Wildfire has become a constant refrain for many U.S. residents, particularly those in the western half of the country. No state has had it worse, however, than California. Golden State residents have faced numerous evacuations over the years, and those who have kept their homes in tact are facing a new challenge: proper insurance policies.
Insurers have been pulling out of the homeowners insurance space in California for years. As a result, many residents are forced to look for new coverage each year even if they have never filed a claim before. The potential risk is becoming too much for most insurers in the area.
According to the California Department of Insurance, State Farm, Allstate and other insurers in the area collectively did not renew over 350,000 policies in areas of wildfire risk. The department has reported record numbers of insurer requests to increase the rates of the homeowners policies that they were willing to keep.
In an effort to help residents keep some sort of coverage the California legislature passed a law that gives the California Department of Insurance emergency powers to force policies to stay in effect. California Insurance Commissioner Ricardo Lara decided to enact a one-year moratorium on non-renewals in the hope that a solution is reached during that time.
Lara released a statement about the situation, saying that “This wildfire insurance crisis has been years in the making, but it is an emergency we must deal with now if we are going to keep the California dream of home ownership from becoming the California nightmare, as an increasing number of homeowners struggle to find coverage.”
The reality is that wildfires are only going to become more prevalent and more dangerous. The CA fires 2015 caused $1.1 billion of damages. The fires of 2017 and 2018 cost a combined $25.3 billion in damages. The costs are only going to grow. As a result, insurers who operate in wildfire-prone areas are going to have to stop writing policies.
Many residents do not want to leave California, but they understand the necessity of a proper homeowners policy. Since mother nature has no sympathy, the insurance industry itself is going to have to adapt.