California Insurance Commissioner Ricardo Lara said this week that insurance companies in the state will soon be allowed to factor in climate risks including wildfires in their insurance rates — if they increase their underwriting in at-risk areas to wean consumers off state-funded coverage.
Reuters reported that in the last year or two, seven of the state’s top 12 insurers have paused or restricted new business, including State Farm and Liberty Mutual, and the government’s Fair Access to Insurance Requirements (FAIR) Plan, intended as an insurer of last resort, has grown to a 3 percent share of California’s market.
“We are at a major crossroads on insurance after multiple years of wildfires and storms intensified by the threat of climate change,” Lara said.
Unlike other states, according to an ABC News report, California does not allow insurance companies to consider current or future risks when setting the rate for an insurance policy. Companies can consider only what’s happened on a property in the past to set the price.
And insurers say that restriction makes it difficult to accurately price the risk.
On Thursday, Lara said California will write new rules to let insurers look to the future when setting their rates. “Modernizing our insurance market is not going to be easy or happen overnight,” he said. “We are in really unchartered territory and we must make difficult choices when the world is changing rapidly.”
The rule change is not all good news — it could mean higher rates for homeowners who have already seen dramatic increases. Eight insurance companies in California have requested increases of at least 20 percent this year, according to the California Department of Insurance.
Harvey Rosenfield, the author of a 1988 ballot proposition that regulates insurance rates, said Lara’s announcement “will dramatically increase homeowner and renter insurance bills by hundreds or even thousands of dollars.”
El comisionado de Seguros de California, Ricardo Lara, dijo esta semana que a las compañías de seguros del estado pronto se les permitirá tener en cuenta los riesgos climáticos, incluidos los incendios forestales, en sus tarifas de seguro, si aumentan su suscripción en áreas de riesgo para que los consumidores dejen de recibir cobertura financiada por el estado.
Reuters informó que en el último año o dos, siete de las 12 principales aseguradoras del estado han detenido o restringido nuevos negocios, incluyendo State Farm y Liberty Mutual, y el Plan de Acceso Justo a los Requisitos de Seguro (FAIR, por sus siglas en inglés) del gobierno, pensado como una aseguradora del último año. resort, ha crecido hasta alcanzar una cuota del 3 por ciento del mercado de California.
Several major insurance companies have stopped accepting California homeowners for new policies because of growing wildfire risks. As the number of fires in the state increases and other factors escalate, insurance companies worry about the risk — and the expense.
In 2022 there were over 5,000 wildfires, according to Cal Fire, that burned about 118,000 acres. Already this year 4,337 fires have burned over 114,560 acres.
Residents in high-risk fire areas or hurricane regions need homeowners’ insurance — and lenders require it. No insurance, no home loan. More people are moving into the interface, costing insurance companies too much to repair and replace houses while battling inflation, said Janet Ruiz with the Insurance Information Institute. Two insurance giants withdrew from California’s home insurance marketplace, explaining that increasing wildfire risk and soaring construction costs have resulted in their decisions to stop writing new policies in the state. State Farm announced last week it would stop accepting applications for all business and personal lines of property and casualty insurance, according to the Associated Press. The company cited inflation, a challenging reinsurance market, and rapidly growing catastrophe exposure.
“We take seriously our responsibility to manage risk,” State Farm said. “It’s necessary to take these actions now to improve the company’s financial strength.”
Unlike heavyweights State Farm and Allstate, which declined to sign new homeowners in the state, AmGUARD and Falls Lake will also drop their existing policyholders.
Allstate, another insurance powerhouse, announced in November it would pause new policies for homeowners, condos and commercial properties in California to protect current customers.
Homeowners may have to turn to the California FAIR Plan, which provides basic fire coverage, if they aren’t able to find an insurer that will cover fire expenses. The high-risk pool known as the FAIR Plan is not a government entity or a state program. Taxpayers do not fund the FAIR Plan — it’s supported by all carriers licensed to do business in California, which spreads the risk among all the insurance carriers. Because the FAIR Plan is a high-risk policy, people should expect to pay more than they would for a standard homeowner policy.
The San Francisco Standard reported last week that two more companies quietly left the California market, further narrowing options for those trying to insure their home or purchase one with a mortgage.
AmGUARD Insurance — a subsidiary of Berkshire Hathaway GUARD Insurance Companies — will withdraw its homeowners and personal umbrella programs, and Falls Lake Insurance will also end its homeowners program. Both companies made the announcements July 21 in little-noticed filings submitted to the state regulator. AmGUARD and Falls Lake are the latest insurers to end or limit their business in the state during the past year.
Unlike heavyweights State Farm and Allstate, which declined to sign new homeowners in the state, AmGUARD and Falls Lake will also drop their existing policyholders. Safeco plans to drop 950 policies in October in San Francisco and the East Bay.
An SFGATE report noted that State Farm held the most policies in the California property market in 2021, and the company experienced about a 60 percent loss that year.
We were talking with Jennings about the making of the film when the text arrived. He shared the news, and remembered, as a filmmaker and resident of Portland, Oregon, those days of wind, smoke and firestorms, of so many lost homes, and of when the film’s team first saw the footage of sparking power lines that ignited the destructive fires.
