Wildfires cause turmoil in CA property insurance market

Wildfires cause turmoil in CA property insurance market

NEW YORK — Kent Michitsch seemed to be running out of traditional options to insure the home he’s lived in for more than 30 years northeast of San Diego as California’s massive property insurance market reels from three consecutive years of destructive wildfires.

Michitsch, 57, has received three non-renewal notices in three years, and says he feared getting a fourth one when his homeowners’ policy comes up for renewal the middle of next year if it wasn’t for California lawmaker’s recent intervention in the market.

“It’s constant worry and frustration. You know you’re covered now, but I might have to look for a new policy next year yet again.” Michitsch says he’s never made a claim on his insurance and never had fire damage.

Thousands of homeowners like Michitsch have lost their insurance policies in the last few years as insurers pull out of areas that are at risk of fire damage or stop insuring homes altogether. They’ve been forced to scramble to find coverage from regular insurance providers or to turn as a last resort to a government sanctioned plan that at the moment only provides fire coverage.

State Farm, the largest in the state, and Allstate and other insurers declined to renew roughly 350,000 policies in areas at high risk for wildfires since 2015 the California Department of Insurance said back in August, and the department has gotten “record numbers” of requests this year from insurers to increase the rates they charge property owners. The data also shows 33,000 policies were not renewed by insurers in zip codes affected by the major wildfires.

While the insurance industry says the California property insurance market is resilient, state lawmakers and officials have had to scramble to keep the market from grinding to a halt from the unexpected additional risk.

The California legislature passed a law earlier this year giving the Department of Insurance emergency powers to keep policies in effect for those in fire-prone areas. This month California Insurance Commissioner Ricardo Lara put a one-year moratorium on non-renewals, in hopes that lawmakers, insurance companies and other stakeholders can reach a more substantial solution for the roughly 1 million homeowners in zip codes adjacent to previous wildfires.

“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,” Lara said in a statement.

The fires of 2017 and 2018 caused a combined $25.3 billion in damages according to the California Department of Insurance. That’s exponentially higher than the previous wildfires in 2015 and 2008, which caused $1.1 billion and $719 million in damages, respectively.

The insurance industry has yet to release an estimate of damages from this year’s wildfire season, but the costs are expected to be high. The most significant wildfire this year was the Kincade fire, which is started October 23 and has burned 78,000 acres in Sonoma county. It destroyed 374 buildings and damaged another 60, according to the California Department of Forestry & Fire Protection.

“The wildfires in California will likely make it more difficult for California homeowners to buy insurance,” Stu Ryland, senior vice-president of the Pacific Region at Sedgwick, an insurance claims management company. “Premiums are likely to go up, particularly in areas that are prone to wildfires and in some cases, it may be difficult for consumers to find an insurer willing to write their insurance.”

While some insurers are pulling out and others are reconsidering how they price property insurance, it is still available in one form or another to every homeowner, according to the Insurance Information Institute.

However, those not insurable by regular insurance providers are having to turn to what’s known as the California FAIR Plan, which is a government-sanctioned association of insurers who pool together to cover the highest risk properties. FAIR Plan insurance currently only covers $1.5 million in damages, although Lara has ordered that starting in April 2020 it will cover $3 million in damages. Currently the FAIR Plan only covers fire, not other forms of risk, but California regulators have announced that FAIR Plan insurers can start doing comprehensive coverage.

Earlier this month, the California FAIR Plan Association sued to block those changes, arguing Lara’s order is illegal.

Karl Susman, owner of Susman Insurance Agency in Los Angeles, says the average annual premium on a homeowner policy plus FAIR to cover fire now costs around $2,500 a year, which is three times higher than it was three years ago.

“These wildfires are not sustainable for these companies. They aren’t going to go bankrupt but they are just going to stop writing policies.”

Susman said he worries that without a longer-term solution the California insurance market will repeat the experience after the 1994 California Northridge earthquake, which caused many insurance carriers to stop offering earthquake insurance. He’s already seen insurance companies limiting their risk to certain zip codes as well.

“I haven’t seen anything like this in the 28 years I’ve been doing this,” he said.

Fortunately, those who still do have insurance have been able to start rebuilding their lives after the fires.

Maggie and Dan London of Santa Rosa lost their home in the massive and fatal Tubbs fire of 2017. They worked quickly after the fire, filing a claim and reaching out to their contractor that same day. But it took them two years to rebuild and move back in.

Like many who tried to rebuild after the fire, they ran into obstacles — higher costs for labour and materials and ongoing talks with their insurer. All the same, Dan London feels his insurance company has done a fair job. And while they bought their home in 1979, he has not seen a sharp jump in insurance costs over time. The cost to insure their new home is slightly more, but Dan felt it reflects the increased value of the property.

