 20 most destructive fires in California have occurred in the last four years, Lara noted there has been a 12% increase in non-renewals of insurance policies in El Dorado County with that trend expected to continue in the future.

Going into the specifics of why insurance companies aren’t renewing policies, he noted that more of them are relying on satellite imagery of people’s property to determine if they want to write a policy and that more transparency in the process needs to take place. That way people have a chance to review their risk scores, appeal them and mitigate issues so risk scores can be lowered, he said.

Some new legislation related to insurance was passed in 2018-19, which may help. Senate Bill 824 provides non-renewal protection for all homes in a disaster area, Assembly Bill 38 provides financial assistance to homeowners to help pay to fire-harden a home and Assembly Bill 1816 increases advance notice insurers must give to policy holders of non-renewal to 75 days. Not all the laws are in effect yet.

Lara reminded the audience that the state’s FAIR Plan provides last-ditch insurance for those who can’t get insurance elsewhere. Not a state-funded plan, the FAIR Plan is a pool of all the admitted carriers in the state who pay into it based on the number of policies they have issued. FAIR policies do not cover liability. That requires a separate policy at additional cost.

Lara let people know that more information about the FAIR Plan or other insurance-related questions can be found at insurance.ca.gov or by calling 1 (800) 927-4357.

The idea of providing tax incentives or tax credits to homeowners to harden their homes and make them more fire safe or subsidies for homeowners with disabilities was also discussed by Kiley and Lara. Such changes would require new legislation.

People were also reminded that there are surplus line brokers for homeowners who cannot find coverage with an admitted insurer. That includes companies such as Lloyds of London, Lexington, Scottsdale and Hanover. They are considered non-admitted carriers because they are not regulated by the CDI. They charge more because of the additional risk they assume, although one audience member said some of them may be leaving the market.

Members of the public had a chance to question the speakers, with many describing the ordeal they have faced in finding insurance and the fear they have of losing their homes.

One woman said she might have to walk away from her home because she can’t afford the insurance rate she was quoted and selling her home may not be an option. Even with the FAIR Plan her rate went up 30 percent.

Another in the audience said there is a need to bring more insurance carriers into the market and asked what the county is doing about the problem. They also blamed PG&E for contributing to the problem and advocated for putting electrical lines underground and bringing back the logging industry to help thin out forests.

Kiley said failed policies and no oversight of PG&E have contributed to the problem. He went on to suggest that people consider a higher deductible as one way of reducing the cost of insurance.

A last comment came from a resident who said he is a retired fire chief. He blamed the insurance industry for using the fire-risk ratings without taking into account factors unique to rural areas. He said the county was to blame for approving developments with narrow streets and no fire hydrants. He also claimed that insurance rates are tied in part to local fire protection, saying fire agencies have lost funds to counties who used the money for other purposes.

UPDATE:

8 Responses to “Cancelled: Insurers Bailing on Fire-Risk Areas”


  1. Reblogged this on The Most Revolutionary Act and commented:
    Getting out of the business is the safest way for insurers to avoid the possibility of tremendous losses. They’re taking entire zip codes out of their portfolio.

    • rhymeswithgoalie Says:

      It’s here. Many of us predicted that it wouldn’t sink in for many people until they couldn’t get insurance and/or a mortgage.

  2. Sir Charles Says:

    Land of the free: As Rich Hire Private Firefighters, Housekeepers Go to Work in Fire Zone & Prisoners Fight CA Blazes

    • rhymeswithgoalie Says:

      I’m not sure I’d remember to tell the cleaning service that comes to my house every two weeks not to come in, being distracted about losing my house and all.

  3. rhymeswithgoalie Says:

    [The retired fire chief] said the county was to blame for approving developments with narrow streets and no fire hydrants.

    The question is how the county commissioners rationalized permitting those development$.

  4. dumboldguy Says:

    Saw on the news last night that 100’s of thousands of policies were being cancelled in CA fire-risk zones. Two people said that their last premiums before cancellation were $19,000 and $11,000 a year.

    So, no insurance means no mortgages, and no ability to buy or sell a house (that would have no electricity for extended periods besides). When people finally realize that large parts of CA are likely to become uninhabitable and the ship is sinking, there’s going to be a run on the lifeboats that will leave many behind to drown. Remember the Titanic!

    • rhymeswithgoalie Says:

      Fire- and flood-prone communities will be left with no tax base for adaptation. My advanced psychic abilities predict that the poor will be left behind to suffer.


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