California’s wildfires keep growing bigger, more frequent and more destructive. Of the 20 worst wildfires in state history, four were just last year, giving rise to a record $12.6 billion of insurance claims.
It has not gotten any better this year. The Mendocino Complex fire in August was the biggest in state history and the Camp fire that wiped out the town of Paradise is the deadliest. It had destroyed more than 13,000 homes.
This year’s fires, along with last year’s North Bay wildfires that destroyed more than 5,300 homes in Sonoma County, have put pressure on property insurers. Some have been declining to renew homeowners’ policies in fire-prone areas. When the houses that burned this year are rebuilt, their owners may find that no one is writing insurance there — at least not at affordable prices.
“We’re not in a crisis yet, but all of the trends are in a bad direction,” said Dave Jones, who is completing his eighth and final year as California’s insurance commissioner. “We’re slowly marching toward a world that’s uninsurable.”
Here’s what you need to know about California’s slow-motion insurance crisis.
Who is being wiped out?
Millions of Americans want to live in what experts call the wildland-urban interface — quiet, scenic realms where towns and cities end and forests, grasslands or scrublands begin. For decades, the number of people moving to such places has grown, and today about a third of all American housing stands on the wildland-urban interface. But houses close to vegetation pose complex risks — including the danger of fires.
Of California’s 8 million houses, about 3 million stand on the wildland-urban interface. And of those, 1.7 million are considered highly prone to wildfire. Real estate agents warn homebuyers, but they pay little attention, said Alice Hill, a research fellow at the Hoover Institution who studies climate change and other catastrophic events.
She ignored past warnings herself, she said. When she lived outside Los Angeles, she received a notice from the local fire department saying that her property was at extreme hazard and would not be defended in a wildfire.
“It didn’t change our landscaping,” she said. “We planted trees right next to the house” — a big no-no in fire country.
And when insurance premiums spiral upward, she said, many people try to save money by cutting back on their insurance coverage or dropping it entirely.
“It’s a known risk and people just hope it won’t happen to them,” Hill said.
What is California doing about it?
To protect homeowners from unnecessary rate increases, California requires insurers to justify increases with reams of data showing that their cost of paying claims is rising. And after a catastrophic year, insurers are not allowed to raise rates right away, but must phase in the increase over 20 years.
After last year’s fires, United Policyholders, an advocacy group, heard from homeowners who had received letters from their insurers stating that their coverage would end in 45 days. The group set to work with regulators and lawmakers on a legislative package that would have required insurers to seek state approval before pulling out of high-risk areas, mandated discounts to policyholders who fireproofed their homes and given regulators the power to make sure that insurers’ wildfire models were sound.