Residents heating up over fire insurance

By Jake Lee Green
Kern Valley Sun

Issues surrounding fire insurance plans and their policies provided under the California FAIR Plan, and other insurance agencies, are becoming complicated for many residents of California who are considered to be in at-risk areas where wildfires are prone to create devastating loss. Essentially, this is a risk insurers do not want to take and little can be done to prevent the rise in rates attributed to the premiums. Many Californians, especially those of us who rent and own in the Kern River Valley, are deciding to opt-out of living in the area where wildfires are prone. Many people are selling their properties cheap or deciding not to purchase homes in the KRV. However, there is a bit of light peeking through the end of this tunnel. Governor Gavin Newsom is looking to direct funding into bringing older homes up to date with coding that could potentially safeguard homeowner’s assets in the event of catastrophic wildfires. An action that may bring insurance agencies back to the table and bring premiums down for insurance recipients.

In December of 2019, California’s Insurance Commissioner, Ricardo Lara, had issued a one-year moratorium banning insurance agencies from cancelling homeowners’ coverage in areas directly affected by the 16 major fire emergencies in 2019. Approximately 800,000 homeowners living in these areas were affected by the moratorium which will end on December 5, 2020. Even though this declaration is specific to citizens of California affected by the 2019 fires, Lara encouraged insurance providers to voluntarily refrain from cancelling policies of persons living within all fire-prone areas of California. A request that has been quite an undertaking for insurance agencies.

Since 2017, fires have ravaged millions of acres of rural and urban areas. Insurance industry officials have had little choice in canceling thousands of at-risk homeowners. Between 2017 and 2018 the industry has paid out more than $24 billion in damage claims from the fires. Long-time small business insurance companies have even been forced out of business after having to pay out exorbitant amounts of money to settle their claims.

California law protects customers of insurance companies by preventing rate increases from being passed on to them by their insurance providers when international reinsurers raise their rates. Rates that California insurance companies must pay. This is forcing insurance companies to reassess the seriousness of the risk that they are taking by insuring homeowners who live in areas prone to environmental disaster. This has also forced a great deal of low-income people to adopt the California FAIR plan which is becoming a last resort insurance policy as traditional policies are nearly doubling or tripling. Another drawback to the California FAIR Plan is the necessity to buy additional coverage for liability, water damages, debris removal (* Correction; See below), and other threats to property.

Locals in the Kern River Valley have expressed a great deal of dissatisfaction with the California FAIR Plan because of the bare-bones coverage it provides. Many residents have had to take out a second policy to cover what the California FAIR Plan does not. An issue that has tacked on an extra $800-$1,000 for homeowners in the area. One of the largest issues purveying KRV homeowners is that the moratorium declared by California Insurance Commissioner Lara does not include them due to the specific time frame the moratorium is set to. This has allowed insurance companies to deny, drop, or increase the rates of their policies. Unfortunately, for KRV homeowners, an insurer’s decision to deny or non-renew is not prevented by the declaration Lara has made. It only protects victims in specific zip codes in California affected by the wildfires in 2019. The declaration merely suggests that insurance companies extend this courtesy to all at-risk homeowners.

Members of the community here spend a great deal of time, energy, and money to make sure their properties are hardened against natural elements. Each year, residents clear brush, make necessary controlled burns and ensure that a zone around their properties is up to par with the standards mandated by law. These investments are not covered by insurance agencies and are done so to comply with a larger community effort to prevent the spread of naturally and unnaturally occurring wildfires.

The Director of Forestry and Fire Protection must assess which areas are at-risk and what precautions must be taken to comply with the mandate. In addition, existing law requires the State Fire Marshal to conduct an analysis and build a list of low-cost retrofitting that could bring homes up to code on fire prevention by January 31, 2020. Data collected from the 2018 Camp Fire revealed homes that had been built, or adhered to, strict wildfire building codes stood undamaged.

In particular, homes that have been built since the codes became law stood up against the ravenous fires that destroyed many structures. As evidenced during the Camp Fire in Paradise, Calif. Approximately six percent of California’s housing stock has been built since 2008 when the codes took effect. The building codes call for fire-resistant roofs, siding, and various other fire preventative materials. Gavin Newsom has now decided to develop funding methods for a “home hardening pilot program” to help residents of California retrofit their homes, built prior to 2008, with wildfire preventative materials. The new program would draw $25 million from the general fund and $75 million under “federal hazard mitigation funding.”

It is with hopes that by bringing California homes up to a higher standard insurance agencies will reassess their risk in areas prone to devastation by wildfire thus driving down the high cost of insurance premiums. Experts have been saying that retrofitting is a crucial step in preventing the risks associated with wildfire. In addition, the housing market would benefit from the preventative materials being applied to properties in the Kern River Valley.

*Correction: The California FAIR Plan does include debris removal in their plan.