Calif Urges Insurers to Expand Coverage in Fire-Risk Areas

State insurance regulators have unveiled a new plan to stabilize the home insurance market by pushing insurers to expand coverage in fire-prone areas where companies have dropped hundreds of thousands of homeowners in recent years.

The plan updates a map of high-risk zip codes where insurers will be required to write more policies, aiming to create a more equitable insurance market despite growing wildfire threats, the San Jose Mercury News reported.

However, many high-risk Bay Area neighborhoods, including Oakland, the Berkeley Hills and Gilroy, aren’t included in the updated map.

State regulators say this is because those areas fall within zip codes where the overall insurance need is deemed lower. Despite this, new rules will still require insurers to offer coverage to homeowners in these areas who have been rejected by traditional providers due to fire risk.

“Insurance companies have ignored those homes, and we’re trying to put the spotlight on them,” Michael Soller, spokesperson for the California Department of Insurance, told the Mercury News.

The plan stems from a deal with the insurance industry, allowing companies to raise rates based on climate-related risks in exchange for expanding coverage in high-risk areas.

Californians currently pay an average of $1,435 annually for homeowners insurance, below the national average. But prices vary widely. And insurers like State Farm and Allstate have stopped issuing new policies in the state, citing strict rate-setting rules and wildfire losses.

The new rules require insurers to cover a proportional share of high-risk policies. For example, if a company covers 100 of every 1,000 policies statewide, it must cover 85 of every 1,000 in high-risk areas.

However, some consumer groups argue the reforms have loopholes that may allow insurers to delay meeting these targets or only slightly increase coverage.

Homeowners in fire-prone areas, like Carolyn Grote of the Berkeley Hills, are preparing independently. Grote formed a “Firewise community” with neighbors to improve fire safety, hoping to retain her insurance.

“If Firewise could help people retain their insurance, that might be the biggest motivator,” she told the newspaper.

Consumer groups are skeptical.

“Insurers can use secret models to raise rates right away with unenforceable promises to expand coverage,” Carmen Balber of nonprofit Consumer Watchdog told the Mercury News.

Regulators, however, insist they will monitor compliance closely and can revoke rate-setting privileges if insurers fail to meet coverage requirements.

— Dana Bartholomew