August 5, 2022
  • August 5, 2022

California protects millions of homeowners in fire zones from home insurance denials

By on November 5, 2020 0

In the wake of the worst fire season in California history and a dramatic increase in denials of residential property insurance in fire-risk areas, the state insurance commissioner extended Thursday a moratorium on non-renewals and refusals which he says will affect more than 2 million policies. incumbents, many in the Bay Area.

The areas covered by the moratorium are those in or next to officially declared forest fires that have occurred since the passage of the Wildfire Safety and Recovery Act in 2018. While the law in force protected home insurance holders . whose homes were completely destroyed by fire, the 2018 law extended restrictions to those living in and near fire emergency areas.

Commissioner Ricardo Lara’s directive, authorized by state law, also extends a similar moratorium he issued last year, saying it would protect 364,000 policyholders, many in the hills of East Bay and of North Bay.

Lara’s office published a newsletter that includes a list of postal codes affected by the moratorium, including dozens in and around the massive SCU fire this year in Santa Clara, Alameda, Contra Costa and three other counties, 16 postcodes in and around the devastating CZU complex fire in this year in Santa Cruz and San Mateo counties, as well as with 50 in and around the complex fire in August this year in Northern California and 19 in the recent glass fire in the wine country. Dozens of additional postal codes are subject to the extension of last year’s moratorium.

This year, more than 4 million acres burned statewide, more than double the previous record of 2018.

While the state’s move is good for homeowners in high fire risk areas, it could cause insurers to raise rates in other areas, the prominent insurance industry lobbyist said. , John Norwood. “Insurers will not get an adequate rate,” Norwood said. “It may well force them to restrict coverage and availability in other locations. If they’re stuck on what they can charge and what their real rate is in Auburn or Paradise, is there a way to catch up elsewhere? Is it San Francisco or LA or San Jose or some more urban place? “

Last month, Lara’s office released data showing that non-renewal of insurance companies across the state jumped nearly a third from 2018 to 2019, mostly in areas at risk of highest fire. The number of people turning to the insurance program of last resort known as the FAIR plan has skyrocketed in recent years.

“I have heard your nightmarish fears of losing all that is precious to you despite your heroic efforts to protect your homes, families and communities from wildfires, and the unfathomable frustration you have endured of losing your self-assurance. way – despite all the steps you’ve taken to reduce risk and remain insurable, ”Lara said in a“ virtual investigative hearing ”on Oct. 19.

The commissioner said he would force insurance companies to stop “playing with the system” by calling for rate increases just below the 7% level that triggers public participation. Citing climate change, Lara also said he would use his “authority as a regulator” to create “insurance incentives recognizing home hardening, property mitigation and home mitigation actions. community”.

Norwood said state lawmakers in areas hit by fire this year described plate-sized embers floating for miles to start fires, and that he had personally watched the Glass Fire leap into Napa Valley near Saint Helena.

“The home hardening situation is really clear,” he said. “The individual hardening at home didn’t make much of a difference. Where it is done, it must be done on a community basis.

Norwood acknowledged that insurers are “intimidated” by public reviews of rate increases, a lengthy and costly process required under Proposition 103 of 1988, “said Norwood.

Steve Young, general counsel for independent insurance agents and brokers in California, hailed the moratorium as a “time out” for non-renewals, but called it “a band-aid on a gaping gunshot wound.”

“The home insurance market is in a very serious state of dysfunction right now, with insurance companies not writing new policies in certain areas at all costs and not wanting to renew policies where they are. they can because the risk of loss is so great, ”Young said. noted.

Historically, property insurance in California was a predictable gold mine for insurers, but global warming, neglected management of forests by federal and state governments, and the rapid development of communities in forested areas have ended. to that, with billions of dollars in claims to get paid, Young said. “Insured losses are exponentially higher than anything risk models have ever assumed or calculated before,” he said.