CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, DECEMBER 10, 2021 OR THEREAFTER
BY THOMAS D. ELIAS
“WILDFIRE
INSURANCE CRISIS HITS EVER HARDER”
If
Californians didn’t already know about the wildfire crisis that’s been burning
through the state for the last few years, pictures of low-hanging smoke from
the Caldor fire blocking views of Lake Tahoe should have driven the new reality
home more than ever this fall.
But for
many homeowners who live in unburned areas nevertheless deemed possibilities
for future blazes, another crisis is hitting ever harder.
That’s
the availability of homeowners’ insurance and the fire coverage it provides,
which has become increasingly scarce with each passing year.
It’s high
time to get creative and solve this thorny problem.
Yes, some
owners of intact houses not yet torched are still OK. That’s thanks to an edict
from state Insurance Commissioner Richard Lara forbidding insurance companies
from cancelling or “non-renewing” fire coverage for homeowners on the fringes
of this year’s two most destructive fires: the Dixie Fire that spread for weeks
across many tens of thousands of acres in several Northern California counties
and the Caldor blaze that seemed to follow U.S. Highway 50 from Placerville
toward Lake Tahoe.
But
that’s a stopgap measure lasting only one year. Most affected property owners
know their policies will be cancelled the moment their insurance companies can
dump them.
No
insurance firm wants to be bankrupted by California conflagrations the way
Pacific Gas & Electric Co. was by the unprecedented damages from fires it
sparked from 2017 through 2019, essentially an introductory period for today’s
blazes that are hotter and faster-moving than the wildfires of just a few years
ago.
What’s
developed is a situation akin to the boycott the insurance industry inflicted
on California in the mid-1990s, after several companies were nearly bankrupted
by earthquake payouts after the 1994 Northridge earthquake damaged heavily
populated parts of Los Angeles.
Every
significant insurance company cancelled almost all California property policies
at that time, protesting a law that forced any firm issuing property insurance
also to offer quake coverage. The industry wanted out of the earthquake
insurance business.
Legislators
and then-Insurance Commissioner Chuck Quackenbush could have fought back by
denying the lucrative right to sell car insurance to any company refusing to
sell quake policies. But Quackenbush, whose election was largely funded by
insurance companies and brokers, instead caved to their demands. The result is
the current California Earthquake Authority, which issues most quake policies
in the state, separately from standard property insurance.
In an era
when many tens of thousands of homeowner policies have been cancelled in and
near past or prospective fire areas, maybe something like the CEA is needed to
make sure property owners can get insurance at fairly reasonable rates.
Where
policies are cancelled today, some homeowners go bare, but many wind up buying
coverage from the state’s last-chance Fair Plan (FP), whose rates are
astronomically higher than what insurance companies charge in non-fire areas.
FP enrollment jumped from 140,000 to more than 200,00 in the last two years,
even though a few companies returned to writing new policies when they were
allowed astronomical rate increases.
So it may be time for the
Legislature to at least partially separate other property coverages like liability
from fire insurance in wildfire circumstances.
That way,
homeowners could decide how much fire coverage to buy, rather than being forced
to insure the entire value of their properties against fast-moving flames. They
could be required to substantially fireproof their homes in order to qualify
for such an arrangement, making one-time investments rather than large payments
every year.
One thing
for sure: So far, no one has thought creatively enough about how to manage the
wildfire insurance crisis in an era when it seems several highly damaging
blazes will afflict this state every year.
Simply
ordering companies to leave policies in place for a year kicks the can down the
road a short distance, but ultimately solves little, for homeowners in wildfire
areas will eventually need new policies.
Californians
have found creative solutions to every major problem that’s ever confronted
this state, from transporting water hundreds of miles to putting Covid vaccines
in tens of millions of arms. Why not approach this major problem with the same
style of resolute, outside-the-box thinking?
-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, visit www.californiafocus.net
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