Lloyd and his wife then bought another home in Hidden Valley Lake, a town that has taken ambitious steps to reduce flammable vegetation, but their insurance premium still amounts to more than $4,500 a year, or more triple what it was for their last house in Kansas. Lloyd is concerned that his insurance company will increase its price further under the new rules.
Other Western states, like Colorado and Oregon, also see gaps in insurance coverage after large wildfires, although their problems are less acute than those in the Golden State. In Colorado, for example, authorities recently established a state fire insurance safety net like California’s FAIR plan, since only in recent years have customers been massively abandoned. California’s big deal with the insurance industry provides a model for other states: If you want to close coverage gaps, you need to give insurers greater authority to set prices.
Even that might not be enough. Recent years have seen a respite from major wildfires like those that struck in 2017 and 2018, but this week’s fires in the Los Angeles area could cause billions of dollars in damage, on par with an event like the campfire.
Joel Laucher, a former regulator and fire insurance expert at the consumer advocacy organization United Policyholders, said damage from the Los Angeles fires could lead to further price hikes and more availability shortfalls.
“These will definitely be major losses,” he told Grist. “Some regions will certainly face new challenges, as insurers will be able to charge at the rate they believe those regions deserve to pay.” Laucher said insurance companies wouldn’t be able to refuse to renew as many policies as they could under previous state rules, but they could still avoid selling policies in some of the affected areas.
Frazier, of the insurance group, expressed similar concerns. He said a new wave of monster fires on the scale of 2017 and 2018 could drive the state’s insurance industry away again, despite the commissioners’ reforms.
“If we were to experience a few more unprecedented years, all bets are off,” he told Grist.
