California wildfires impact insurance

Years of devastating wildfires across California have resulted in a more restrictive insurance market

Posted: Oct 2, 2020 9:09 AM
Updated: Oct 2, 2020 9:09 AM

CHICO, Calif. – In recent years, California wildfires have been responsible for burning thousands of acres, claiming lives and destroying property.

Action New Now Morning Anchor Julia Yarbough recently discovered, the fires may also be leading to an unraveling of the market for insurance for wildfire coverage.

Several insurance agents Yarbough spoke to, one on-camera for interview and another who did not wish to be identified, said some insurance companies are no longer writing homeowners policies; others are not renewing existing policies.

Yarbough also spoke with an Oroville homeowner, who lost his home to the Camp Fire. Bob Gustafson says at that time, he found it difficult to find homeowners insurance. He worries now about his daughter; in the process of purchasing a home. He recognizes that should insurance carriers pull back on offering coverage; closing on a property could be in danger.

“Well, there have always been wildfires, but they have been mighty up close and personal lately,” says Gustafson.

Two years since losing his home and countless fires since, Gustafson may be the benchmark for what many others are now facing.
"It is definitely a scary and frustrating time for homeowners throughout Northern California or basically all of rural California,” explains insurance agent Jeff Fowler.

He says many homeowners; including many of his clients, are now paying the price for years of devastating wildfires, and he says he is seeing the situation up and down the state – customers paying much for coverage or not being able to secure coverage at all.

A recent California Department of Insurance study shows homeowners in fire impacted zip codes are seeing a 10-percent increase in non-renewals of insurance policies.

Earlier this year, California's insurance commissioner introduced temporary legislation to halt companies from pulling out of the market or raising rates.

"Insurance must be part of the solution,” said Commissioner Ricardo Lara at the time. “Insurance companies must renew their approach to protecting our fire hardened communities."

But since then, the list of fires has just kept growing. This year alone, California has seen more than 81-hundred wildfires, more than 3.8 million acres have burned and more than two dozen lives have been lost.

Those within the industry predict it will all lead to an even tighter insurance market in the coming weeks and months.
It’s a major event that has happened over five years,” explains Fowler. “These insurance companies have lost billions of dollars."

Fowler says carriers which are writing policies are tightening guidelines on what areas are considered high risk. And that impacts homeowners living in more than just heavily wooded or rural areas.

"Defensible space has never been more of an issue right now for keeping your existing insurance carrier,” says Fowler.

When it comes to determining ‘high risk’, Cal Fire also refers to state maps which rank high risk areas through the state. The agency is slated to unveil an updated map next year.

The map shows the topography of the state, marking regions in yellow, orange and red. Yellow equals ‘moderate’ risk, orange indicates ‘high risk’ and red indicates area of ‘very high risk.’

For customers who encounter difficulty securing traditional insurance coverage, many are turning to the California Fair Plan.
Established in the late 1960’s, it is a pool of carriers that offer high-risk customers basic and typically more expensive coverage.
Homeowners must then also purchase supplemental insurance to cover other liabilities.

Given the current state of insurance and a new round of wildfires this season, Yarbough asked Fowler if he was nervous.
“Yes, I’m nervous, as an insurance agent and as a resident of Northern California of how this is going to impact insurance options moving forward.”

Of the insurance agents Yarbough spoke with, they say they do not see any easy solution. They agree, it is best for customers to shop around for coverage. And, they advise to do so early before your current policy is up.

Later this month, the California Department of Insurance and Commissioner Lara is scheduled to hold a virtual hearing on the status of wildfire insurance coverages. That session is scheduled for October 19, 2020.

And, California Governor Gavin Newsom just recently signed legislation aimed at helping wildfire survivors with resources for recovery and looking at options for increased and improved long-term insurance options for those living in high wildfire risks regions of the state.

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