Wild fires and insurance

[Luanne]

@klpca I grew up in Southern California and when you say things are not like they were when you were a kid, I hear you. We may have had some fires, but nothing like the devastating fires in recent years.

 

[wilma]

Another issue is California did not allow insurance companies to increase their premiums so many pulled out.

Not true, you have any evidence for this?

 

[T_R_Oglodyte]

I think that one major fire factor in the So Cal foothills and valleys is the historic suppression of chaparral fires. Recurring fire is a natural part of the chaparral biome. It clears dead biomass, eliminates weaker plants, controls non-native invasive species (which are not adapted to the fire). Currently, when a fire gets started in the undeveloped lands, it often grows explosively. And, of course, building wood frame houses in chaparral communities literally adds more fuel to fire.

Now, when a fire gets going, it throws off so many burning embers, that are carried over such distances, that there really isn't any choice but to suppress the fire because unsupressed it will spread into major residential areas. I was living in Contra Costa County when the Oakland hills fire happened in the mid-1980's. That fire started in the woodland hills behind Berkeley and Oakland, and there was a dry east wind which pushed the fire downslope. Fed by flying embers, the fire left the woodland area and just continued going downslope, through many residential neighborhoods. Similar thing happened in the Santa Rosa fires about eight years. Entire subdivisions, that weren't any where near wildlands, were burned to the ground.

***********

In my opinion, a major infrastructure issue that needs to be addressed is the availability of water at ground level to conduct fire suppression in elevated risk areas. The ability of public water systems to supply fire hydrants is based on providing water needed to fight more typical residential and commercial/industrial fires. Water systems do not have the hydraulic capacity to deliver the amounts of water needed to fight urban and suburban conflagrations. Then add in that as houses burn, plumbing breaks or melts, which means that there are now uncontrolled leaks in the water system.

 

[klpca]

I think that one major fire factor in the So Cal foothills and valleys is the historic suppression of chaparral fires. Recurring fire is a natural part of the chaparral biome. It clears dead biomass, eliminates weaker plants, controls non-native invasive species (which are not adapted to the fire). Currently, when a fire gets started in the undeveloped lands, it often grows explosively. And, of course, building wood frame houses in chaparral communities literally adds more fuel to fire.

Now, when a fire gets going, it throws off so many burning embers, that are carried over such distances, that there really isn't any choice but to suppress the fire because unsupressed it will spread into major residential areas. I was living in Contra Costa County when the Oakland hills fire happened in the mid-1980's. That fire started in the woodland hills behind Berkeley and Oakland, and there was a dry east wind which pushed the fire downslope. Fed by flying embers, the fire left the woodland area and just continued going downslope, through many residential neighborhoods. Similar thing happened in the Santa Rosa fires about eight years. Entire subdivisions, that weren't any where near wildlands, were burned to the ground.

***********

In my opinion, a major infrastructure issue that needs to be addressed is the availability of water at ground level to conduct fire suppression in elevated risk areas. The ability of public water systems to supply fire hydrants is based on providing water needed to fight more typical residential and commercial/industrial fires. Water systems do not have the hydraulic capacity to deliver the amounts of water needed to fight urban and suburban conflagrations. Then add in that as houses burn, plumbing breaks or melts, which means that there are now uncontrolled leaks in the water system.

I heard a Pepperdine professor mention that because of our years long drought, chaparral which is a naturally fire resistant native plant *died* during the drought, which is not typical. That allowed invasive grasses to grow in it's place, which fuels a fire since the grasses die every year. There's a lot of moving parts in all of this.

 

[Cyberc]

I just read in some of the media outlets that the fire will most likely be the most expensive in U.S history and on top of that some of the most expensive houses in Hollywood does not even have insurance.

If you can afford to buy some of the most expensive houses in the country - why not get insurance, despite the high cost. Unless no companies will have you, but then you can get the one from the State right?

 

[T_R_Oglodyte]

Interesting article, with an assertion that the the conversion of agricultural land to urban use due to population growth is a significant factor in the increased destructiveness of So Cal wildfires.

How Santa Ana winds fueled the deadly fires in Southern California

Where people live today also makes a difference when it comes to fire risk.

theconversation.com

 

[T_R_Oglodyte]

I just read in some of the media outlets that the fire will most likely be the most expensive in U.S history and on top of that some of the most expensive houses in Hollywood does not even have insurance.

If you can afford to buy some of the most expensive houses in the country - why not get insurance, despite the high cost. Unless no companies will have you, but then you can get the one from the State right?

