Please ensure Javascript is enabled for purposes of website accessibility
Walters: California Wildfires Ignite an Insurance Crisis
dan_walters
By Dan Walters, CalMatters Commentary
Published 3 years ago on
September 12, 2021

Share

As if California needed another crisis, the state’s seemingly perpetual wildfires are forcing millions of homeowners in fire-prone areas to pay skyrocketing premiums for insurance coverage — if, indeed, they can buy it at all.

As the number and severity of wildfires increase, insurers are increasingly reluctant to renew policies and even if they do, premiums often double or triple.

Moratoriums Are ‘Stopgaps’ That Don’t Address the Issue Directly

Insurance is required for most homeowners since their mortgage lenders demand it. And if they cannot obtain regular coverage, they are forced into the insurer of last resort, FAIR, that has very high premiums and limits on coverage.

Dan Walters

Opinion

Insurance Commissioner Ricardo Lara has repeatedly invoked a law he authored three years ago as a state legislator, imposing one-year moratoriums on policy cancellations for property in or immediately adjacent to the sites of major fires.

In 2020, Lara’s moratoriums covered 2.4 million policyholders after fires scorched more than 4 million acres and consumed hundreds of homes and other buildings. When this year’s fires are finally extinguished, including the immense Dixie fire and the Caldor fire that nearly wiped out South Lake Tahoe, Lara will extend the moratoriums to their burn zones.

At best, however, such moratoriums are merely stopgaps. So what, one might ask, are politicians doing about the crisis? Mostly, it seems, they are scapegoating.

Wildfire Risk is Substantially Increasing Property Insurance

This month, Assemblyman Marc Levine, a Democrat from fire-prone Marin County, fired off a letter to insurance trade groups, telling them, “I do not believe that the costs of utility mismanagement, or the impacts of climate change should be arbitrarily and capriciously passed through to my constituents in the form of homeowners’ insurance being declined, non-renewed, or their insurance premiums being raised exorbitantly. Particularly when there has been no change of conditions or circumstances.”

Circumstances are also beyond insurers’ control as they assess potential losses and calculate whether to offer coverage and if so, what to charge. They cannot, as Levine seems to suggest, ignore the perils regardless of their causes.

John Norwood, a veteran insurance industry lobbyist, set forth the dilemma in a recent article for an industry publication:

“The availability and affordability of property insurance in California are not likely to change until the worldwide reinsurance market believes California is serious about addressing its wildfire risks and there are demonstrable results in reducing the number and severity of wildfires in the state.

“Without the reinsurance market backing California property/casualty insurance companies, there will continue to be an availability crisis in the state for property insurance and prices for such coverage will continue to increase substantially to the detriment of California’s homeowners and businesses.”

More Money Spent on Fire Prevention, Not Enough for Insurance Crisis

The initial state budget signed by Gov. Gavin Newsom appropriated $2 billion for making the state more fire-resilient, but was criticized for spending many billions more on problems of lesser import. Last week, with big fires still burning, the wildfire budget was sharply increased before the Legislature adjourned for the year.

Reducing the likelihood of destructive fires is a good step in the right direction, but the insurance crisis demands more — perhaps, even, an entirely new approach.

The state could, for instance, purchase basic disaster insurance for every California property owner — covering earthquakes and floods, as well as fires — and pay for it through some sort of property-based assessment. Property owners could tap the private market for coverage beyond the basic policy’s limits.

Through reinsurance, the risk would be spread worldwide and Californians wouldn’t have to worry about scrounging for coverage. The state’s voluntary earthquake insurance program already embodies that concept.

There may be other workable approaches, but without new thinking, the insurance crisis will, as Norwood warns, continue to worsen.

CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more stories by Dan Walters, go to calmatters.org/commentary.

