California Forbids Insurance Carriers From Leaving Fire-Prone Communities

By: NAPIA On: 11/06/2020 14:24:53 In: NAPIA News

California forbids insurance carriers from leaving fire-prone communities for 1 more year, by Andrew Sheeler, Sacramento Bee, November 5, 2020

The state insurance commissioner on Thursday (November 5) issued an order forbidding insurance companies from canceling or declining to renew property insurance policies for one year in communities hit by wildfires. The move is expected to affect 2.1 million policy holders, nearly a fifth of California's residential insurance market, who were affected by recent wildfires.

More than 4.1 million acres have burned in wildfires this year, with 31 fatalities and more than 10,400 structures destroyed, according to Cal Fire. Gov. Gavin Newsom has declared several wildfire emergencies this year.

The moratorium applies to properties in zip codes located either within or adjacent to recent wildfire disasters, according to Lara's office. Property owners can visit the Department of Insurance website to find out if their zip code qualifies for the moratorium.

The move comes as insurers are dropping policies in wildfire-prone areas at a growing rate, according to data from the Department of Insurance. Homeowners who get dropped by their insurance can still purchase coverage from the California FAIR Plan, which is an “insurer of last resort,” but they can expect to pay three or four times more for it.

Earlier in 2020, Lara introduced a bill that would have required insurers to offer coverage in fire-prone areas where communities took steps to “harden” homes against the threat of wildfire. That bill, which met resistance from insurers, did not pass.

The two trade groups representing the insurance industry in California, the American Property Casualty Insurance Association and the Personal Insurance Federation of California, issued a joint statement on Thursday. In the statement, they said that Lara's moratorium was anticipated based on this year's wildfire season.

“The effects of increasingly frequent wildfires include a significantly higher risk of homeowner property damage and we need to adapt to this new reality. We agree with the commissioner that this is a shared responsibility, which means everyone plays a part. We hope to work collaboratively on comprehensive solutions to better account for increased wildfire risk in homeowners coverage, which will increase availability of insurance,” the joint statement read.