Source: Palo Alto Online
There are no easy answers, but Assemblymember Marc Berman's webinar outlines how homeowners can find insurance
With insurance companies ending coverage of thousands of local homes, a lament is growing along the Peninsula.
Property owners report policies are being dropped after 30 years with the same carrier. A 28-unit affordable-housing complex lost its coverage because the insurance carrier fears sea level rise. Another property owner failed to find any insurance for a newly purchased home that had extensive work done to protect against wildfire, including the addition of non-combustible siding and a metal roof.
These and other stories were shared by property owners who attended a Wednesday, July 19, webinar held by California Assembly member Marc Berman to address the issue of insurance carriers who are dropping coverage throughout the state.
In one case, despite investing in fire-proofing the home and property, the new owners could only obtain insurance through the California Fair Access to Insurance Requirements (FAIR) Plan Association, which offers policies that are both expensive and have considerable limitations. And without strong insurance protection, the apartment owner worried that she can't get loans for repairs and other necessities.
A survey by Berman's office in June of his district's residents living in communities that abut against wildland areas found that out of 320 respondents about one-third had been dropped by their insurance company. Berman's district ranges from Pacifica to Saratoga and includes Menlo Park, Palo Alto, Mountain View and Los Altos.
More than 350,000 homeowners statewide living in areas with high wildfire risk have had their coverage dropped since the state began collecting the data in 2015, State Insurance Commissioner Ricardo Lara said during the webinar. That number is likely to grow as insurance companies, fearing bankruptcy from multiple claims for fire and flood damage against high-priced properties, are backing out of the California property insurance market as a result of climate change.
At least 350 concerned people attended Berman's online informational meeting, which included Lara; Woodside Mayor Chris Shaw; Daniel Berlant, the California Department of Forestry and Fire Protection (Cal Fire) acting state fire marshal; Denise Enea, executive director of Fire Safe San Mateo County and former Woodside Fire Protection District fire marshal; and James Lindsay, city manager of Saratoga.
Wholesale dumping of homeowners by insurers isn't new. In 1968, after the Watts riots in Los Angeles, insurers were not issuing new policies. So legislators passed a state statute establishing the California FAIR Plan Association, a syndicated fire insurance pool composed of all insurers licensed to conduct property and casualty business in California, based on their share of the market, Lara said. Taxpayers don't fund the program.
But the plan is a policy of last resort, he said.
"About 3% of the overall market is in the plan. It's a piecemeal product and has limits," he said.
The plan also hasn't been updated since the 1970s. Lara said he wants to modernize the FAIR Plan and increase coverage to 3 million homes and 20 million commercial properties.
Instead of the companies offering expensive wrap-around insurance as they do now through the program, Lara wants to require the companies to offer comprehensive coverage. Insurers are objecting, saying they don't want the FAIR plan as competition.
"They sued us and we are in court. We have won every step of the way," he said.
Lara's office is also working on five pilot projects related to innovative insurance programs. A pilot program in Pajaro would create community insurance purchased by governments in high-risk areas. The idea is that everyone would have basic property insurance coverage so there's a better chance of recovery if a disaster strikes.
"This is the future. New York did it around flood; Hawaii did it around their coral reefs" to restore them after storm damage, he said.
Similarly, a sea-level rise pilot project in Imperial Beach in San Diego County will allow residents to enter into a flood insurance program purchased by the city. The program would offer a level of protection to everyone, he said.
Incentive programs: the way forward
Under a new California law, communities and residents who take part in the National Fire Protection Association's Firewise USA program can receive discounts in their insurance costs, Lara said.
While there's no guarantee an insurance company won't drop a policyholder, insurance companies want property owners to reduce their risks. Whole communities who meet the criteria might lower risks enough to prevent dropped coverage.
Lara said his office has been meeting with stakeholders from state and federal agencies to trade associations to find ways to reduce fire risk in California that might stop the exodus by insurers.
Some of the planning and programs — particularly the state's additional funding for clearing out 50 years of overgrowth, adding fire breaks and other mitigations — appear to be helping.
Communitywide mitigations and home hardening based on science and research are also having a positive impact in reducing fire risk, data shows. As are programs to reduce fire fuels.
"Last year these investments were working. Hardened homes are not catching fire, and fuel breaks are preventing the spread of fire," Cal Fire's Berlant said.
Enea, who retire as fire marshal for Woodside Fire Protection District in 2019, said incentives are crucial to get residents to comply with home hardening and creating defensible space to reduce fire risks. She tried "shock and awe" warnings, but they didn't work, she said.
"Getting local agencies to use grants and build on the programs — that really is the ticket," she said.
Enea worked with the town of Woodside to offer an incentive matching program in which residents can earn $3,000 toward home hardening and creating defensible space. She is also in charge of Woodside's hazardous tree-removal program near roads and other locations that create fire risks.
Lara said that, despite the headlines about insurance companies pulling out of the state's housing-coverage market, 115 companies are writing insurance policies, and that's been consistent over the last four years. Yet, there's a delicate balance between consumer protection and solvency of the insurance companies.
"The last thing I want to see is that they are too exposed to pay off claims," he said.
Every California homeowner is paying for the amount of risk for where they live. Lara's office has negotiated with insurers to make sure the brunt doesn't fall only on residents living in the communities abutting wildlands and argued for rates that would be more democratized throughout communities statewide.
While some might argue that people would pay for where they choose to live, Lara said there are other things to consider.
"People living in the wildland-urban interface are not all of the same income stream. Many have been pushed out of the urban core. And one fire alone undoes everything done in L.A. to clean up the air. Fires are happening in the entire state," he said.
More information about reducing home and property fire risk can also be found at readyforwildfire.org/; firesafesanmateo.org and sccfiresafe.org.
Editor's note: A previous version of this story stated that the number of companies writing insurance polices was 150 rather than 115.
Sue Dremann, Palo Alto Weekly