[activecampaign form=31]

RELATED TOPICS:

DON'T MISS

Surprising Ways and Places You Can Use SNAP EBT Food Benefits

DON'T MISS

Californians Worry About Crime, Setting up a Ballot Measure Showdown

DON'T MISS

The Pickle Flavor Frenzy and Its Rise in Food Trends

DON'T MISS

Kate Hudson Had a Lifetime to Make a Record. The Result is ‘Glorious,’ Out in May

DON'T MISS

Long-Lost First Model of USS Enterprise from ‘Star Trek’ Boldly Goes Home

DON'T MISS

California Leaders Take Sides in Monumental Supreme Court Case on Homelessness

DON'T MISS

Man Sets Himself on Fire Outside Trump Hush Money Trial Court

DON'T MISS

McDonald’s Ice Cream Machines Are So Unreliable They’re a Meme. They Might Also Be a Climate Solution.

DON'T MISS

Real Estate Experts Talk Fresno’s Economic Future. Are Tough Times Ahead?

DON'T MISS

Unlocking the Secrets to Fresno State’s Superb Baseball Season

UP NEXT

McDonald’s Ice Cream Machines Are So Unreliable They’re a Meme. They Might Also Be a Climate Solution.

UP NEXT

Will State AG Rob Bonta Jump Into 2026 Race for CA Governor?

UP NEXT

Local Leaders Must Put Their Shoulders Into Making Fresno ‘Education City USA’

UP NEXT

Carbon Capture Isn’t Nearly as ‘Green’ as Fossil Fuel Promoters Make It Sound

UP NEXT

CA’s High Construction Costs Limit Housing. A Supreme Court Decision Might Help

UP NEXT

A Fresno Edition of Monopoly? That’s Capitalism at Work, Baby!

UP NEXT

Biden’s Embrace of Trump’s Tariffs Could Spell Trouble for His Reelection: Fareed Zakaria

UP NEXT

‘Digital Democracy’ Project Penetrates California’s Opaque Political Processes

UP NEXT

While California Politicians Skirmish Over Housing, the Shortage Keeps Growing

UP NEXT

As PG&E Bills Skyrocket, Will California Lawmakers Hold Anyone Accountable?

Kate Hudson Had a Lifetime to Make a Record. The Result is ‘Glorious,’ Out in May

2 days ago

Long-Lost First Model of USS Enterprise from ‘Star Trek’ Boldly Goes Home

2 days ago

California Leaders Take Sides in Monumental Supreme Court Case on Homelessness

2 days ago

Man Sets Himself on Fire Outside Trump Hush Money Trial Court

2 days ago

McDonald’s Ice Cream Machines Are So Unreliable They’re a Meme. They Might Also Be a Climate Solution.

2 days ago

Real Estate Experts Talk Fresno’s Economic Future. Are Tough Times Ahead?

2 days ago

Unlocking the Secrets to Fresno State’s Superb Baseball Season

2 days ago

‘This Is How to Improve Reading Proficiency. We Just Have To Execute It’: FUSD Board President

2 days ago

Does Dyer Support (or Endorse) Bredefeld for Supervisor?

2 days ago

Get a 3D First Look at Merced’s High-Speed Rail Station Design

2 days ago

Surprising Ways and Places You Can Use SNAP EBT Food Benefits

Did you know that SNAP EBT benefits used to be called food stamps and that recipients can use those benefits to get healthy food in places o...

20 hours ago

20 hours ago

Surprising Ways and Places You Can Use SNAP EBT Food Benefits

20 hours ago

Californians Worry About Crime, Setting up a Ballot Measure Showdown

2 days ago

The Pickle Flavor Frenzy and Its Rise in Food Trends

2 days ago

Kate Hudson Had a Lifetime to Make a Record. The Result is ‘Glorious,’ Out in May

2 days ago

Long-Lost First Model of USS Enterprise from ‘Star Trek’ Boldly Goes Home

2 days ago

California Leaders Take Sides in Monumental Supreme Court Case on Homelessness

2 days ago

Man Sets Himself on Fire Outside Trump Hush Money Trial Court

2 days ago

McDonald’s Ice Cream Machines Are So Unreliable They’re a Meme. They Might Also Be a Climate Solution.

MENU

CONNECT WITH US

Search

Send this to a friend