In­sur­ance climbs for homes in wild ar­eas

Lodi News-Sentinel - - FRONT PAGE - By Michael Finch Ii

At first, Lucy Reynolds was un­nerved by the non-re­newal no­tice from the in­sur­ance com­pany two years ago.

Mort­gaged homes must have cov­er­age so Reynolds and her hus­band needed to find a re­place­ment, quick. She was turned down by her neigh­bor’s car­rier and an in­sur­ance agent spent a week look­ing for ways to cover their ranch-style home in the foothills of El Do­rado County.

They landed with the Hart­ford In­sur­ance Com­pany, only their premium was 17 per­cent higher af­ter re­ceiv­ing a dis­count through AARP.

“When we bought the house we had no trou­ble get­ting in­sur­ance,” Reynolds said. “I’ve heard anec­do­tal sto­ries of peo­ple hav­ing to pay twice as much as they had be­fore so I felt for­tu­nate that we only had a (17 per­cent) in­crease.”

More and more, in­sur­ance com­pa­nies are cast­ing a wary eye on Cal­i­for­ni­ans who live in wild­fire-prone ar­eas, choos­ing not to re­new poli­cies or drop some home­own­ers’ cov­er­age al­to­gether.

Re­searchers have found that as wild­fires be­come less pre­dictable and more po­tent, the in­dus­try that re­lies on spread­ing out risk is in re­treat in some parts of Cal­i­for­nia. Some home­own­ers now buy more ex­pen­sive in­sur­ance prod­ucts that of­fer fewer pro­tec­tions and less cov­er­age in case of a catas­tro­phe.

Con­sumer ad­vo­cates and in­dus­try groups say the state’s prop­erty in­sur­ance mar­ket is not yet in a cri­sis, but the re­cent spate of in­tense wild­fires will por­tend last­ing change. The Camp Fire that burned through the town of Par­adise was only the lat­est in a string of blazes ex­perts say are grow­ing larger, mov­ing faster and caus­ing more de­struc­tion than fires in pre­vi­ous years.

The buildup of foothill com­mu­ni­ties in the last two decades means many now live in harm’s way — and that risk will come with a price.

“I think con­sumers are go­ing to have to get used to pay­ing more for their home­own­ers’ in­sur­ance,” said Amy Bach, ex­ec­u­tive di­rec­tor of the in­sur­ance ad­vo­cacy group United Pol­i­cy­hold­ers.

“The days of your an­nual premium be­ing un­der $1,000 are com­ing to an end here in Cal­i­for­nia. The ques­tion is how much more are they (pre­mi­ums) go­ing to jump.”

Wild­fires are al­ready re­shap­ing the home­own­ers’ in­sur­ance mar­ket. Some in­sur­ance sell­ers have al­ready no­ticed the dif­fer­ence. A half-dozen bro­kers and agents in­ter­viewed by The Bee said find­ing cov­er­age has be­come more chal­leng­ing in the last five years.

“All these ma­jor com­pa­nies started pulling out qui­etly. Peo­ple got non-re­newals; peo­ple got flat-out can­celed. There are com­pa­nies that are still do­ing that to­day,” said Joyce Howard, a bro­ker in Auburn who spe­cial­ized in high-risk prop­er­ties un­til she sold her book of clients in Novem­ber.

If a home­owner is de­nied cov­er­age by an in­surer three times, they can buy fire in­sur­ance through the FAIR Plan — the state’s in­surer of last re­sort. Since 2011, the or­ga­ni­za­tion has seen en­roll­ment fall by 5 per­cent but pol­i­cy­hold­ers in coun­ties that bor­der wild­lands now ac­count for a greater share than be­fore.

Home­own­ers in cer­tain coun­ties have flocked to the state’s in­surer of last re­sort for fire cov­er­age. Con­sumer ad­vo­cates say the shift is trou­bling since those poli­cies of­fer less pro­tec­tion than main­stream in­sur­ers.

In a state-funded study, re­searchers found that be­tween 2007 and 2015, in­sur­ers re­newed fewer poli­cies in ZIP codes in and around the city of San Bernardino and the Sierra foothills of Placer, Nevada and El Do­rado coun­ties.

While in­sur­ers pulled back from the places with a higher con­cen­tra­tion of risky prop­er­ties, the FAIR Plan saw a dis­tinct in­crease in mar­ket share, ac­cord­ing to the study pub­lished by the RAND Cor­po­ra­tion in Septem­ber. FAIR Plan of­fi­cials, when reached, said the in­crease does not pose a chal­lenge and the or­ga­ni­za­tion can ad­just.

“The ques­tion is how fast are pre­mi­ums chang­ing. We’ve found that be­tween 2007 and 2014 the pre­mi­ums in the high­risk ar­eas that we iden­ti­fied rose by about 12 per­cent. The pre­mi­ums in the low-risk ar­eas ac­tu­ally fell by the same amount,” said Lloyd Dixon, a RAND econ­o­mist and co-au­thor of the study.

“You have this sit­u­a­tion where over­all in the low-risk ar­eas of the state pre­mi­ums are ac­tu­ally trend­ing down­ward but you’re see­ing in those high-risk ZIP codes where pre­mi­ums are ac­tu­ally de­creas­ing.”

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