State protects insurance policies in fire-risk areas

Companies not renewing coverage ‘needs to stop,’ commissioner says

To see a list of ZIP codes covered by the mandatory moratorium on non-renewal notices, visit the insurance department’s website at INSURANCE.CA.GOV.

owners dropping day als With The in issued wildfire-prone move an complaining their increasing a could one-year fire provide coverage, about areas. number moratorium re- insurance the of California state on non-renew- companies on Thurs- homelief owners perhaps for up across even to 800,000 more the state in the home- and future are declared. as other disaster areas

“I’m hearing the same story again and again,” Insurance Commissioner Ricardo Lara said, speaking outside the Oakland hills home of Sean Coffey, whose insurance company dropped him and forced him to turn to what’s known as the FAIR Plan, a statewide program intended to be a last resort. “This needs to stop.”

In August, the state’s insurance department released data suggesting non-renewals rose by more

than 10% in seven counties across the state after destructive wildfires.

As a consequence, the number of homeowners turning to the FAIR Plan has ballooned in the last few years.

Coffey wouldn’t be covered by the mandatory moratorium, but the insurance commissioner also urged insurance companies to voluntarily stop sending nonrenewal notices to areas at risk of wildfires until December 2020. Lara said he wants company executives, state lawmakers and others to spend the time coming up with a better solution.

“I believe everyone in the state deserves this breathing room,” Lara said.

Coffey hopes companies will agree. When he and his family moved in, they scrambled to find fire coverage before closing on the house. Less than a year later, he got a non-renewal notice and found himself looking for quotes again. Eventually, he was forced into the FAIR Plan, with high costs and limited coverage.

“This is a big budget item for us,” the non-profit worker said.

But the American Property Casualty Insurance Association, which represents insurance companies, objected to Lara’s announcement.

“Limiting the tools insurers use to manage their risk and solvency is not the answer,” Jeremy Merz, vice president for state affairs for the group, said in a statement. “The solutions to reducing California’s wildfire risks are more mitigation and preparedness.”

A few houses down the street from Coffey, his neighbor Larry Cooke hasn’t faced the same challenges. Cooke moved in about 20 years ago and, he said, “We’ve been pretty lucky.”

The decisions companies make about when to issue a non-renewal can feel somewhat arbitrary, Cooke added.

James Gore, who sits on the Sonoma County Board of Supervisors, said the moratorium will help alleviate some of the uncertainty for his constituents who have had their lives upended by wildfires. The Kincade Fire tore through Sonoma County in October, burning more than 77,000 acres and destroying 374 structures.

“We have to be united in doing what’s right by our people,” Gore said.

While his team can’t force insurance companies to comply, the commissioner said he wants lawmakers to pass legislation that would force providers to be more transparent about when and why they drop coverage and require them to continue insuring homeowners who have “hardened” their homes against fire damage by removing flammable landscaping or by other-means.

“There’s definitely a willingness there,” Lara said of legislators in Sacramento. “We’re seeing Republicans and Democrats come together.”

Many of the insurance companies have decided to avoid entire neighborhoods, but the insurance department and consumer advocates would like companies to continue providing at least some coverage so that they all share in the risk without forcing more people onto the FAIR Plan.

Amy Bach, executive director of the consumer advocacy group United Policyholders, said her group “fully supports” Lara’s announcement, adding that the state needs to balance regulating the industry while continuing to promote competition.

“We want to see competition,” Bach said, adding that fire insurance “is not a luxury, it’s a necessity.”

The wildfire insurance crisis, Lara said, has been years in the making and requires a statewide fix to help homeowners already grappling with sky- high housing costs stay afloat. He told the story of one singlemother who lost a home she was trying to buy because fire insurance proved too costly.

Ben Thomas, who moved in near Coffey a year ago, also found himself thrust into a scramble for insurance. His real estate agent had recommended the area because it was safe, the homes were nice and it was close to his job. But fire insurance was “not something you learnabout until you get a home,” said Thomas, who had only dealt with renters insurance in the past.

“None of them would insure us,” Thomas said, noting that he initially got coverage from a company not admitted by the state before eventually finding a traditional insurer that would issue a policy.

In the past, insurance companies havemade good money in California, Lara said. And while they may have been hit hard by the fires, he said, so have residents across the state who have loyally paid insurance premiums only to find nonrenewal notices in their mailboxes.

“We want them to modernize,” Lara said of the companies. “This year is going to be critical.”