The news settled and we turned back to the other topics that he’s been focusing on: the vital dialogues of science, the challenging transitions of policy and funding, and the role of insurance as a potential pivot point to help us face wildfire’s risks to homes.
At the moment we were talking about the film itself, and the continuing conversations that the film prompts.
From initial screenings of the film. Jennings learned that the film sells out in communities where there are effective partnerships working to face wildfire issues. In these communities, Jennings said, the audience may have “a little bit of experience with fire, and they’re curious what to do. They want ideas on how to move forward, they’re feeling vulnerable and concerned. And fire folks are excited about the film too and want to share it. Yet it’s hard for firefighters to say, there’s a limit to what we can do.”
Which is one component of the theme in Elemental. That what we’ve been doing isn’t solving the problems. “We point out the limits to suppression,” though Jennings added that “There’s not a world where we’re not going to fund fire suppression.” And the role that fire professionals play in an ongoing paradigm shift is key. In making the film and during screenings, Jennings observed the “incredible and rare social capital of firefighters” and how their observations of the fire challenge is helping communities change. He was also pleased that the film caught enough of the nuances of fire management and fire science so that it resonated with firefighters (as well as fire survivors and politicians).
The role and voices of firefighters, cultural burners (firelighters), fire scientists, community members and policy makers will all be required in reimagining fire (and all are represented in the film). “We need to change the way we’re thinking about the cultural narrative. When we say the problem is in the forest, it’s not a sufficient answer. The forest is a value at risk, not a solution [to be implemented by logging]. If we can separate fire safety conversations from forest product industry conversations. … if we can separate the conversations more, to let fire safety be its own topic and goal, then the film will be a huge win. And then we can have a more nuanced conversation that takes in the science.”
While suppression will always be a component, Jennings observed that what we fund when it comes to fire and fuels management needs to be focused on the values at risk, often the homes, which may not benefit from a distant forest treatment (and he notes that brush and grass fires, and home-to-home burning, can be as destructive as “forest” fires). Or, for that matter, a logging project packaged as fire safety.
Jennings pointed out that federal fuels management funding is often limited to federal lands, when the dollars would be more effective if they went directly to fire-hardening houses. “In California, the best numbers we can find show that only two of every hundred dollars is spent on the the home. The rest is spent on vegetation management. That’s part of what we help communicate in the film” … including the benefit of focusing on the home ignition zone, building on the work of Jack Cohen, the National Fire Protection Association (NFPA) and the Insurance Institute. of Business and Home Safety (IBHS). And to remember “that in one year we lost more homes in Paradise to fire than were built in California.”
Rebuilding homes is very expensive and fraught with legal and practical issues. “We’ve found ourselves in the insurance space,” Jennings said when the film first began to screen, in part because of ongoing work that Jennings and film producer/editor Sara Quinn are doing for the PBS Terra show “Weathered.”
“It’s the story of what’s going on for so many people rebuilding after fires. A lot of people who got dropped from insurance after a fire, for instance, if their house didn’t burn all the way down. A lot of recovery efforts seem to help those who have time and financial resources.”
And the rates rise. “We talked to someone who paid $1000 total, now their insurance totals $4500. I might spend that money to improve my home, not on insurance.” When it comes to fuels treatment, he said “I think we need to see that where the money goes. Even if it goes to private homes, that is a huge private benefit but everyone is safer if we spend money preparing homes for wildfires. If we cant get out the loop that we can only spend [fuel treatment and preparedness funds] on public lands.”
With some insurers leaving home insurance markets, Jennings wondered if the challenge of identifying the specific cost of wildfire risk, and charging for that through the home insurance process, may be a watershed moment. Again he echoed the ability of the film to reach targeted audiences. With showings to insurance professionals and risk managers he anticipates they may see the value to more clearly identify homes and home clusters that are ready to coexist with fire, and to offer price adjustments for those prepared homes. “We began with FireWise and now the key may be more granular initiatives. Homes are beginning to be counted with the “Wildfire Prepared Home” program being rolled out by IBHS [in a California pilot program], but whether the neighbors are prepared isn’t counted yet. There’s no idea how to model and price the individual risk within a neighborhood.” Though the IBHS program is a key step that may allow homeowners and insurers to rate a home’s wildfire preparedness, which may also mesh with a wildfire risk-rating process by the First Street Foundation along with NFPA’s “Outthink Wildfire” strategy.
Of course, this week’s news and next week’s developments aren’t in the film, but Jennings believes the film is evergreen, in part because of the conversations it prompts (such as those we’ve had with Jennings over the past two months).
There is this and more in the film, of course, including an examination of the role of cultural burning in re-working our relationship with fire. And if our relationship with fire is complex, it is also, as the title reminds us, elemental. As elemental as the reminder that Jennings shared: the key to coexisting with fire begins within the five-foot zone adjacent to the house. “Since the 2008 WUI code, the science around the first five feet has developed a lot. Maybe it’s more important than any single thing.”
