California Protects Homeowners Not Having Enough Insurance


Californians who live in wildfire-prone areas received temporary relief as the historic wildfire season ends. They can still retain their homeowner’s insurance for one more year.

Since 2015, premiums and non-renewal rates in California’s fire-prone areas have risen dramatically as companies refuse to pay for the damage caused by California’s devastating fires. More than 4 million acres were burned this year, a record that is twice as high as the state’s old modern-day record. Ricardo Lara, Insurance Commissioner, has enacted a moratorium that will allow 2.1 million homeowners living in the area of the blazes, 18 percent of all state policyholders, another year to search for a new insurer or to take steps to reduce fire risk and convince their insurance company to extend their coverage.

According to Lara’s December data, insurers in California dropped 235,274 policies in 2019, a 61% increase over 2018. Sixty-five per cent of these policies were in areas with moderate to high fire danger, while the nonrenewals in the state’s ten most fire-prone counties showed a 203% increase.

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Many of these customers have turned to California’s last resort, the California FAIR Plan. This state-run pool provides fire coverage for customers who are unable to find an insurance company. Last year, enrollments in the FAIR Plan rose 225%.

Lara, then a senator from the state, created a law that required insurers to wait one year before dropping a policyholder who was in an area burned by fire. This is double if the policyholder’s house was damaged.

He used the law to imposition a one year moratorium on nonrenewals in 180 zip code areas that were identified by state fire officials in December as being directly affected by 2019’s fires. This new moratorium will apply to 477 zip codes. It is more than twice the size of the previous one.

Although the 2019 moratorium that covered more than a million Californians will end Dec. 5, 364,000 residents of those areas live in areas that overlap with Thursday’s new moratorium.

According to Michael Soller, spokesperson for Lara, there won’t be an abrupt, large number of people being dropped from their policies Dec. 6. The homeowners covered by insurance companies can cancel their policies at any time. If you have a March 2018 policy, the insurer cannot opt out until December 6.

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The new moratorium is in line with Gov. Gavin Newsom’s emergency declarations on Sept. 6 and Sept. 10 and Sept. 28 protected homeowners in the affected zip codes for one year.

Amy Bach, the founder of the nationalUnited Policyholders, a consumer advocacy group founded in 1991, stated last month in an interview that California’s current conditions for homeowners’ insurance may be the worst.

She said that some Californians living in fire-prone areas are still paying premiums three to four times higher than they did before 2015. Bach stated that while the one-year moratoriums can be helpful, long-term solutions are required to protect homeowners living in areas that haven’t burned in the past year.

Despite the fact that they have done their best to reduce fire risk, many people in these areas are seeing cancellations. They’re too high-risk due to how far California’s fires spread. Bach spoke of Santa Barbara as an example, which was the location of the 2017 Thomas Fire.

She said, “That’s where I would expect insurance companies to have really pulled back.” “Even though the Oakland Hills has not been hit by a wildfire since 1991, I believe it is still an area that some insurers are reluctant to service.”

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Insurers claim that the market in certain fire-prone areas isn’t sustainable. They’re also facing challenges paying back to reinsurers, which are the companies that insure them.

According to state data, homeowners insurance paid $2.01 per $1 of premiums collected in 2017. They paid $1.70 per $1 of premiums in 2018. This added up to $24 billion in claims, with approximately $11 billion being borne by Pacific Gas and Electric.

According to a RAND Corporation report, 2017, the 2017 fires “almost entirely wiped out” California’s industry’s profits between 2001 and 2016, according to last year.

Both the insurance company and Bach, consumer advocates, believe that the best solution is for homeowners to make improvements to their homes to protect them from wildfires.

Lara and Bach backed AB 2367 this year which would have required that insurers renew policies for homeowners who met state-standards of home hardening. However, it was defeated in committee by strong opposition from insurance companies.

Representatives from the insurance industry stated that they believe fire mitigation measures are crucial to solving the problem in the long-term. However, they argue that more science is needed to better determine how specific mitigation measures reduce risk and more flexibility in rate regulation before they can partner in home hardening.

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Janet Ruiz (communications director, Insurance Information Institute), a trade group, said that mitigation is something she was as passionate about as anyone. “We do see homes being saved because we have done mitigation.” “The science is only getting to the point that they can identify what really makes a difference.”

Customers like Jaimi Jansen who lives in Bonny Doon will continue to see rising premiums and risk of nonrenewal.

Jansen moved from Santa Cruz to the area two years ago. Her home’s insurance refused to cover her, and she was dropped by the company she went afterward in March.

She’s now paying 70% more for her third insurance company than she did last year. Jansen is now questioning whether Bonny Doon should be covered under the 2020 moratorium.

She said, “It’s going cause people like me leave the state.” “If we don’t have the means to afford to live here, and our house is destroyed, how can we rebuild? What are we going then?”