California’s fire and fire-related damage costs have been astronomical in recent years. While the sunshine state has never been on any top ten most affordable living lists, the more than 6,000 wildfires of 2018 have driven the cost of living problem to record highs. Unfortunately, the response by insurance companies has been to raise the price of new homeowner’s insurance policies and to refuse to renew existing ones. And, theses increasing insurance premiums impact California homebuying potential.
2017 saw a record 5,700+ wildfires, an all-time record. The wildfires of 2018 beat that number handily, and 2019 is not expected to be any better.
What Does this Mean for the Future of CA Home Insurance?
According to Byron Tucker, California’s deputy insurance commissioner, “Years of drought, millions of dead trees and charred grassland have fueled four consecutive years of destructive wildfires. This includes the deadliest, most expensive spate of wildfires in our state’s history. This has taken a serious toll on homeowners insurance prices in California.”
A drought and temperatures report released by the Trump Administration in 2018 claims the lengths and heat extremes of the state’s dry seasons are expected to increase over the next few years.
According to the Wall Street Journal, the policy count for legacy insurance providers like Allstate has been reduced by as much as 50% over the last decade. Tucker explains, “We expect that for homeowners in any area who present a high risk of wildfire loss to insurers, there will be fewer coverage options. Insurance will become more expensive and harder to get. We noted an increase in policy non-renewals in high-risk areas and we are monitoring the situation.”
Do Other Insurance Options Exist?
California has a public insurance option called the FAIR Plan, but it is expensive and has few options. Some homeowners have turned to surplus insurance providers. These are expensive and prone to harsh premium hikes. The WSJ says companies like these sold just under 50,000 policies in 2018. That’s up by roughly 18,500 since 2014.
Tucker says, “Surplus line insurers are required to be licensed to sell coverage in California, but they are not part of what we call the admitted market. That requires insurers to be subject to the regulations under Proposition 103.”
What that means is insurance buyers won’t have the same protections that they get from Prop 103 insurers. Prop 103 requires insurance providers to obtain permission from the Insurance Commissioner before changing their rates, Tucker explains.
Homeowners who contract with these organizations cannot lock in safe rates that they can afford. They can be drawn in by attractive rates (or the lack of available policies), but then can have those premiums raised at renewal time without advanced warning.
Are There Any Insurers Still on the Side of Homeowners?
The good news is that certain forward-looking insurance agents see this as an opportunity to fill an unmet need. Here at Brashears Insurance, we take your individual situation into account and do what it takes to secure fair premiums. Get in touch today to learn more about how insurance premiums impact California homebuying.