Wildfires spark big rise in fire insurance premiums across county

Homeowners experiencing sticker shock



PROTECTING PROPERTY—California’s wildfires are impacting more than the state’s landscape. Insurance companies are instituting higher premiums for homes in fire-prone areas or are dropping coverage altogether for homes deemed to be too high-risk to insure. Acorn file photo

PROTECTING PROPERTY—California’s wildfires are impacting more than the state’s landscape. Insurance companies are instituting higher premiums for homes in fire-prone areas or are dropping coverage altogether for homes deemed to be too high-risk to insure. Acorn file photo

California residents whose homes survived last year’s devastating wildfires are beginning to feel the burn of higher insurance premiums. Even worse, some are losing their insurance completely.

Those fires—including the Woolsey and Hill blazes that tore through Ventura County in November 2018—burned more than 1.8 million acres of land across the state and caused billions of dollars in property damage, according to the National Interagency Fire Center.

Insurance companies took a huge financial hit and, as a result, are raising rates and offering fewer coverage options in high-risk fire areas.

“Premiums are increasing a lot, especially in high-brush areas,” said Desmond Sandlin, a Farmers Insurance agent based in Camarillo. “You are seeing increases anywhere from 10% to 100% based on the area you are in.”

Some of the greatest increases Sandlin said he’s seen are in the Santa Rosa Valley, where homes sit close to fire-prone hillsides and are many miles from the closest fire station.

Other homeowners are losing their coverage altogether. Recent data from the California Department of Insurance shows ZIP codes affected by fires from 2015 to 2017 experienced a 10% increase in policy non-renewals last year. Those numbers are continuing to rise this year as insurance companies try to recoup the $11.4 billion in wildfire-related losses they suffered across the state in 2018.

Last year’s losses came on top of losses from previous years, a cumulative effect that has left insurance companies scrambling to counteract the financial drain.

“Some companies are writing new policies, some are keeping current policies and not writing new (ones), some are non-renewing if they have too much risk in the area,” said Janet Ruiz, director of strategic communications for the Insurance Information Institute, an objective source of analysis on the insurance market.

Insurance alternatives

Homeowners whose insurance policies have been canceled do have options.

Under California law, homeowners are guaranteed insurance through an alternative provider called the Fair Access to Insurance Requirements (FAIR) Plan. The FAIR Plan provides coverage to those living in high-fire risk areas at state-approved rates.

The rates, though, tend to be much higher than traditional insurance because more than half of the policies are provided to individuals who live in areas where the threat of fire is high.

“The California FAIR Plan is a good option for people and they are taking advantage of it. No one has to go uninsured in California,” Ruiz said. “Since it is a high-risk pool, the rates do reflect the wildfire risk and may be higher than what they were paying.”

The FAIR Plan is also less comprehensive than traditional insurance as it only provides fire, lightning and windstorm coverage. Insurance brokers recommend that those who opt for the FAIR Plan also get a second policy, called a Difference in Conditions (DIC) policy, for coverage against water damage, theft and other liabilities.

Ruiz said some homeowners are also taking advantage of Surplus Line Insurance policies, which can be purchased individually from different carriers. Unlike normal insurance, these policies can be bought from carriers that are not licensed in California.

Rate increases

The Insurance Information Institute said companies determine coverage and pricing by assessing the overall risk of a home and the area it is in.

Most look at a combination of factors including topography, availability of fire services and wind, which can carry embers to homes. Some insurers are using new technology such as satellite imagery to determine how near a home is to brush and hillsides.

The rate increases have been a year in the making. The California

Department of Insurance looks at a 20-year history of losses prior to approving rate increase filings. It can take, on average, six months to a year to complete the process, Ruiz said.

To offset the rising premiums, experts are recommending that individuals work with a local broker to find better coverage and “shop around” to find the best deal in their area.

“A lot of my clients are getting sticker-shocked but I’m letting them know that you don’t want to cancel your insurance until you have secured coverage somewhere else at a better rate,” Sandlin said.

Ian Bradley contributed to this article.