State Sen. Ricardo Lara (D-Long Beach) has introduced new legislation aimed at protecting homeowners from getting kicked off their insurance policies in the wake of California’s devastating 2017 wildfire season.
“This is unprecedented for California, and wildfire continues to smolder in Southern California,” Lara said, referencing the now 92 percent contained Thomas Fire. “But Californians already face a new threat, and that threat is of losing their insurance because of wildfire risk.”
The proposed bill, titled The Wildfire Safety and Recovery Act, would prevent insurance companies from dropping customers after a wildfire, require insurers to offer discounts to customers who take steps to protect their homes from fire, and require approval from the California Department of Insurance if insurers want to significantly reduce the number of policies they hold in a geographic area.
Janet Ruiz of the Insurance Information Institute said the insurance industry wants to work with the Legislature to make sure any new laws actually benefit consumers.
“I don’t think that’s really the right way to go about it,” she said of the main provisions in Lara’s bill. “I think it’s more important for insurers to be able to spread their risk and be sure that they can pay claims.”
Ruiz said insurance works best for customers if insurance companies are allowed to compete freely. She said some insurers already offer discount programs for homeowners in Firewise communities. She also said there is a lot of insurance available in California.
However, Lara’s legislation comes just as a new report from the California Department of Insurance shows a 15 percent uptick over 2015-2016 in non-renewals for policyholders who live in areas that are prone to wildfire.
The study also shows that more than 1 million homes in California are at high risk or very high risk of wildfire.
Percent of Housing in High-Risk Fire Zones
Dwelling Unit data is provided by the Department of Finance's Demographic Research Unit. Dwelling units include single family dwellings, condominium units, residential dwelling complexes of 2 to 4, and mobile homes. Data is as of January 1, 2015. Dwelling units exclude residential dwelling complexes of 5 or more units that are normally written under a commercial policy.
The % in High / Very High is a weighted average of the modelers' risk scores.
State Insurance Commissioner Dave Jones said he is especially concerned because these findings are based on risk models created before 2017’s record-breaking fires that have resulted in more than $9.4 billion in insured losses.
The Tubbs Fire alone killed 21 people and burned through 36,000 acres in Sonoma County, a zone that was not considered high risk by the insurance models.
“Entire subdivisions were burned to the ground,” Jones said.
“Thousands of homes in areas that were thought to be at lower risk of fire were completely destroyed by fire. That experience will be used by insurers to update their models, and that will in all likelihood have an impact in those areas where insurance availability has not traditionally been as much of a challenge.”
Ruiz said it is too soon to say what the impact of the 2017 fires will be on insurance risk models and the availability of insurance in California’s high-risk wildfire areas.
“You know at this point we’re kind of lumping them [2017 wildfires] all together and they’re very different terrain,” she said. “So I think it will depend on the actual geographical area.”
Ruiz said any new law needs to take into account insurers’ ability to pay out claims so that insurance companies can effectively help people recover after a disaster.