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Wildfires Make It Difficult for Californians to find Insurance

Health

The devastating wildfire season has left California residents, particularly in high-risk areas, with no insurance coverage. Last year, the zip codes affected experienced as much as a 10 percent increase in insurer-initiated non-renewals; whereas in 2017 to 2018, the data shows only a six percent increase of insurer-initiated policy non-renewals in Cal-Fire State Responsibility Areas.

The trend across The Golden State has become one of people not being able to renew their insurance due to the increase of wildfires in the area. Ricardo Lara, currently serving as the 8th Insurance Commissioner of California, expresses his concerns about the local community’s lack of access to insurance and how it can affect the economy locally as well as property taxes and home sales. He believes state and policymakers should consider how the lack of preservation of the insurance market and prevention of wildfires can affect our communities.

Homeowners insurance has also become unavailable throughout the counties most affected by the wildfires. Back in 2015 to 2018, the amount of new and renewed policies for homeowners dropped to 8,700 in the top 10 counties with homes in high risk areas. These counties also experienced a large increase in new FAIR Plan policies during the same time period with a 177 percent growth when compared with the 4 percent increase in counties with the lowest risk. The Fair Access to Insurance Requirements (FAIR) Plan is a mandatory program that provides insurance to homeowners that couldn’t find coverage for being categorized as high risk by insurers.

Approximately 57 percent of new FAIR policies are currently written in State Responsibility Areas (SRA), which is higher than the 47 percent reported back in 2015. According to this data, there has been a 49 percent growth in surplus lines policies in SRA from 2015 to 2018.

This data doesn’t include the full impact of the disastrous 2018 wildfires such as the Camp, Carr and Woolsey/Hill fires when linked to homeowner policies. The full effects carry on to 2019 and possibly beyond. According to recent statistics by Insurance Commissioner Ricardo Lara’s staff, about 340,000 rural homeowners have been denied insurance coverage over the past four years. Last year, nearly 21,848 Californians bought FAIR Plan coverage for the first time. Overall, the cost in high-risk zones and throughout the state is costing 50 percent more.

Commissioner Lara and local leaders continue to pursue ideas to lower the risk through stronger consumer protections and mitigation. He just announced the creation of Department of Insurance Strike Team. The team will be visiting communities affected by the wildfires by connecting residents and assisting the government in responding to any insurance issues that may arise.

Lara also believes that more data is needed to come up with an effective solution. Since carriers aren’t required to tell the state Department of Insurance when they drop a client, there are no detailed records about the growth rates and specific communities that have been most affected by this catastrophe. While Lara’s department doesn’t have the authority to force insurers to report about non-renewals, they are doing everything they can to calculate the overall trends in premiums. Meanwhile, the hardship keeps spreading and thousands of Californians are left with no other option than to seek more expensive coverage.

Insurance issues are a reality for most people across California. In the past two years alone, insurance companies have paid $25 million in claims. With non-renewals on the rise, who knows what the future may hold if the appropriate measures are not taken. Insurance could become practically unaffordable in some areas.

  • Number of New, Renewed and Non-Renewed Homeowners’ Policies
  • Number of New, Renewed and Non-Renewed Residential Dwelling Policies in ZIP Codes Affected by 2015 and 2017 Wildfires
  • Number of New, Renewed and Non-Renewed Residential Dwelling Policies in Moderate to Very High Fire Risk ZIP Codes
  • Fact Sheet: Impact of Wildfires on Insurance Non-Renewals and Availability
  • Commissioner Lara Announces Insurance Strike Team During Meetings with County Leaders
  • CDI wildfire resource page
  • California Department of Finance

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