State Insurance Commissioner Dave Jones on Thursday called on the state Legislature to change California law to prevent more homeowners from losing their coverage because of wildfire risk, an issue that has been exacerbated by last year’s North Bay fires.
Jones called for quick action, noting 3.6 million California homes are located in areas identified by insurers as being at high or very high risk of fire. In Sonoma County, 17 percent of dwellings are in high or very high-risk areas, while Mendocino County had 49 percent of its residences in those classifications.
In Lake County, 50 percent of the homes have been identified in areas subject to high or very high fire risk. In 2015, the Valley fire swept through the county, killing four people and burning more than 76,000 acres. In the aftermath of the Valley fire, Jones said his department has received complaints that homeowner insurance is difficult to obtain and unaffordable for many residents. The department noted that insurers did not renew 428 homeowner policies in 2016 for Lake County.
In counties designated with the highest fire risk, his office saw a 15 percent increase in non-renewals by insurers last year, Jones said. Some policyholders, meanwhile, have complained their annual premiums have gone from $800 to $1,000 to as high as $2,500 to $5,000 based on increased fire risk.
“We have a major problem here in California,” Jones said during a Sacramento news conference. “If last year’s fires didn’t teach us we got to do something, then shame on us.”
Sonoma County will likely see more areas being designated as a higher fire risk in the aftermath of the Tubbs fire, Jones noted. The blaze jumped Highway 101 and destroyed more than 1,000 homes in the northwest Santa Rosa neighborhood of Coffey Park — an area previously thought to be at a low risk.
“That’s what I’m concerned about as those models are updated based on the fires that occurred,” Jones said.
The October fires have resulted in about $9 billion in insurance claims in the North Bay, with almost $7.5 billion from Sonoma County losses.
Policyholders whose homes were destroyed in the fires will still be able to renew their coverage for at least one additional year as mandated under state law. Jones noted “there will be some impact” on whether insurers will continue to write policies in areas that were significantly burned during the recent fires.
Carriers are reassessing their appetite for risk in the aftermath of fires, though some may see opportunity for providing coverage, said Mark Sektnan, vice president of the Property Casualty Insurers Association of America. For example, Spinnaker Insurance Co. of Chester, New Jersey, announced last year it would start writing California homeowner policies in high-risk areas for wildfires.
“As some companies move out, some companies will move in,” he said.
Local homeowners should not see a massive price spike in their next renewal, Jones noted, as state law requires that insurers recoup their losses in a major disaster over a period of at least 20 years.
“There will be some rate impact,” he said. “It’s too early to say how much.”
The recent wildfire outbreaks have placed a greater reliance on the state’s nonprofit insurer of last resort, the FAIR plan, which provides structure coverage solely for fire and smoke damage. The FAIR plan had 121,516 homeowner policies in 2016 as a result of a spike from new policyholders who could not obtain insurance elsewhere in high-risk areas.
Jones called for legislation to spur insurers to offer more coverage in high-risk areas if the homeowner makes efforts to mitigate potential damage by wildfire, such as creating a vegetation-free buffer zone around the house. If carriers opt out of such fire coverage, Jones said they should have to offer a policy that would supplement the FAIR plan for such items as theft and liability that are part of an overall homeowner package.
Carriers also should have to obtain state approval for the wildfire modeling they conduct to set premiums and allow for an appeal process if a policy is denied, Jones added.
Jones predicted that he will face some opposition from the industry. “Historically, the industry has fought hard against consumer protection proposed by the state insurance commissioner,” he said.
The industry was withholding comment on the proposals until it reviews bill language, said Sektnan. He added that his companies “stand ready to develop workable solutions that do not disrupt California’s healthy and competitive insurance market.”
You can reach Staff Writer Bill Swindell at 707-521-5223 or firstname.lastname@example.org. On Twitter @BillSwindell.