The California Fair Plan provides only limited coverage with stiff premiums.

As much as the politicians might try, you can't escape the reality that premiums charged need to support the underlying financial risks. If the Fair plan does not collect premiums that offset the risk, then the system is just a house of cards that will crash when it is stressed.

The Fair plan was not designed to be a primary source of insurance; it was simply to provide a stop-gap until people whose coverage was terminated could find a new carrier. But it is now apparently morphing into primary coverage for the large number of people who cannot find an insurer who will provide coverage. And I'm pretty sure that if the Fair program were subject to the same financial standards that admitted casualty carriers must meet, the Fair program would utterly fail those standards.

 

[Brett]

Not true, you have any evidence for this?

Plenty of articles about the difficulties of getting insurance and insurers pulling out in California (and Florida)

California Insurance Crisis Deepens
https://www.wsj.com/finance/california-home-insurance-los-angeles-palisades-fire-3cce96a9

"Leading insurers, including State Farm and Allstate, have stopped selling new home-insurance policies in the state, saying rate increases approved by regulators were insufficient to cover their losses, including from devastating wild fires of 2017 and 2018. "

 

[wilma]

Plenty of articles about the difficulties of getting insurance and insurers pulling out in California (and Florida)

California Insurance Crisis Deepens
https://www.wsj.com/finance/california-home-insurance-los-angeles-palisades-fire-3cce96a9

"Leading insurers, including State Farm and Allstate, have stopped selling new home-insurance policies in the state, saying rate increases approved by regulators were insufficient to cover their losses, including from devastating wild fires of 2017 and 2018. "

She claimed California would not allow rate increases so the insurance companies left, the insurance companies have definitely been raising their rates over the past few years.

 

[beejaybee]

I've seen pie charts showing the prevalence of California wildfires from the 1930s up to 2021.

Top 20 Destructive California Wildfires Pie Chart | Sierra News Online

sierranewsonline.com

I wonder how the pie chart would change with the inclusion of the last 4 years?

 

[dioxide45]

I've seen pie charts showing the prevalence of California wildfires from the 1930s up to 2021.

Top 20 Destructive California Wildfires Pie Chart | Sierra News Online

sierranewsonline.com

I wonder how the pie chart would change with the inclusion of the last 4 years?

This looks like it is based on number of structures. Certainly that is skewed with population increase with more and more structures being built over time?

 

[Janann]

Here in Ohio we do get tornados- last year one ripped through our suburb toppling trees and tearing off roofs which is minor damage compared to what could have occurred. But because of this, insurance companies are now excluding roof replacement unless a specific rider is purchased or with a 10k deductible.

Its about the same in Texas, and the most common cause of damage to a home in my area is a hail storm. My policy has a 1% deductible for all losses, except for wind and hail, which have a 2% deductible. Fortunately tornados are not considered ordinary wind, so they fall into the 1% category.

 

[1Kflyerguy]

She claimed California would not allow rate increases so the insurance companies left, the insurance companies have definitely been raising their rates over the past few years.

While insurance rates have indeed been going up in California, the insurance companies felt the state regulatory formula did not allow them to go up enough to account for changes. That was widely reported in the news, and various consumer groups alleged the insurance industry was charging too much. They have kept these statements up even as the companies stopped writing policies. I don't like paying more for my insurance, but I also want the insurance companies to operate in the state.

 

[mountainboy]

Our insurance has never gone down or stayed the same. We have had the same company since 1987, get a longevity discount and a multi policy discount, and have never had a claim and our annual premium is just under $3k per year with a $2500 deductible. I believe that it was about ~ $700 when we bought the house. Our house is 2300 sq feet, nothing fancy.

This is not directed at anyone in particular:
When I hear people talking about CA residents like we are not actual people, I have to scratch my head. Where are we all supposed to move that is affordable, safe from natural disasters and near employment centers? Most of us live where we live because we have family and/or jobs tying us to our location. In our case, the gain on the sale of our house is substantial and we're not going to sell and pay tax to the government just so we can move. Plus, where would we move? (Hint - not Truckee lol. It's lovely but I'm not doing snow in my senior years). At at the end of the day, we can't leave our elderly parents anyway - all 4 of ours are still alive and going into their 90s. We are stuck like a cork in a bottle.

