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Study Data Shows Insurance Search Impacted By Wildfires

New data collected by the Department of Insurance shows insurance is becoming harder to find for those in high wildfire-risk areas as a result of recent wildfires. The data reveals there was a six percent increase in insurer-initiated homeowner policy non-renewals in CalFire State Responsibility Areas from 2017 to 2018, while zip codes affected by the devastating fires from 2015 and 2017 experienced a 10 percent increase in insurer-initiated non-renewals last year.

“We are seeing an increasing trend across California where people at risk of wildfires are being non-renewed by their insurer,” said Insurance Commissioner Ricardo Lara. “I have heard from many local communities about how not being able to obtain insurance can create a domino effect for the local economy, affecting home sales and property taxes. This data should be a wake-up call for state and local policymakers that without action to reduce the risk from extreme wildfires and preserve the insurance market we could see communities unraveling.”

The data provided by insurers also revealed the availability of homeowners insurance dropped in high-risk counties. From 2015 to 2018, the number of new and renewed homeowners’ policies fell by 8,700 in the 10 counties with the most homes in high or very high-risk areas. These same counties saw a steady increase in new FAIR Plan policies during that timeframe, growing 177 percent, compared to only a four percent increase for the five counties with the lowest risk. The FAIR Plan provides insurance coverage as a last resort for homeowners who are unable to find coverage in the voluntary market.

Nearly 57 percent of new FAIR Plan policies are now written in State Responsibility Areas (SRA), which is up from 47 percent in 2015. Data shows there has been a 49 percent increase in surplus lines policies in State Responsibility Areas between 2015 and 2018.

The 10 counties with the most homes in high or very high-risk areas include Tuolumne, Trinity, Nevada, Mariposa, Plumas, Alpine, Calaveras, Sierra, Amador, and El Dorado. The five counties with the least homes at risk include Yolo, Merced, Sutter, Imperial, and Kings. The 10 counties are being compared to five counties so each set would have roughly the same number of housing units based on Census data. According to the California Department of Finance, in 2018, there were 248,958 housing units in counties with the most high-risk homes and 260,718 housing units in counties with the most low-risk homes.

The new data does not measure the full impact of non-renewals of homeowner policies linked to the devastating 2018 wildfires, including the Camp, Carr and Woolsey/Hill fires. Since California law requires insurers to give a 45-day notice before a non-renewal and these wildfires occurred near the end of the year, the effects of these fires on the insurance market would likely appear in 2019 and possibly beyond.

In recent weeks, Commissioner Lara has met with local leaders in counties affected by wildfire risk, and the Department of Insurance continues to pursue ideas to reduce risk to communities through mitigation and stronger consumer protections.

The State Responsibility Area (SRA) is the area where the California Department of Forestry and Fire Protection (CalFire) is responsible for the prevention and suppression of wildfires, which excludes lands within city boundaries or in federal ownership.