Memorial Day weekend means the start of summer vacation, and it also means the start of wildfire season. Many Californians will be “naked.”
Many more places will be only partially covered and cannot afford so-called wraparound protection.
We are talking about home insurance. Hundreds of thousands of Californians are being dumped by property insurance companies because they live in dangerous, fire-prone areas.
“This is one of the biggest challenges facing the state right now,” said new state Senate Leader Mike McGuire (D-Healdsburg), whose largely rural state includes North Coast forests and world-class wineries.
McGuire said that in his area, “insurance is top of mind. You can’t walk into a coffee shop or grocery store and not hear about it. Thousands of insurance companies are not renewing their policies.”
When Californians lose their fire insurance, they have two basic options: go without protection and risk losing what is, to many, their most valuable asset—known as going naked. Or sign up with a last resort insurance company called FAIR Plan.
It’s almost impossible for mortgage holders to get naked because lenders insist that their homes be insured. But for some people who have paid off their mortgage, are retired, living on a fixed income and don’t have a lot of change, it’s attractive.
The FAIR program was developed by the state after the Watts riots and a number of natural disasters in the 1960s prompted insurance company bailouts. It is funded by insurance companies and has about 375,000 policyholders.
But equitable insurance is very costly and often only covers fire, not household contents or liability.
“I don’t know how fair that is. It’s so expensive, it’s ridiculous,” said Jodi Goodenough, who lost fire insurance on her modern home in Placer County’s Sierra Forest.
Ironically, her husband, John, owned an insurance agency, and even though their home had a metal roof and stucco siding, they were unable to obtain traditional insurance. “them [insurers] Don’t care,” Jody said.
Full confession: She is my niece.
In neighboring El Dorado County in the Sierra foothills, then-Placerville Mayor Michael Saragosa lost his home insurance two years ago even though he lived with two fire hydrants and a fire station nearby.
He was stuck with a FAIR policy, which increased his insurance costs by 40%. “I feel very lucky,” he said. “I know people are paying 100 per cent more. Four out of five council members are now on the FAIR programme.
Political connections and inside insurance knowledge were not important.
Santa Rosa Fire Department crews battled the Shady Fire as it spread through homes in Santa Rosa in 2020.
(Kent Nishimura/Los Angeles Times)
Former state insurance commissioner Steve Poizner, who lived in a wooded area of Santa Clara County in Silicon Valley, was fired by his insurance company two years ago.
“I’m the former insurance commissioner of California. If this happened to me, it could happen to you,” Pozner wrote in an op-ed in the Los Angeles Times.
Pozner established a relationship with an out-of-state airline. “The coverage is half and the price is twice as high,” he told me recently. Finally he found a willing California insurance company.
“But now they just informed me that they are not renewing the contract,” Pozner added. “This is a broken system.”
It’s not just broken in California. This is a national crisis. Climate change is an acknowledged culprit as it is thought to be responsible for escalating wildfires, floods, hurricanes, tornadoes…
The New York Times reported this month that insurance companies lost money on home insurance in 18 states last year.
“The result is that insurance companies raise premiums by 50% or more, cut coverage, or simply abandon entire states,” the report reads.
“What’s unique about California is the regulatory system we have in place under Proposition 103,” said Denni Ritter, Western states lobbyist for the American Property Casualty Insurance Association. “Insurers don’t have the ability to adjust rates to absorb the price… “
“In California, for every $1 of premiums paid between 2012 and 2022, insurance companies will pay $1.13 in claims. California’s situation is untenable.”
Proposition 103 is a citizen initiative approved by voters in 1988. It also creates an elected insurance commissioner, who must approve rate increases before they can take effect.
But the insurance industry and current commissioner Ricardo Lara insist approval times are too long — up to a year or more. Proposition 103 promises 60 days. This is Lara’s goal.
“In the 21st century, we are obviously operating under 20th century regulations,” Lara said.
There was a lot of finger-pointing.
“The problem is insurance companies are greedy and they don’t want to insure people without getting as much money from them as possible,” said Jamie Court, president of Consumer Watchdog, which drafted the Proposition 103.
“Our plan is to require insurance companies to insure everyone who fortifies their homes. And the price should be reasonable.
Something like that makes sense.
McGuire, who is considering running for insurance commissioner, has promised legislation this year to give homeowners incentives to fortify their homes to make them more fireproof. Insurers should offer discounts and perhaps government tax credits, he said.
Insurance companies want to be able to predict their future liabilities when setting premiums. Other states allow this. Sounds very logical.
They are also asking for insurance rates to be reimbursed for the cost of claims resulting from natural disasters.
Laura promised to have new regulations in place by the end of the year. This seems too long. He blamed the slowdown on Proposition 103 rules.
Gov. Gavin Newsom is pushing the legislation — at least rhetorically. No action has been taken yet.
“We’re going to have one more fire season. This will be the last summer before the insurance market stabilizes,” predicted Sen. Bill Dodd (D-Napa), whose wine country region was devastated by fires and has been active in Participate in fire prevention legislation.
“Now we have a lot of cases of people being naked without any insurance. More than anyone knows.
There is no good reason for them not to get affordable insurance.
