Wildfire risk, realized last year during the Camp Fire, have led insurers to raise premiums by double or more. Photo via CalFire.
If you live in Hanford, Fresno, Madera, Tulare or another community on the Valley floor, you probably saw your home or business insurance rates go up last year and this year.
But if you live in the Sierra foothills, including Oakhurst, Three Rivers, Lemon Cove, Mariposa or Shaver Lake, chances are your insurance rates also increased, but at a much higher rate, or your insurance carrier stopped providing coverage in your area or stopped selling new policies there.
The result is that property owners and renters in rural and foothill areas are having to pay a lot more for their policies — and likely having to contend with higher deductibles — or, they’re looking to find cheaper coverage and likely not finding it, as so few insurers are writing new polices in these areas.
Fill in the gaps
While its not clear how many billions of dollars insurers had to pay out as a result of these fires, Liz Winterton , a personal insurance lines accounts manager for Foster and Parker Insurance, a brokerage in Oakhurst, said, “You have to figure the average homeowner’s claim, even if you have a plain, old, simple home, is going to be about a million dollars by the time you pay out personal property and the home and the loss of use.”
According to a recent report compiled for the state Assembly, “ensured losses through 2017 wiped out the entire underwriting profit insurers earned since 2000,” and that doesn’t include the “enormous” damages and casualty claims they covered in the 2018 fires.
Liability to go around
Then there’s the case of Merced Property & Casualty Co., a small property underwriter that did a lot of business in and near Paradise that was so inundated with claims after the fire that it went under. While no other insurers have folded in the state due to the fires, the incident prompted state Insurance Commissioner Dave Jones to order financial reviews of all insurance companies accredited to operate here to check if they’re managing their exposure to fire claims.
Shrinking the map
Experts note that areas considered high risk for fire cover roughly half of California, with the Sierra and its foothills, along with parts of the Central Coast, comprising much of that geography.
“So not only is it going to be harder to insure your home, and pay more if you can get it, but for your business as well” in these areas, Winterton said. “You are going to be paying more for your business [insurance], and it is getting harder to get.”
Rate increases take work
A California insurance official said that insurance rate hike requests in 2018 and this year have largely been granted, justified by the high amount of insurance payouts from the prior year.
“We’ve never been close to the losses of the last couple of years.”
Requests to CDI for insurance rate hikes have increased since the rash of big fires started, from 25 requests in 2015 to 69 last year, with some of the latest requests made more than once in the year by the same companies.
For the consumer
In some cases, the higher increases are hitting properties in and around cities, mostly for properties in less-developed areas and around parks —- Woodward Park in Fresno among them — with heavy enough vegetation to put them at risk for wildfires.
More than double
Now he’s paying $4,000 a year, partly for a FAIR Plan policy and part for a separate “difference in conditions” policy to cover items not covered by the state-offered product.
Winterton said a home in the local foothills with a $1,400-a-year insurance quote last year might have about a $3,000 yearly rate for coverage under the FAIR Plan, along with a difference and condition policy, but that’s still less than having to pay about $8,000 for a surplus lines plan.
For somebody on a fixed income or raising a family, that jump is going to be unsustainable, said Winterton, adding that Oakhurst and the rural communities around it have high ratios of retirees being hit hard by the higher insurance rates.
While 2019 has brought above-average rain and snowfall to the Sierra so far this year, with fewer triple-digit temperature days than last year, there still are millions of dead and dying trees remaining from the drought years peppering California forests and other wildlands, along with layers of dead, dry brush layering the ground in those areas, potential fuel for any future fires.
What’s in the future?
In fact, in discussing the recent insurance rate hikes, the Assembly report states, “These rates also generally reflect the widely recognized ‘new normal’ of increased wildfire risks in many areas of the state by focusing the price increases in high-risk areas.”
Dority believes lawmakers will have to be involved, while Winterton said California’s insurance commissioner has begun talking with officials in Oakhurst and other high-risk areas, as well as with the insurance industry, to try to help.
In fact, the report to the Assembly members notes there exists sentiment that the legislators must “do something,” though what to do isn’t clear. It goes on to say that possible actions by lawmakers could include raising insurance rates in more urban areas to lower rates for policyholders in high-risk areas, but that would increase the cost of home ownership in low-risk areas. And policies that continue to allow insurers to raise rates in high-risk areas would have the opposite effect, the report continues.
It adds that “it is an unpopular and uncomfortable truth that property insurance costs in California are going to rise, and this is especially true in the [wildland-urban interface].”
It also states the imposing reforms before the insurance market has settled and the full situation can be assessed would be perilous.
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