California Insurers Are Dropping People In Wildfire Zones. A New Bill Could Stop It.

Feb 21, 2020

As the threat of longer, more devastating wildfire seasons increases risks for California homeowners, insurance companies have been responding with their own strategy: refusing to renew homeowner policies. Zip codes in counties most impacted by wildfire saw a 10% increase in non-renewals of homeowner insurance between 2017 and 2018, according to the California Department of Insurance.

“This is a real problem,” says Assemblywoman Lorena Gonzalez, D-San Diego. “Any of us, if you ask around, in a community that has had any history of fires, you’ll find people who have been dropped by their insurance companies.”

In response, Gonzalez introduced a bill this week in California’s legislative session that would require insurance companies to write or renew policies for existing homes if they incorporate fire protection techniques.

The bill, AB 2367, will define new "fire-hardening" standards that Gonzales says could include brush clearance and setbacks, access to water, using specific types of roofing, and availability of fire trucks in communities. A committee including the California Department of Insurance, State Fire Marshal, and California Office of Emergency Services would develop the new standards.

Insurance denials ripple through communities, Gonzalez says. They can prevent residents from being able to sell their homes and lower property values which contributes to a smaller tax base for public safety services including firefighting.

California state law only requires insurance renewals for those who experience a total loss or for individuals living in a series of communities declared wildfire disaster areas, according to the Insurance Commissioner’s office.

Representatives from the state’s insurance companies argue the measurable benefits of fire-hardening steps in homes and communities are still an unknown. Thus basing regulations on such steps is not effective.

“We can’t give up, but we can’t give a false promise that if you do X, Y, and Z a home is appreciably better from a fire,” says Rex Frazier, president of the Personal Insurance Federation of California, a trade association that represents large property insurance companies.

Frazier also warns that such legislation could cause insurers to leave the most risky counties all together or raise rates.

In fact, the California Insurance Department, which regulates the state's insurance industry, says they received more than 100 requests for rate increases in 2017 and 2018, twice the number they got during the previous two years.

Assemblywoman Gonzalez says in her own district in San Diego County the number of non-renewals increased by 14% since 2015, despite a lack of major fires there. During the same period, she says, Nevada County in Northern California saw an increase of 38% of non-renewals.

Gonzalez’s legislation has not yet been heard by the legislature. If it became law insurance rates would likely increase, she says, but that’s a smaller problem than the status quo.

“That is less important than being pushed into a situation where you just can’t get insurance.”