Almost a year to the day after she moved out of the deadly CZU Lightning Complex fire in August 2020, Judy Osborn learned that her home insurance company had canceled.
His two-bedroom home in the Santa Cruz Mountains became too dangerous to cover, a service provider explained, and Osborn was left to find a new plan in the middle of fire season.
“It was like adding insult to injury,” Osborn said. “It brought back a lot of memories and a lot of fear.”
Following a series of devastating and deadly wildfires in 2017 and 2018, insurance companies canceled coverage for tens of thousands of California homeowners as providers withdrew from areas with high fire risk – forcing more homeowners to purchase policies through California. FAIR Plan is a cost-effective, state-of-the-art insurance policy.
Now, heading into what could be the worst of this year’s fire season, many homeowners may soon be at risk of losing their policies.
“It’s that time of year, and we’re going to be back,” said Osborn, who finally found new security for the home he’s lived in since 1985.
To address the growing uncertainty in the insurance market, the government has introduced new fire laws in recent years to lower costs and protect homeowners. But insurance companies have pushed back against the change, saying the government needs to change the way it regulates rates for high-risk fires.
“The risks are increasing, and rates are going to have to go up to keep insurers solvent and active in California,” said Seren Taylor, a legislative representative with the Personal Insurance Federation of California, a trade group.
In 2018, Gov. Former Jerry Brown signed the bill to ban insurance companies prohibiting or refusing to renew the landlord’s code in areas affected by wildfires up to twelve months after the fire. In 2019, California Insurance Commissioner Ricardo Lara issued the order FAIR Plan to expand its coverage beyond fire including liability, theft and other aspects of the homeowner’s policy. Insurance companies, which administer and fund the federally funded FAIR Plan, challenged the law in court.
And later this year, the state’s insurance department is expected to begin requiring providers to offer lower rates to homeowners who burn their homes.
While consumer advocates have welcomed the new rules, some in the insurance industry worry that they could lead to providers reducing their presence in the state.
“If (Commissioner Lara) goes too far, and he already has several times, the insurance companies will just say, ‘We’re leaving California – we’re not going to write the thing,'” said Edan Cassidy, a sales representative. Cassidy Insurance Agency in Scotts Valley near Santa Cruz.
Earlier this year, the top home insurance policies American International Group Inc. and Chubb Ltd. has greatly reduced transmission in California due to recent fire seasons. And this summer, Geico closed all of its brick-and-mortar stores in the state, although company officials said it would continue to offer online policies.
Department of Insurance spokesman Michael Soller said the agency is working with the companies to understand their concerns and opposes the idea that the new rules could push more insurers into the state.
“We have a strong insurance market across the country, even with the wildfires we’ve seen in the last few years,” Soller said.
In 2020, insurers canceled coverage for more than 212,000 properties in California, according to the latest government information. More than 77,000 homeowners could not get private insurance that year and signed up for the FAIR Plan. This was a slight increase from 2019, but more than triple the number of new FAIR Plan policies in 2018.
To solve the problem, insurance companies say they should be allowed to set premiums based on the risk of wildfires caused by weather problems. These companies want to use computer models to predict future fire risk and improve regulatory processes. That could increase premiums, but it could also help insurers write policies for high-risk properties and drop fewer homeowners, insurance companies say.
“We’re dealing with laws that say we can look backwards and we can’t look forwards,” said Taylor, with the Personal Insurance Federation. “That’s what’s missing from the conversation to increase availability.”
The state insurance department – which under a 1988 voter-approved law called Prop. 103 should sign a change in the policies of the insurance companies – currently it requires insurers to determine prices based on past damage. Providers have been able to raise prices in recent years, but argue that it is not enough to protect their risk.
State insurance officials and consumer advocates say changing the policy would allow so-called “example of disaster” can unfairly raise prices for homeowners through vague and discriminatory practices.
“Insurance companies have been saying ‘we have to use algorithms to set insurance rates,'” said Harvey Rosenfield, founder of Consumer Watchdog. “But under Prop. 103, they have to use historical data, which is helpful.”
With no resolution seemingly imminent, this could mean losing plans and rising wages in the coming years.
Sean Murawsky had to buy a FAIR Plan after his insurance stopped covering his home in Boulder Creek following the CZU fire. His annual salary is now about $3,000, nearly three times what he was paying before.
Despite the high cost and the risk of wildfires growing, he has no plans to move his family out of the area.
“I’m not afraid,” he said. “I know there’s a lot of risk, but there’s a lot of risk in many parts of California.”