Stepping back from danger zones
Between 2011 and 2018, insurers paid about $4 billion annually to cover wildfire losses, but the recent fire seasons have resulted in $26 billion in claims paid to homeowners, UC Berkeley researchers found in a study published last year. More than 1 in 12 California homes are located in high fire danger zones and more than a half-million new homes could be built in these areas under current California rules.
The UC Berkeley study concluded the state should overhaul its policies allowing owners to rebuild their homes after a wildfire.
The Wall Street Journal reported recently that American International Group Inc. and Chubb Ltd. were pulling out of California’s regulated fire insurance market and offering policies in the higher-cost excess-and-surplus lines.
Other insurance companies dropped tens of thousands of California homeowners in rural areas and other fire-prone parts of California following the massive wildfires of 2017-18 in Santa Rosa, Paradise and Ventura County, although that trend has eased somewhat recently.
“We saw increases in non-renewals by insurance companies after the 2017 and 2018 wildfires, but more recently there are some positive signs,” state Deputy Insurance Commissioner Michael Soller said. “In our latest data, non-renewals fell by 10%, meaning approximately 22,000 fewer homes were non-renewed in 2020 compared to 2019.”
Homeowners have been offered discounts for reducing their home’s risk of wildfires through such measures as using noncombustible materials and removing flammable brush and vegetation from around the home.
New state regulations “will require insurance companies to recognize the wildfire safety actions that homeowners take in their pricing,” Soller said. “If you do the hard work of making your home safer, you should see the reward.”
In addition to discount pricing incentives, Soller said California’s “Safer from Wildfires” insurance framework aims to create transparency in insurance companies’ wildfire risk scores used to evaluate risk.
“Most homeowners don’t know there is a score that ranks their risk,” Soller said. “It will require those scores to be available. If you have added a fire-resistant roof or dual pane windows, that score needs to reflect it.”
Soller said he expects the new regulations to be in place this summer. Insurance Commissioner Ricardo Lara also has sponsored legislation to strengthen consumer protections for wildfire survivors and evacuees.
Protections include providing an advance payment of claims without a detailed inventory, at least two weeks of additional living expenses to cover mandatory evacuation costs, increased payouts for a total loss if you choose to relocate rather than rebuild and additional insurance for disaster survivors who chose to rebuild to cover updated building codes.
Soller suggested homebuyers should take a property’s insurance costs into account during the buying process.
Fire survivors can contact the Department of Insurance if they have questions about their policies or about how to file a claim by calling 800-927-4357 or going to bit.ly/calinsurancehelp.