California Wildfire insurance crisis is now hitting even harder

If Californians didn't already know about the wildfire crisis that's been burning through the state for the last few years, pictures of low-hanging smoke from the Caldor fire blocking views of Lake Tahoe should have driven the new reality home more than ever this fall.

But for many homeowners who live in unburned areas nevertheless deemed possibilities for future blazes, another crisis is hitting ever harder.

That's the availability of homeowners' insurance and the fire coverage it provides, which has become increasingly scarce with each passing year.

It's high time to get creative and solve this thorny problem.

Yes, some owners of intact houses not yet torched are still OK. That's thanks to an edict from state Insurance Commissioner Richard Lara forbidding insurance companies from canceling or "non-renewing" fire coverage for homeowners on the fringes of this year's two most destructive fires: the Dixie fire that spread for weeks across many tens of thousands of acres in several Northern California counties and the Caldor blaze that seemed to follow U.S. Highway 50 from Placerville toward Lake Tahoe.

But that's a stopgap measure lasting only one year. Most affected property owners know their policies will be canceled the moment their insurance companies can dump them.

No insurance firm wants to be bankrupted by California conflagrations the way Pacific Gas & Electric Co. was by the unprecedented damages from fires it sparked from 2017 through 2019, essentially an introductory period for today's blazes that are hotter and faster-moving than the wildfires of just a few years ago.

What's developed is a situation akin to the boycott the insurance industry inflicted on California in the mid-1990s, after several companies were nearly bankrupted by earthquake payouts after the 1994 Northridge earthquake damaged heavily populated parts of Los Angeles.

Every significant insurance company canceled almost all California property policies at that time, protesting a law that forced any firm issuing property insurance also to offer quake coverage. The industry wanted out of the earthquake insurance business.

Legislators and then-Insurance Commissioner Chuck Quackenbush could have fought back by denying the lucrative right to sell car insurance to any company refusing to sell quake policies. But Quackenbush, whose election was largely funded by insurance companies and brokers, instead caved to their demands. The result is the current California Earthquake Authority, which issues most quake policies in the state, separately from standard property insurance.

In an era when many tens of thousands of homeowner policies have been canceled in and near past or prospective fire areas, maybe something like the CEA is needed to make sure property owners can get insurance at fairly reasonable rates.

Where policies are canceled today, some homeowners go bare, but many wind up buying coverage from the state's last-chance Fair Plan, whose rates are astronomically higher than what insurance companies charge in non-fire areas. Fair Plan enrollment jumped from 140,000 to more than 200,00 in the last two years, even though a few companies returned to writing new policies when they were allowed astronomical rate increases.

So it may be time for the Legislature to at least partially separate other property coverages like liability from fire insurance in wildfire circumstances.

That way, homeowners could decide how much fire coverage to buy, rather than being forced to insure the entire value of their properties against fast-moving flames. They could be required to substantially fireproof their homes in order to qualify for such an arrangement, making one-time investments rather than large payments every year.

One thing for sure: So far, no one has thought creatively enough about how to manage the wildfire insurance crisis in an era when it seems several highly damaging blazes will afflict this state every year.

Simply ordering companies to leave policies in place for a year kicks the can down the road a short distance, but ultimately solves little, for homeowners in wildfire areas will eventually need new policies.

Californians have found creative solutions to every major problem that's ever confronted this state, from transporting water hundreds of miles to putting Covid vaccines in tens of millions of arms. Why not approach this major problem with the same style of resolute, outside-the-box thinking?

Email Thomas Elias at [email protected].