California Commissioner Issues Report on Fire Insurance Availability Issues

California Insurance Commissioner Dave Jones in mid-January released a report on the growing problem of homeowners fire insurance availability and affordability in many areas throughout the state.

The report recommends changes in the law that Jones believes the Legislature should enact to address what he sees as a growing problem that he said are likely to get worse as a result of last year’s devastating wildfires.

Wildfires have caused significant insured damage the wildland-urban interface where an estimated 3.6 million California homes are located and more than one million are identified as being at high or very high fire risk, according to the report.

“Californians are facing more severe, more unpredictable and more frequent wildfires,” Jones said in a statement. “Add to the equation, increasing development in areas more vulnerable to fire and you can see why wildfires are now an everyday threat to life and property for Californians.”

The report keys in on late 2017 when wildfires driven by high winds destroyed and damaged more than 21,000 homes in the North Bay and killed 44 people, and then in December when a stubborn high-pressure ridge, record temperatures and Santa Ana winds fueled deadly fires from San Diego and Los Angeles to Ventura and Santa Barbara. The Thomas Fire, which is near full containment, has gone down in history as the state’s largest wildfire, burning more than 280,000 acres in December.

The California Department of Insurance is fielding an increasing number of complaints from policyholders, consumer groups, public officials, and others that homeowners insurance coverage in the wildland-urban interface is increasingly difficult to obtain or is unaffordable for many, according to the report.

“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,” Jones said. “In the wake of last year’s wildfires, we may see more areas of the state where insurers decline to write. The Legislature has given insurers broad latitude to decide whether and where to write fire insurance, therefore we are recommending new laws to improve fire insurance availability.”

Jones directed the department to undertake its own analysis of the scope of the availability and affordability issue and develop proposed solutions to mitigate or solve these problems. This analysis includes a review of consumer complaints and feedback from stakeholders, and also included an analysis of the two major wildfire-risk models.

Mark Sektnan, vice president of state government relations for the Property Casualty Insurers Association of America, issued a statement in response to the report.

“The insurance industry’s first and ongoing priority is helping policyholders recover from the historic wildfires that have burned thousands of homes and charred hundreds of thousands of acres across the state,” Sektnan said. “Insurance is the economic safety net that will finance the rebuilding and recovery of the communities in both Northern and Southern California.”

He noted that PCI is working closely with the governor’s office and the CDI to find solutions and develop tools that make insurance available in higher risk areas.

“We look forward to reviewing Commissioner Jones’ recommendations and working with him and other policymakers to address wildfire safety and recovery efforts, while balancing the need to remain solvent and pay future claims,” Sektnan said. “We stand ready to develop workable solutions that do not disrupt California’s healthy and competitive insurance market which provides consumers with a variety of choices to protect their largest asset, their home.”