OAKLAND — Following a historic year of wildfires, property owners in fire-prone areas are finding it increasingly difficult to get affordable insurance — and in some cases, any policies at all.
Several major insurers have stopped writing new policies or renewing plans in the state’s most fire-prone regions, the California Department of Insurance says. Their actions are in many ways understandable: The Wine Country wildfires in October caused an estimated $9 billion in insurance damages.
“Insurers are increasingly using computer models to assess the risk of fires for individual homes and deciding that homes in some areas face too high a risk,” said Insurance Commissioner Dave Jones. “In the wake of last year’s wildfires, we may see more areas of the state where insurers decline to write.”
In the past two years, the state insurance department has seen a sharp increase in complaints, evidence and feedback from consumers, consumer groups and public officials that homeowners insurance in vulnerable areas is “increasingly difficult to obtain and, if available, is unaffordable to many that need it.”
Between 2010 and 2016, the most fire-prone ZIP codes made up more than 60 percent of these complaints, while encompassing just 38 percent of the state population. Non-renewals have gone up over a two-year period, according to a survey of residential property insurers.
The state office found examples of homeowners seeing their annual premiums of $800 to $1,000 jump to $2,500 to $5,000.
In the Oakland hills, residents have seen just that sort of increases, according to resident Sue Piper, who lost her home in the 1991 Oakland hills blaze. Hartford refused to renew one neighbor’s fire insurance in November, Piper said, forcing him to switch to a new carrier that resulted in a $2,000 premium increase.
Piper said another resident’s insurance company is recommending an increase in coverage because rebuilding costs are soaring.
While Oakland hills residents are required to clear vegetation around their homes to reduce fire danger, and receive annual inspections, the report found that most insurers don’t take such mitigation into consideration when underwriting a policy.
“That is my big fear following the back-to-back devastating Northern and Southern California fires, that the insurance companies will have taken such large hits that they will want to pull out of California for a while,” Piper said. “This has tremendous implications. If you can’t obtain fire insurance, you cannot get a mortgage — or you end up having to go to a tertiary insurance company at a very high cost.”
Amy Bach, executive director of United Policyholders, said the recurring issue of affordable insurance after wildfires has been around since her San Francisco advocacy group was formed to address insurance problems encountered by Oakland and Berkeley homeowners who lost their homes in the October 1991 fire.
“We’ve always been able to solve it before but in recent years insurers have started using several different modeling systems that predict the likelihood of an insured home being destroyed,” Bach said.
Bach said the computer models can put the “equivalent of a red letter” on a home, even areas where conditions have not changed.
“People are getting dropped even though their circumstances haven’t changed at all,” Bach said.
Some homeowners are turning to the insurance-of-last-resort, through the state-mandated FAIR Plan that requires insurers to offer policies in risky areas, according to the report. Those policies can be expensive, but often provide scant coverage.
There are about 3.6 million California homes in the so-called wildland-urban interface, populated areas that bear many characteristics of rural wilderness, and of those more than 1 million homes sit in high- or very-high-risk fire areas, according to the report.
The report recommends a series of new laws to ensure property owners can still obtain insurance.
The insurance issues peaked after the 2015 Valley and Butte fires in Lake and Calaveras counties destroyed more than 3,000 structures and caused several fatalities and more than $1 billion in insured damages, the report found.
Last year’s historic wildfire season, including the deadly Wine Country fires in October, destroyed or damaged more than 14,700 homes and 728 businesses, causing more than $9 billion in insured damages and dozens of deaths.
Staff writer David DeBolt contributed to this report.
