California wildfires result in insurance companies dropping homeowners at faster rate

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The growing risk of devastating wildfires in California has resulted in insurance companies dropping tens of thousands of homeowners in the most vulnerable communities, according to date in a new state report.

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The California Department of Insurance said Monday in a report that nonrenewals grew by 55,792 policies, or 31%, to 235,250 in 2019 statewide.

In areas where there is moderate to very high fire risk, the number of nonrenewals jumped even higher to 61%, and 203% in the state's 10 counties with the highest exposure.

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California Insurance Commissioner Ricardo Lara said residents living in wildfire areas have "nightmarish fears of losing everything that is precious," despite taking actions to reduce the risk of their homes and stay insurable.

"The people of California are strong and resilient, but we cannot just continue business as usual," he said during a four-hour "Virtual Homeowners’ Insurance Investigatory Hearing" on Monday.

In this Sept. 27, 2020, file photo, a house burns on Platina Road at the Zogg Fire near Ono, Calif. (AP Photo/Ethan Swope, File)

Insurers began dropping thousands of homeowners after the devastating wildfire seasons in 2017 and 2018 that left them paying out claims of $25 billion, according to the Sacramento Bee.

While insurers did get compensated for about $11 billion in losses by Pacific Gas & Electric Corporation, who was found responsible for the worst of those blazes, industry officials said during Monday's hearing that large swaths of California are almost uninsurable.

Flames lick above vehicles on Highway 162 as the Bear Fire burns in Oroville, Calif., on Wednesday, Sept. 9, 2020. (AP Photo/Noah Berger)

State Farm representative Nicole Forziati said during the hearing the insurance company “must consider limiting growth” if it wants to “maintain financial strength to pay those claims whenever they come, at whatever number they come."

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While the company has not refused to renew existing customers because of wildfire risk, it has stopped selling new policies in some areas of the state.

Those who are dropped by mainstream insurance carriers find themselves having to turn to niche companies or to the state's Fair Plan, which has policies that cover fire and limited smoke damage but exclude other types of coverage in a standard homeowner's policy, according to the San Francisco Chronicle.

A firetruck drives along state Highway 168 while battling the Creek Fire in the Shaver Lake community of Fresno County, Calif., on Monday, Sept. 7, 2020. (AP Photo/Noah Berger)

In 2019 the state said new Fair Plain policies increased by 225%, with most of the growth in areas with higher wildfire risk. Those plans can have rates three to four times higher than what homeowners had been paying.

Colleen Cross, a retired public school teacher, lost coverage when her carrier, Merced Property & Casualty Co., went out of business in December 2018. Cross said during the hearing on Monday she had settled on a Fair Plus Plain, which ended up raising her premium from $1,500 with Merced to more than $4,800. It then was at $6,300 when her renewal notice came.

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“In a blink, my insurance went from $1,500 per year to over $4,800, more than triple what I was paying previously,” Cross shared about her experience following the 2018 Camp Fire in Paradise. “I hoped fire mitigation efforts would help my insurance rate when it came time to renew, but my agent said they just go by ZIP Code and fire risk zones. I continue to work on wildfire clearing but with no incentive from my insurance provider, it is discouraging.”

Flames consume a cabin at the Nichelini Family Winery in unincorporated Napa County as the Hennessey Fire burns on Tuesday, Aug. 18, 2020. (AP Photo/Noah Berger)

Earlier this year, Lara introduced AB 2376, a bill that would require insurance companies to write coverage in wildfire-prone areas if homeowners and communities took steps to "harden" their homes from wildfires. His hearing on Monday focused on how the insurance industry needs to find ways to work with the department, state, and local governments to find ways to keep their insurance and keep the marketplace competitive.

Wildfires across the state so far in 2020 have burned over 4 million acres, a new record.

The state has already seen more than 8,100 wildfires that have killed 31 people, scorched 5,780 square miles, and destroyed more than 7,000 buildings.

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The Associated Press contributed to this report.

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