“I was expecting something triple, but it’s not at all,” he said.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

As of Friday, Alberta has under 10,000 active COVID-19 cases. (Image courtesy CDC)
Alberta reports 2,271 new COVID-19 cases, Red Deer cases rise slightly

Across Alberta, there are 666 people in hospital with COVID-19, including 146 in the ICU

‘Love, Oran’ is a documentary feature made by Red Deer-raised filmmaker Colin Scheyen. It’s about hidden letters, found in a Woodlea home after 70 years, revealing a family secret. (Screenshot by Advocate staff).
Hidden letters reveal secrets of Red Deer family in a new documentary film

‘Love, Oran,’ by filmmaker Colin Scheyen is showing at Edmonton’s NorthwestFest

Red Deer Rebels' three graduating players, Josh Tarzwell (left), Chris Douglas (middle) and Ethan Anders (right) will all move on to new opportunities next season. (Photo by ROB WALLATOR/Red Deer Rebels)
‘It was a rollercoaster’: Rebels’ graduating players look back on wild season

The nerves. Even three and a half years later, Josh Tarzwell still… Continue reading

Red Deer Mayor Tara Veer addressed the city in a Facebook Live video Wednesday and asked citizens to continue to be diligent in the battle against COVID-19. (Photo by LANA MICHELIN/Advocate staff).
‘It’s affecting us all’: Veer encourages city to come together in response to COVID-19

Red Deer Mayor Tara Veer is gravely concerned about the growing COVID-19… Continue reading

Alberta Health Services locked the Whistle Stop Cafe in Mirror on Wednesday morning after owner Christopher Scott refused to comply with health orders. Photo by Paul Cowley/Advocate staff
UPDATED: AHS shuts down Whistle Stop Cafe for defying health orders

Justice minister promises to get tough with those ignoring public health orders

Deputy Prime Minister and Minister of Finance Chrystia Freeland joins Prime Minister Justin Trudeau as they participate in a virtual discussion from Ottawa on Monday, May 3, 2021, with seniors from Residence Memphremagog in Magog, Quebec. THE CANADIAN PRESS/Sean Kilpatrick
Federal budget ‘overstates’ economic impact of stimulus spending, budget officer says

OTTAWA — Parliament’s spending watchdog says the federal Liberals’ budget overestimates how… Continue reading

A dose of the Pfizer COVID-19 vaccination is prepared at a mobile clinic for members of First Nations and their partners, in Montreal, Friday, April 30, 2021. THE CANADIAN PRESS/Ryan Remiorz
Health Canada maintains getting immunized ASAP with any vaccine offered is best

OTTAWA — Health Canada’s chief medical adviser says her advice has not… Continue reading

FILE - This Sunday, April 10, 2011 picture shows a rig and supply vessel in the Gulf of Mexico, off the cost of Louisiana. Thirteen states sued the Biden administration Wednesday, March 24, 2021 to end a suspension of new oil and gas leases on federal land and water and to reschedule canceled sales of offshore leases in the Gulf of Mexico, Alaska waters and western states. The Republican-leaning states, led by Louisiana Attorney General Jeff Landry, seek a court order ending the moratorium imposed after Democratic President Joe Biden signed executive orders on climate change on Jan. 27.     (AP Photo/Gerald Herbert)
Report finds climate change rarely part of Atlantic Canada’s fisheries management

ST. JOHN’S, N.L. — Climate change is rarely factored into management decisions… Continue reading

Pharmacist Barbara Violo shows off a vile of the Oxford-AstraZeneca COVID-19 vaccine after providing doses to customers at the Junction Chemist, which is a independent pharmacy, during the COVID-19 pandemic in Toronto on Friday, March 12, 2021. THE CANADIAN PRESS/Nathan Denette
New Brunswick reports blood clot death in connection with Oxford-AstraZeneca vaccine

FREDERICTON — New Brunswick health officials on Wednesday reported the province’s first… Continue reading

Avoid mixed messaging with any mix-and-match vaccine plan: CEO

Public health doctors and immunologists in Canada are calling for a wait-and-see… Continue reading

Passengers from New Delhi wait in long lines for transportation to their quarantine hotels at Pearson Airport in Toronto on Friday April 23, 2021. Transport Minister Omar Alghabra says the resumption of international travel requires a coordinated approach for testing and a common platform for recognizing the vaccinated status of travellers. THE CANADIAN PRESS/Frank Gunn
Canada supports ‘common platform’ to recognize vaccine status of travellers: Alghabra

OTTAWA — Transport Minister Omar Alghabra says the resumption of international travel… Continue reading

Toronto FC midfielder Richie Laryea (22) and Vancouver Whitecaps midfielder Caio Alexandre (8) compete for the ball during the second half of an MLS soccer match, Saturday, April 24, 2021, in Orlando, Fla. Unable to dig itself out of a deep first-leg hole, Toronto FC exited the Scotiabank CONCACAF Champions League on Tuesday at the hands of Cruz Azul. THE CANADIAN/AP/Phelan M. Ebenhack
Toronto FC exits CONCACAF Champions League at the hands of Mexico’s Cruz Azul

Mexico to face either MLS champion Columbus Crew SC or Monterrey in the August semifinals

Most Read