Millions of California homeowners are now at the mercy of the insurance market after a moratorium guaranteeing insurance expired.
New wildfires may extend protection for some residents in fire-threatened areas. Still, nearly one in five, or 18% of households, could lose protection.
Devastating fires in 2017 and 2018 wiped out more than 25-years of underwriting profits for the California insurance market, according to risk assessment company Milliman. As insurers recalibrated risks, homeowners saw soaring rates and canceled policies.
It is hard to determine if the cancellation moratoriums are effective policy.
According to Bloomberg, the state saw an uptick in non-renewals for homeowners insurance of 31% in 2019. Over that same period, the state’s slim homeowners insurance alternative, the FAIR plan, saw a 36% increase.
In October, the commissioner’s office will release the numbers of insurance cancellations for 2020. The effects of the moratorium law will remain unknown for some time, according to experts. It could take upwards of a year to figure out how many of the 2.4 million homes lose their insurance protection.
“Even when these moratoriums end, they have given people time to make their homes safer,” California Insurance Commissioner Ricardo Lara wrote to Bloomberg news. “I expect insurance companies to take that into account.”
As regulators had hoped, homeowners and their communities may be getting better at fire protection, Mark Sektnan, vice president for state government relations for the American Property Casualty Insurance Association, told Bloomberg.
Sektnan pointed to the fire that swept near Lake Tahoe this summer. The community was aggressive about forest management after devastating fires in 2007.
“The firefighters will tell you that when the fire got to that area, the flames dropped from like 20 feet in the air to like five feet in the air,” Sektnan said to Bloomberg. “We can’t prevent wildfires, but we can ensure they are less intense, which increases the ability of properties to survive.”
Photo: A smoke plume from the 2018 Woolsey Fire in Southern California seen from Hollywood Hills. (Credit: Jeff Pinette / Shutterstock.com)