SACRAMENTO (KPIX 5) — Hundreds of thousands of Californians have lost their home insurance coverage due in large part to wildfires that have ravaged the region. State insurance Commissioner Ricardo Lara is taking action, mandating that California’s insurance companies do more to work with consumers.
Lara is starting with the FAIR plan, which is supposed to be California’s insurer of last resort. He’s requiring that the FAIR plan become more comprehensive. Currently the FAIR plan is often limited to just fire damage–that will change starting in April 2020.
“We have to sound the alarm now,” Lara said.
Homeowners like Annabelle Hall who have been with AAA insurance for more than a decade are being dropped. Hall lost her coverage the same day the Kincade Fire started.
“I didn’t think AAA would do that, we’ve been with them for a long time, my mother was with them, I never thought they would do this but they did,” Hall said.
It’s a growing trend across California: 350,000 people have lost home insurance. Orinda, where Hall lives, is the new hot spot. Non-renewals in her zip code are double the Bay Area average and she says she worries about the ripple effect it’s going to have. “People won’t be able to sell their homes, they won’t be able to get a loan to buy a home, it’s a catch 22.”
The non-renewals are directly correlated to devastating wildfires we’ve seen in recent years. After the Tubbs Fire in 2017 and the deadly Camp Fire that ravaged Paradise in 2018, insurance companies paid out $25 billion. AAA told Hall they won’t renew her because she lives on a hill near the woods, on a small road, but these are also some of the reasons why she wants to live there.
“I mean this doesn’t really make any sense, it’s like not insuring a car because they can get in an accident…maybe we need to change some laws,” she said.
Which is exactly what State Insurance Commissioner Lara intends to do. Starting in April of 2020, the FAIR plan will be forced to increase coverage limits from $1.5 million to $3 million.
Customers will be able to pay a monthly fee by credit card or electronically, something they cannot do now. Lara says the expectation is that the FAIR plan will be a comprehensive plan able to make people whole.
In January, Lara says he’ll ask the legislature to start targeting insurance companies that are issuing these non-renewals.
“Unless you force them to come to the table, they won’t come to the table,” Lara said.
He wants to mandate that insurance companies work with their customers and give them the chance to do things to harden their homes, like cutting down trees, clearing away brush, or ensuring the property is accessible.
“What we’re proposing is allow us to mandate insurance coverage for homeowners who have done the right thing,” he said.
Hall says she was able to find coverage for the next year through another provider, but she’s worried about the future and if fires in other communities will put the value of her nest egg at risk.
“If we can’t sell our house, that’d be terrible,” she said.
The FAIR plan’s president has said this mandate could have “unintended consequences” like increasing operating costs that could result in higher rates for consumers. The FAIR plan’s board has 30 days to come up with a new operating plan.