In San Diego we had a fire in 2007 called the Witch fire. It "jumped" a 12 lane freeway and burned homes nowhere near the back country or canyons. If you back up to a huge concrete firebreak, you would think you'd be safe, but not in those winds. When the wind speeds get going like what we experienced then, there is not much that you can do other than pray. The embers are carried far away from their source, towards homes that would otherwise seem very safe. That what it looks like in Altadena (my husband's cousin most likely lost his home there the other day - he's still waiting for the official confirmation and hoping that he was somehow spared). Areas that were safe, are safe no longer. We're pretty used to our seasons, and January isn't usually fire season. Things are not like they were when I was a kid, or even a young adult. My entire adult life has had the word "drought" in it every single day. I am sick and tired of it (the money we have spent on saving water!). But that is where we are today, and our heightened fire risk comes with the drought conditions. For other areas, flooding is the issue, for us it's fire. I wish that folks would have a little compassion and not dunk on California residents during an absolute tragedy.

Praying for all of you in SoCal/Greater LA....

 

[WinniWoman]

Not true, you have any evidence for this?

I had read an article. I don’t remember where.

 

[T_R_Oglodyte]

While insurance rates have indeed been going up in California, the insurance companies felt the state regulatory formula did not allow them to go up enough to account for changes. That was widely reported in the news, and various consumer groups alleged the insurance industry was charging too much. They have kept these statements up even as the companies stopped writing policies. I don't like paying more for my insurance, but I also want the insurance companies to operate in the state.

I have seen web posts complaining about how State Farm last year canceled fire insurance policies for all properties in Pacific Palisades. I would venture to say that events have shown that State Farm's risk call was correct.

If people want to say that State Farm, and other insurers, have a social duty to continue coverage at rates that do not compensate for the risk, then I would contend there is corollary social duty to bail out those insurers when they write policies at rates that do not correspond to the risk. But I don't hear anyone talking about that.

 

[jp10558]

Our insurance has never gone down or stayed the same. We have had the same company since 1987, get a longevity discount and a multi policy discount, and have never had a claim and our annual premium is just under $3k per year with a $2500 deductible. I believe that it was about ~ $700 when we bought the house. Our house is 2300 sq feet, nothing fancy.

This is not directed at anyone in particular:
When I hear people talking about CA residents like we are not actual people, I have to scratch my head. Where are we all supposed to move that is affordable, safe from natural disasters and near employment centers? Most of us live where we live because we have family and/or jobs tying us to our location. In our case, the gain on the sale of our house is substantial and we're not going to sell and pay tax to the government just so we can move. Plus, where would we move? (Hint - not Truckee lol. It's lovely but I'm not doing snow in my senior years). At at the end of the day, we can't leave our elderly parents anyway - all 4 of ours are still alive and going into their 90s. We are stuck like a cork in a bottle.

In San Diego we had a fire in 2007 called the Witch fire. It "jumped" a 12 lane freeway and burned homes nowhere near the back country or canyons. If you back up to a huge concrete firebreak, you would think you'd be safe, but not in those winds. When the wind speeds get going like what we experienced then, there is not much that you can do other than pray. The embers are carried far away from their source, towards homes that would otherwise seem very safe. That what it looks like in Altadena (my husband's cousin most likely lost his home there the other day - he's still waiting for the official confirmation and hoping that he was somehow spared). Areas that were safe, are safe no longer. We're pretty used to our seasons, and January isn't usually fire season. Things are not like they were when I was a kid, or even a young adult. My entire adult life has had the word "drought" in it every single day. I am sick and tired of it (the money we have spent on saving water!). But that is where we are today, and our heightened fire risk comes with the drought conditions. For other areas, flooding is the issue, for us it's fire. I wish that folks would have a little compassion and not dunk on California residents during an absolute tragedy.

I can't imagine having to move from where I've lived my entire life. My mom probably wouldn't unless forced out by like sherrifs or something. I get that. I also think it's a little crazy to say nothing should ever change, and if it does someone else (the government? the insurance companies?) should have to start paying pretty extreme costs to make people whole who sadly are not living in livable areas with the current climate. It'd be like wanting to push back the Sahara. Like it'd be a significant line item to replace several large cities worth of houses every 2 years on average in the mix of flood and wildfires for the Government, and I don't think lots of people are up for that. Lots of people got pushed out of cities cause they couldn't afford them anymore, now it's coming for the middle class in natural disasters.

It's extremely sad - but the way our country works is you're basically not likely to get the government to really take care of these sorts of losses, and private insurers are walking away. This leaves you moving where you can get private insurance again or self insuring. And sometimes we just don't personally have that kind of money and it sucks.

