The Problem: Wildfire Insurance Crisis in California
In recent years, California has faced an increasing number of devastating wildfires, which have not only caused widespread destruction but have also led to a significant crisis in the insurance industry. This crisis affects homeowners, developers, and the overall growth of housing in our state.
Key Issues:
- Rising Insurance Costs: With the increasing frequency and severity of wildfires, insurance companies are facing higher costs. This has led to many insurers pulling out of the California market or significantly raising premiums.
- Outdated Legislation: The California Standard Fire Policy, established in 1943, does not adequately address the unique and catastrophic nature of wildfires, treating them as standard fire risks rather than the distinct hazards they are.
- Impact on Housing Development: Developers are finding it increasingly difficult to build in wildfire-prone areas due to the lack of affordable and reliable insurance options. This is hampering the state’s ability to meet its housing growth targets.
- Limited Insurance Availability: The California FAIR Plan, designed as a last-resort insurance option, has seen explosive growth, indicating that more properties are being forced into this high-risk pool due to a lack of available options from traditional insurers.
Our Suggested Solution
To address these challenges, we propose a fundamental change to the way wildfire risks are insured. Our solution focuses on modernizing the California Standard Fire Policy to recognize the unique nature of wildfires.
Proposed Changes:
- Amend the California Standard Fire Policy: Update the policy to distinguish between wildfire and standard fire perils. This allows insurance carriers to treat wildfire as a catastrophe peril, separate from non-wildfire risks.
- Define Wildfire Explicitly: Include a clear definition of wildfire, encompassing various types such as wildland fires, forest fires, brush fires, and more. This definition should recognize the rapid spread and difficulty in controlling these fires, as well as the associated risks like smoke, heat, and soot.
- Adjust Coverage Requirements: Allow insurance policies to exclude wildfire from the standard fire coverage, enabling insurers to offer specialized wildfire policies that reflect the true risk and cost of these events.
- Encourage Market Competition: By creating a more sustainable insurance framework, we aim to attract insurers back to the California market, increasing competition and availability of coverage options for homeowners and developers.
Detailed Letters to Key Officials
To support our advocacy for these changes, we have sent detailed letters to key officials, including Governor Gavin Newsom and Insurance Commissioner Ricardo Lara. These letters outline the current issues and our proposed legislative amendments in detail.
You can read the full letters here:
Want to contact your representative? Find them here!
Conclusion
The wildfire insurance crisis in California requires urgent and thoughtful reform. By modernizing outdated policies and recognizing the unique nature of wildfires, we can create a more resilient and competitive insurance market. This will not only protect homeowners and businesses but also support the growth of housing in our state.
We encourage our customers to understand these issues and support the proposed solutions to ensure a safer and more sustainable future for all Californians.
