Manny Mello Comments on Increasing Property Insurance Premiums Due to Wildfire Risk

Property Insurance Challenges in Rural Areas Amid Increasing Wildfires

Property insurance has long been difficult to obtain in rural parts of the state, and it is becoming increasingly challenging as wildfires grow more catastrophic. Those who already have insurance can expect premium increases.

Manny Mello, an insurance agent with George Petersen Insurance Agency in Eureka, advises: “If you already have insurance, do your best to protect it and maintain it. Pay it early, pay it often, pay it in full because this is a very, very tough time to be an insurance buyer.”

Rising Premiums and Limited Availability

In the current climate, a 20% to 30% rate increase should be considered reasonable. Insurance buyers are better off paying the increase than seeking cheaper policies, which may be unavailable due to insurer moratoriums in fire-affected areas. Mello shared his personal difficulty securing insurance for someone in the Willow Creek area due to the Red Salmon Complex Fire.

There is more availability in the Eureka-Fortuna-Arcata area, but insurers are leaving the market overall, making affordable property insurance harder to come by. This is especially true for outlying areas and locations near active fires.

Non-Renewals and State Response

In August 2019, the state Department of Insurance released data showing increased policy non-renewals in high wildfire risk areas—rising more than 10% in seven counties. State Insurance Commissioner Ricardo Lara issued a voluntary one-year moratorium on insurers refusing renewals for wildfire reasons and a mandatory one-year moratorium for those adjacent to wildfire emergencies, set to expire in December.

North Coast Assemblyman Jim Wood commented on the probability of more non-renewals and rising rates statewide, saying, “It’s really the game of risk. Companies don’t want to write policies in those areas.”

The Growing Wildfire Threat

Wildfires on the West Coast have been growing larger and more destructive each year. By the end of the last fire season, over 7,860 fires burned 259,823 acres, caused three deaths, and damaged or destroyed 732 structures. This year’s fire season, still ongoing, has already produced 7,718 fires that burned 3.1 million acres, caused 20 deaths, and damaged or destroyed 4,936 structures.

“These structures aren’t all homes—they could be barns or outbuildings,” Wood explained, “but regardless, that’s a big hit to insurance.”

Industry Challenges and Consumer Impact

Amy Bach, executive director of the consumer advocate nonprofit United Policyholders, said insurers have been trying to maintain profitability amid worsening climate effects since Hurricane Katrina in 2005. She highlighted the rural California home insurance crisis—customers being dropped or facing premiums rising from $800 to nearly $3,000 annually.

Insurers must provide 75 days’ notice before policy expiration if dropping customers. Senate Bill 824 offers disaster victims two years of non-renewal protection and one year for those adjacent to disaster zones.

“It’s a seller’s market,” Bach said. “Homeowners are in a weaker position with fewer and less favorable options.”

The Surge in FAIR Plan Usage

As a result, enrollment in the state’s insurer of last resort, the FAIR Plan, has surged. However, the FAIR Plan is known for being expensive and less comprehensive than private market policies.

Legislative Efforts and Outlook

Legislators have proposed bills to address wildfire damage and insurance challenges, but progress has been slow due to industry resistance and opposition from less fire-prone regions.

“It’s very, very frustrating,” Wood said. “With the fires and damage we’ve seen, my hope is that people will wake up and realize we need to take action.”

This article was originally published by the Times Standard.