 

[Ken555]

This was announced just moments ago. I immediately contacted our agent as my parent's home was non-renewed by State Farm, and the existing policy expires next month. The California FAIR plan fire coverage was ~$7,400 for their home, plus we need other policies to cover liability, etc. Renewing State Farm will undoubtedly be less expensive and include greater coverage.

Insurance commissioner issues moratorium on home policy cancellations in fire zones

Insurance Commissioner Ricardo Lara has issued a one-year moratorium on home policy non-renewals and cancellations in the Pacific Palisades and the San Gabriel Valley's Eaton fire zones.

www.latimes.com

 

[T_R_Oglodyte]

Newly returned to CA, I'm still catching up on some things. Apparently, when CA approves casualty insurance rates, the approval is based solely on past loss history. Forward-going hazard assessments are not considered. When applying this to a place such as Pacific Palisades, the insurer sees an obvious fire risk. The state does as well - it is identified as high fire hazard area. Nevertheless, since there isn't a past history of wildfires in the Palisades area, premium adjustment to reflect that risk is not allowed.

Add to that that CA is the only state that does not allow insurance rates to include the cost of reinsurance.

Given those fenceposts, it strikes me that the only prudent course of action for an admitted insurer is to pull out of the market and stop writing money-losing policies.

 

[Carolinian]

From what I am reading, the national insurance companies with the most exposure are Allstate, Travellers, and Chubb, all of whose stock had dipped by 4 to 5% earlier today, but I am not sure how much they had dipped by market close. AIG and Kinsale Capital also have some exposure, but they had not dropped as much. The worst hit on the market was California-based Mercury General, 80% of whose policies are written in California and with many in LA County. Earlier today, their stock had already taken a 35% hit.

 

[klpca]

From what I am reading, the national insurance companies with the most exposure are Allstate, Travellers, and Chubb, all of whose stock had dipped by 4 to 5% earlier today, but I am not sure how much they had dipped by market close. AIG and Kinsale Capital also have some exposure, but they had not dropped as much. The worst hit on the market was California-based Mercury General, 80% of whose policies are written in California and with many in LA County. Earlier today, their stock had already taken a 35% hit.

They are our carrier. Probably not for long as we renew next month. We've been expecting this for years. I'm surprised that it took this long. Insurance companies aren't in it for the premiums, they are in it for the investment returns, which have been healthy for a long time. All of the sudden they will have to liquidate some of their portfolios to pay out claims.

At any rate, for some people this is the worst possible time to have this discussion. The ground is still smoldering. They have lost everything that they worked for - and more. They are real people and we should keep that in mind when passing any judgement.

 

[CalGalTraveler]

When we were researching insurance for our property in a forested area, we were told that many major carriers pared back but not cancelled every home in a neighborhood to manage overall risk. You want to be one of the homes they carry because Calif. Fair plan is terrible coverage.

I pay certified fire dept defensible space crews to cleanup the Tahoe property for defensible space every summer.

I want verifiable proof that we took measures to protect the property to avoid cancellation, or if there is a wildfire and the insurance company attempts to deny coverage on the basis of not maintaining defensible space.

 

[Ken555]

If you aren't watching the news... the fire is now threatening the San Fernando Valley - Encino, Tarzana, Sherman Oaks, etc.

 

[CalGalTraveler]

PSA...I have a relative in San Diego who was notified of insurance non-renewal because the insurance company claimed lack of defensible space. Apparently they had either drone or satellite images of the property.

My relative was able to cut down the trees and bushes before the cancellation deadline and their broker was able to appeal and was reinstated.

Bottom line: You can appeal if they tell you why they are cancelling and fix the situation. Of course this was before the LA fires. YMMV

 

[Carolinian]

When we were researching insurance for our property near Trucker, we were told that many major carriers pared back but not cancelled every home in a neighborhood to manage overall risk. You want to be one of the homes they carry because Calif. Fair plan is terrible coverage.

I pay certified fire dept defensible space crews to cleanup the Tahoe property for defensible space every summer.

I want verifiable proof that we took measures to protect the property to avoid cancellation, or if there is a wildfire and the insurance company attempts to deny coverage on the basis of not maintaining defensible space.

North Carolina has a state sponsored plan for insurance on the coast where sometimes the private carriers do not write policies. The coverage in those plans is not bad for a fire and extended coverage policy, but without liability coverage. Our insurance carrier always compares what is availible both ways. This year, our previous private carrier on our rental properties in anothere county from where we live raised their rates and it was cheaper with essentially the same covergage to use the state sponsored plan plus a separate liability policy.

I think more states are going to offering a state plan. I have relatives in Florida and that is how they insure their house.