Wildfire insurance crisis looms for California homeowners

Insurance companies are expected to stop offering coverage in fire-prone areas

Los Angeles /
Sep.September 02, 2020 11:00 AM
Firefighters monitoring California wildfire (Credit: Anda Chu/MediaNews Group/East Bay Times via Getty Images)
Firefighters monitoring California wildfire (Credit: Anda Chu/MediaNews Group/East Bay Times via Getty Images)

Homeowners in fire-prone areas of California may soon find there’s no one to insure their properties.

Last year, the state barred insurance companies from canceling policies on about 800,000 homes in or near areas with a high risk of wildfires. That ban is set to expire soon and there’s no way to renew it, according to the New York Times.

Insurance companies, which have been financially battered by huge payouts in high-risk areas, are expected to continue pulling out of them unless California officials allow them to raise rates.

“The marketplace has largely collapsed” in those high-risk areas, Graham Knaus, executive director of the California State Association of Counties, which has lobbied state lawmakers on the matter, told the Times. “It’s a very large geographic area of the state that is facing this.”

California wildfires have killed seven people, burned more than 1.46 million acres, and destroyed at least 2,800 structures this year alone, according to newswire United Press International.

This spring, state lawmakers drafted a bill that would have allowed insurance companies to incorporate projections on future climate conditions and other data into their rates. They would continue to cover some areas and provide discounts to homeowners who mitigate their risk. The bill died amid disagreements between consumer advocates and insurance companies.

Despite the state’s rule barring insurance companies from pulling out of some parts of the state, there is evidence that homeowners are having trouble finding insurance.

The number of households with coverage from the state’s expensive high-risk insurance program, the FAIR Plan, has increased by over 50 percent in the 18 months between January 2019 and June 2020.

Rates for the FAIR Plan could go up too — the association representing insurers offering the plan wants to raise its rates by 35 percent. [NYT]Dennis Lynch


Related Articles

arrow_forward_ios
A Los Angeles Superior Court judge blocked construction of the 19,000-home planned community in northern L.A. County (Getty, Centennial Tejon Ranch)
Judge blocks 19K-home Tejon Ranch project over environmental risks
Judge blocks 19K-home Tejon Ranch project over environmental risks
Opponents say the restriction will cause an increase in construction costs. (Getty)
LA explores more restrictions on large wood-frame projects
LA explores more restrictions on large wood-frame projects
A photo of the Woolsey Fire in Malibu in November 2018 (Getty)
Slow burn: Homeowners lose zeal to rebuild after wildfire season
Slow burn: Homeowners lose zeal to rebuild after wildfire season
California insurance commissioner Ricardo Lara
California issues wildfire insurance moratorium for 2nd straight year
California issues wildfire insurance moratorium for 2nd straight year
Prominent Prop 19 supporters include Gov. Gavin Newsom (Getty, iStock)
Prop 19: What you should know about the home value reassessment ballot measure
Prop 19: What you should know about the home value reassessment ballot measure
The Silverado Fire in Irvine, CA (Getty)
OC wildfires prompt tens of thousands to evacuate
OC wildfires prompt tens of thousands to evacuate
Gavin Newsom (Credit: Greg Doherty/Patrick McMullan via Getty Images)
Newsom sets goal to conserve 30% of California land and coastal waters
Newsom sets goal to conserve 30% of California land and coastal waters
A home burns during the Complex fire (Credit JOSH EDELSON/AFP via Getty Images):
Wildfires have destroyed 8K structures and burned 4M acres in record-setting year
Wildfires have destroyed 8K structures and burned 4M acres in record-setting year
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...