With the wildfire season ramping up—as hot, dry weather combines with high winds—many California residents are reporting their nerves are on edge due to recent fires in Maui and a series of blazes currently impacting Oregon, and now more than 50,000 families will be looking for new insurance after another two companies recently announced they will be dropping policies.
“Are there going to be any insurance companies left in California?” Matt Cross—Santa Rosa resident and lifelong Californian—asked The Epoch Times. “To say my neighbors and I are scared for our future is an understatement.”
Berkshire Hathaway’s AmGUARD—a division of the firm’s GUARD Insurance company—wrote a letter to the California Department of Insurance on July 21 declaring its intention to cancel the homeowners and personal umbrella policies it holds in the state beginning in September.
That same day, Falls Lake Insurance—a small firm with fewer than 1,000 policies, according to the insurance department—also submitted a similar letter indicating it will also be canceling policies, with no timeline provided.
News of the companies closing their California books comes on the heels of an exodus of insurers from the Golden State this year. State Farm—the largest insurer operating in California—announced it will no longer be accepting new policies but will retain some of its current clients.
Farmers and Allstate also made similar announcements this summer, along with a number of smaller companies, leaving thousands of homeowners left with only the FAIR Plan—a state-mandated insurance option of last resort in which insurers are required to participate.
Some homeowners that were forced into the plan say the insurance is significantly more expensive and provides less coverage.
Approximately 1.3 million homes are at risk of wildfire damage in California, with a cost of $760 billion to rebuild, according to a recent study released by Irvine-based data analytics firm CoreLogic.
Wildfires, earthquakes, and flooding are the primary concerns for homeowner insurance providers, but experts suggest they are leaving the state due to regulations that restrict rate increases.
Industry representatives said Proposition 103—which restricts how much homeowner insurance policies can cost—is, in part, to blame. The proposition was passed in 1988 by voters in response to high automobile insurance costs.
Insurers report needing to raise premiums to remain profitable, yet regulations slowing and preventing such are leading them to reduce their exposure to risk in California, according to experts.
Current rules mandate that companies price premiums on past losses, but experts say this is significantly impacting profitability—as inflation has driven up the price of materials, labor, and reconstruction costs.
A request for comment from the California Department of Insurance was not returned on deadline.
But the department is aware of the problem and is seeking ways to address the issue, according to statements released earlier this year.
“Historic losses do not fully account for growing wildfire risks, or risk mitigation measures taken by communities,” Michael Peterson, a deputy commissioner at the California Department of Insurance, said during a hearing in May.
Claims have mounted in recent years, with 2022 statistics from the department’s market share report (pdf) revealing billions of dollars in losses for insurance companies.
The assets covered by homeowners’ insurance expose insurers to trillions of dollars in fire and earthquake risk, according to statistics from the agency.
Such could be influencing insurers to take their business elsewhere, according to experts.
Insurance availability started to decline with the California fire season of 2017—which caused more than $14 billion in damage, according to CalFire statistics—and widespread fires in subsequent years have contributed to the dilemma, according to experts.
“Since 2017, we’ve seen a dramatic increase in the number of homes, structures, and businesses burned,” Janet Ruiz, spokesperson for the Insurance Information Institute—a New York-based firm providing research and analytics to the industry—told The Epoch Times. “This really affected the bottom line of insurers.”
While some residents recognize the predicament the industry faces, they’re more concerned about the safety of their families and the security of their homes.
“I get it. They don’t want to lose money,” Mr. Cross said. “But what are we supposed to do?”
From The Epoch Times
