Since we first published this article in April 2022, the predicament around securing fire insurance has unfortunately, but not surprisingly, worsened. The latest news that State Farm the largest homeowner insurance company in California, would stop selling coverage to homeowners everywhere in the state (not just in wildfire zones) captured headlines in the New York Times: Climate Shocks Are Making Parts of America Uninsurable. It Just Got Worse.
To add insult to injury, the San Francisco Chronicle article Yet another home insurance giant quietly stops writing new policies in California, reports that Allstate, the fourth largest property and casualty insurance provider in the state in 2021, quietly did the same thing last year. As we mentioned in our original posting, AIG and Chubb, which cater to high-end homes, have already pulled coverage for some customers in recent years. This signals that insurance woes in the state are likely more severe than the public is aware of.
According to Rex Frazier, president of the Personal Insurance Federation of California,
“State Farm is unusual in that it announces such underwriting actions. It is not required by law and most insurers do not.”
Many insurance companies have already stopped renewing policies in fire-prone areas after fires in 2017 and 2018 devastated communities and resulted in large payouts. Homeowners in high-risk fire areas have had a harder time finding coverage, leading to more usage of the FAIR Plan, a state-offered “insurer of last resort” meant as a temporary safety net that covers only fire insurance and generally costs more than other plans.
According to a CalMatters article, State Farm won’t sell new home insurance in California. Can the state shore up the market?, even the FAIR Plan, the limited insurance plan Californians can turn to when no standard private company will cover them, is on shaky ground. It’s funded by levies on private insurance companies that do business in the state. As the risk of catastrophic wildfire ramps up across California, that risk falls disproportionately on the FAIR Plan and those insurers still doing business in the state in proportion to their share of the market. Having to chip in disproportionally, may be the reason insurance companies are opting not to issue new policies anywhere in California rather than just limiting new policies to places with low wildfire risk.
Bitsa Freeman Founder of Boulevard Marin and Chair of the Fire Committee of KWPOA:
“...this is part of a broader trend of companies pulling back from dangerous areas with high rebuild costs however, there are still close to 100 companies writing in the area. Home insurance is a basic requirement for most home loans, having a hyper-local pulse on this issue is critical for buyers and sellers of properties in Marin County.”
Reach out to us if you want to learn more.