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

Property insurance has been difficult to come by in rural parts of the state for some time, but it’s going to become increasingly difficult as wildfires continue to grew ever more catastrophic and people who do have insurance will see their rates increase.

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

In this climate, a 20% to 30% increase should be considered reasonable and insurance buyers are better off paying it than seeking out the cheapest policy because it may be unavailable, Mello said. Insurance companies are placing moratoriums on new business or changes in policy in places where a fire has broken out, Mello said, adding he personally had an issue with getting insurance for someone in the Willow Creek area because of the Red Salmon Complex Fire.

There’s more availability in the Eureka-Fortuna-Arcata area, but insurers are also leaving the market as a whole making it tougher to come by affordable property insurance, Mello said. That’s particularly true for outlying areas of the county and especially if they’re by an active fire, he said.

In August 2019, the state Department of Insurance released data showing insurance companies had been dropping an increasing number of residents in areas with high wildfire risk, with policy non-renewals increasing more than 10% in seven sample counties in the state, according to a press release from the department.

State Insurance Commissioner Ricardo Lara called for a voluntary one-year moratorium on insurers refusing to renew policies for wildfire-related reasons and issued a mandatory one-year moratorium on non-renewals for people who were adjacent to a wildfire emergency, which is set to expire in December.

While everyone’s renewal dates are different, North Coast Assemblyman Jim Wood said there’s a high probability there will be more non-renewals across the state and higher rates going forward.

“It’s really the game of risk,” Wood said. “Companies don’t want to write policies in those areas.”

Wildfires are growing larger and more destructive across the West Coast every year.

By the end of the prior year’s fire season, there were more than 7,860 fires that burned 259,823 acres of land, killed three people, and damaged or destroyed 732 structures, according to the Cal Fire website. This year’s fire season, which hasn’t yet hit its peak, has already produced 7,718 fires that have burned 3.1 million acres, killed 20 people, and damaged or destroyed 4,936  structures, as of noon Monday.

“Those aren’t all homes,” Wood said. “They could be barns, outbuildings or whatever, but regardless that’s going to be a bit hit to insurance.”

Insurers have generally acknowledged and been working diligently on implementing strategies to maintain their profitability in the face of increased losses resulting from the worsening climate crisis since Hurricane Katrina pummeled New Orleans in 2005, said Amy Bach, executive director of the consumer advocate nonprofit United Policyholders.

“We already had a crisis in the availability and affordability in home insurance in rural California,” Bach said, with insurers sometimes dropping a customer who would go from paying $800 a year to almost $3,000 a year when they would sign up with a new policy.

Insurers have the right to drop a customer, but they have to give them a 75-day notice before the expiration of their policy. Additionally, Senate Bill 824 protects people where there was a disaster from non-renewal for two years, while those who live adjacent to a disaster zone have a one-year protection from non-renewals.

“It’s a seller’s market,” Bach said. ” … The homeowner is in the weaker position right now as a consumer. There just aren’t that many options and the options that there are are not that great.”

As a result, the number of people in fire-prone areas buying into the state’s insurer of last resort — the state Fair Access to Insurance Requirements or FAIR plan — has seen a surge, according to a news release from the department, though that plan is known for being expensive and less comprehensive than what’s offered in the private market.

The Legislature has been working on this issue, but without more immediate steps, Wood said there might not be an insurance market in the state in the future.

Bills have been proposed that could help remedy both the symptoms and the causes of the wildfires, Wood said, but the insurance industry and a large number of legislators in the statehouse from less fire-prone areas have kept them from being a priority.

“It’s very, very frustrating,” Wood said, “but, you know, with the amount of fires that we’ve had and the damage that we’re having, my hope is that people will wake up finally and realize that we’ve got to do something here.”

This article was orignally published by the Times Standard.