UPDATE 06/02/2023 — Allstate and Farmers join State Farm in denying new homeowner policies in California. State Farm quit selling new homeowner policies on Saturday, and now a second major carrier, Allstate Insurance, has confirmed it ended new homeowners’ policies in the state last year. On top of that, ABC-7 News reported that Farmers Insurance is now limiting policies for new customers. All three companies are still serving existing customers, and more than 100 other companies are still issuing new homeowners’ policies, but homeowners across the state will have a tougher time buying coverage.
State Farm will no longer provide home insurance to new California customers because of wildfire risks and increased construction costs. The company quit accepting new applications for business and personal lines and casualty insurance in California, USA TODAY reported.
State Farm said it will still work with the California Department of Insurance and lawmakers and will still serve existing customers.
The Oregonian reported that last year, California became the first state to require insurance premium discounts for those with wildfire protection safeguards at homes or businesses. That change was in response to soaring insurance costs for customers in high-risk areas.
“State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market,” the company said in a statement.
CNN reported that scientists and California officials blame the climate crisis for the intensity of fire seasons. About 25 percent of the state’s forestland burned in the last 10 years — more than triple the previous decade.
The factors behind Illinois-based State Farm’s move are beyond the agency’s control, Michael Soller with the California Department of Insurance said. State Farm, with its affiliates, is the largest provider of auto and home insurance in the U.S.
The Glass Fire has burned over 67,000 acres and 643 residences
The California Department of Forestry and Fire Protection is investigating allegations that an unauthorized backfire was set by private firefighters on the Glass Fire in California’s Wine Country.
ABC7 claims their video shows private firefighters being detained Friday October 2 by officers from CAL FIRE and the CHP.
A backfire or any burning operation can endanger the lives of firefighters and others if it is not carefully planned and coordinated with the fire organization. Fighting a fire in any area, but especially in an urban interface, can be chaotic as hell. Throw in an unauthorized backfire and it can put lives at risk. Many experienced wildland firefighters can tell you stories about a burning operation that meant well, but caught others unaware who had to scramble to escape the unexpected flames.
The tricky part is intermixing the private crews with the existing incident management organization. Some jurisdictions view the insurance company crews as personnel that need to be protected, rather than fellow firefighters engaged in the fire fight. This became very evident during the 2017 Woolsey Fire when CAL FIRE prohibited the private engine crews from accessing their customers’ homes, including mansions in Malibu, California.
First, firefighters that are not part of the incident management structure should not even consider putting fire on the ground unless they are coordinating closely with and have permission from the Division Supervisor or Branch Director.
Private engine crews can be helpful in keeping certain high-value structures from burning during a rapidly spreading wildfire when there are not enough government resources to protect every home. However, if they have no communication with the incident management organization which does not have any knowledge of their location, mission, or capabilities, it can throw a monkey wrench into an already chaotic situation.
CAL FIRE, the U.S. Forest Service, and the other large organizations involved in wildfire suppression need to sit down with the insurance companies and agree on some standard operating procedures. The Incident Management Team needs to know what the private crews are doing and where, and the private crews need to have direct communication with the Team.
One day, when all firefighting resources are carrying equipment that makes it possible to track their location, this will become much easier — and safer.
It will apply for one year after the Governor declared a state of emergency
The California Department of Insurance is invoking a law passed in 2018 that bans insurance companies from dropping or refusing to renew homeowners policies in zip codes within or adjacent to the perimeters of recent fires. This will apply for one year after the Governor declared a state of emergency in October, 2018 and will affect at least 800,000 homes in wildfire disaster areas in Northern and Southern California. The action by Insurance Commissioner Ricardo Lara is the result of Senate Bill 824 that he authored last year while serving as state senator.
In his announcement about the localized ban, the Commissioner went a step further and called on insurance companies to voluntarily cease all non-renewals related to wildfire risk statewide until December 5, 2020.
Many homeowners in California are finding that the premiums on their policies have doubled or tripled in the last two years, and insurance companies in some cases are canceling or refusing to renew policies on residences in areas where wildfires have occurred. California’s property insurers are beginning to retreat from areas they identify as having higher wildfire risk.
Local governments are concerned that this trend could disrupt local real estate markets and cause property values to decline, reducing tax revenue available for vital services to residents such as fire protection, community fire mitigation, law enforcement, road repairs, and hospitals.
The California Department of Insurance has identified some of the zip codes affected by the temporary ban on dropping or refusing to renew homeowners policies. The following fires with the affected zip codes are listed: Saddleridge, Eagle, Kincade, Tick, Getty, Hill, and Maria.
CAL FIRE has not yet provided the fire perimeter maps for the Water, 46, Hillside, Easy, Sky, and Glen Cove Fires, therefore the zip codes near these fires is not yet available.
Opinion: Could this be a tipping point?
I have wondered for years when the insurance companies were going to drastically raise their rates or refuse to issue policies in wildfire-prone areas. I figured that when it occurred it could be a tipping point that could lead to broad positive actions affecting the resiliency of communities at risk from wildfires. Either that, or those areas could experience significant outward migration of residents, causing economic disruption.
Fire-prone communities, if they are going to survive over the long term, have to learn to live with fire. Sticking their heads in the sand and thinking fires can’t happen to them is not recognizing reality.