Homeowners at Insurance Workshop hear that insurers may resume writing policies, but prices to stay high

The Mountain Community Fire Safe Council's Town Hall Homeowners'

Insurance Workshop on Thursday September 12 was well attended, with over

60 local homeowners seeking information and help with rising insurance

rates and cancelled policies. The featured speakers were California

Department of Insurance representative Sharon Smith and Hemet insurance

Broker Bob Severns. MCFSC Executive Director Callie Squires introduced

the speakers and briefed the public on the group's efforts to improve

local fire safety, and programs available to help homeowners. Squires

said the meeting would be recorded and posted on their website,

mcfsc.org.

Smith is the Outreach Analyst for Community Relations and Outreach

Branch, San Diego County Region. She began with a sketch of the market

forces policy holders are facing: Inflation and labor shortages increase

rebuilding costs; As risk from wildfire has grown in California, the

insurance market has contracted as insurance companies try to protect

their own solvency, meet financial obligations, and comply with

regulatory mandates. This has driven the old familiar companies like

Allstate and State Farm to cancel policies in places like Idyllwild.

Smith described how, of the 115 insurers admitted to California's

market, 12 cover 85%. She showed a slide of 2023 requested and granted

increases by these insurers, including figures of 21% for State Farm and

39% for Allstate. Smith noted a recent headline, as Allstate seeks a 34%

increase this year, and clarified that these increases are for a

company's statewide portfolio. An insurer may double or triple some

premiums, as local homeowners know, and leave others alone.

These increases, as Smith explained, are a response to ten years of

conditions in which homeowner's insurance companies "have done far worse

in California than nationally." Figures for the ten years leading up to

2021 showed that the ratio of losses paid to premiums taken in

nationally was 59.7%, and in California 73.5%. During this time, the

national direct profit on insurance transactions stood at 4.2%, while

California represented a 6.1% loss for companies. The table also showed

that seven top companies, including Allstate and Farmers, have paused or

restricted writing new homeowner's policies in the state. The credit

rating agency AM Best has downgraded the outlook for the top 12

companies due to their concentration of risk in California.

The Department of Insurance cannot force companies to write policies

here, Smith underlined but works through various regulations to "address

the root causes" of the exodus. They are attempting this by working to

improve fire safety, and mandating that insurers share their rating

system with their customers and provide discounts for those who make

their homes safer.

Smith described the Department's "three prong" strategy: making

insurance available in at-risk areas, creating a more resilient

insurance market, and protecting communities from climate change. On the

first front, insurers are being offered three ways to comply; either

take on a one-time 5% increase in the polices they write in at-risk

areas, take 5% of their market share from polices now covered by the

FAIR Plan, or "write 85% of their statewide market share in high-risk

areas." This last is difficult to parse. The CDI website explains it

this way: "If a company writes 20 out of 100 homes statewide, it must

write 17 out of 100 homes in a distressed area."

In exchange, insurers will, according to the CDI website, "be able to

take advantage of something they've lobbied for long and hard:

catastrophe modeling." Now the companies use 20 years of historical

records, which do not take into account recent mitigation. These new

forward-looking models, using newer technology, will judge parcel by

parcel risk. Every other state does this, Smith said, and California

uses it for. earthquake insurance now. Next year it will apply to fire

risk also.

According to Smith the insurers intend to resume writing policies, at

one workshop an Allstate representative said that once the new rules are

in place they are going to be "writing in all corners of the state

again." This does not mean those policies will be affordable, Smith

cautioned: "Companies need to write here again and compete. As far as

short term affordability, I'm not going to say it is going down.

Availability is the goal, not affordability, I know that is not what you

want to hear." Smith added that when insurers resume writing policies in

the state, priority will be given to those who have hardened homes, and

done their mitigation and abatement. Squires pointed out that help is

available for homeowners facing big abatement projects, with grant

programs that pay 75% of the cost in most cases, and all cost for those

who meet certain eligibility requirements.

Several times the question came up about the scores that companies use

to determine fire risk and calculate premiums. Because each insurance

company uses its own proprietary risk rating system, you and your

neighbors may be looking at very different numbers. One company may use

a scale of 1-5, another 1-12. The state does not mandate which system

insurance companies use to rate and create their Wildfire Risk Scores,

but consumers must be able obtain, on request, their score and the

factors that went into it, and may appeal them if they are based on

outdated or wrong information. If you decide to appeal your score, the

Department of Insurance will help you with that.

Smith and Severns both recommended that homeowners request their risk

ratings:: when they have performed mitigation on their property; when

they apply for a new policy; 45 days before renewing a policy; or when

they are notified of non-renewal.

For more information or to file a complaint visit the CDI at:

insurance.ca.gov, or call their Consumer Hotline at (800) 927 4357. For

information about MCFSC grants visit mcfsc.org or call (951) 659-9208