CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, NOVEMBER 27, 2018, OR THEREAFTER
FOR RELEASE: TUESDAY, NOVEMBER 27, 2018, OR THEREAFTER
BY THOMAS D. ELIAS
“FIRE INSURANCE CRISIS ALMOST
UPON US”
Californians
already know about the wildfire crisis that’s been afflicting this state for
the last few years, highlighted by a rash of huge blazes and the evacuations of
at least 250,000 persons. It’s caused by a combination of climate change,
forestry practices and the seemingly endless human drive to build more and more
houses in increasingly remote and fire-prone areas.
But
many may not realize that a fire insurance crisis is also almost upon us.
Sure,
state legislators led by incoming state Insurance Commissioner Ricardo Lara
worked much of the year to protect victims of the huge 2017 fires that hit the
Wine Country, Ventura County and parts of San Diego County.
Homeowners burned out in this
year’s firestorms in Shasta, Butte, Ventura, Los Angeles and rural parts of
Mendocino, Lake, Orange and Riverside counties, could also benefit from what
they’ve done – essentially expanding from one year to two the time when
insurance companies cannot cancel fire coverage in burned-out areas or their
nearby peripheries. The clock starts running on that time when the governor
declares a state of emergency in a fire area.
But…there’s
nothing to prevent insurance companies from lowering their risks by canceling
policies on homes and other buildings in fire-prone areas that have not yet
burned.
There’s
little doubt insurance companies want to minimize their risks. They were the
leading lobbyists against a legislative bill letting big utility companies off
the hook for damages caused by fires their equipment starts. That could have
upped liabilities by hundreds of millions of dollars for insurers, who would
then raise premiums everywhere, not just in wildfire-prone areas. A fall-back
bill that eventually passed could end up causing those very things.
Insurance
lobbyists also fought a bill requiring living expense insurance to include all
reasonable costs of fire victims seeking to maintain their pre-conflagration
living standards.
These
were among the biggest battles of the last legislative year, and they are not
yet settled, with a special commission now attempting to hash out solutions
designed to keep the utilities out of bankruptcy without dunning the average
homeowner large new sums.
With
utilities already facing liabilities in the multiple billions of dollars, it
may be hard to find such a formula, especially in a state increasingly fed up
with large corporations fobbing the costs of their mistakes and negligence onto
their customers.
Which
means that what outgoing Gov. Jerry Brown said last year about wildfires and
climate change – “All hell is breaking loose” – applies now to more than the
actual fires. Things always get more contentious as monetary stakes rise.
But the
threat to fire insurance isn’t completely new. Outgoing state Insurance
Commissioner Dave Jones saw it coming a year ago. “The companies must renew
policies for a time on homes in fire disaster areas,” he said then. “But they
don’t have to renew policies in non-disaster areas when they expire and they
don’t have to renew homes in disaster areas beyond the time limits.”
So
crisis is here. But it won’t be like what happened after the 1994 Northridge
earthquake, when property insurance companies refused to renew most policies
and stopped writing new home and business property coverage anywhere in
California. That impasse – it amounted to blackmail – ended in 1996 with
creation of the California Earthquake Authority and elimination of an old rule
forcing companies that write property insurance also to offer quake insurance.
The state-run CEA now writes the vast majority of earthquake policies.
That’s
because there is a safety net of sorts for homeowners whose coverage is not
renewed. It’s called the Fair Plan, roughly equivalent to the CEA in that it
must insure anyone who applies. But Fair Plan rates are much higher than other
fire policies, although by law prices cannot be excessive, whatever that means.
Before
last year’s blazes, the number of Fair Plan policies was rising by about 1,000
per year. The figure was up in 2017 and likely will climb substantially over
the next two years. So the fire insurance crisis will be less about scarce
insurance than it is about money.
That
won’t make it any less painful for those who are forced to foot much higher
bills than ever before.
-30-
Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, go to www.californiafocus.net
Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, go to www.californiafocus.net
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