Insurance market ‘collapsing’: County wants state of emergency called

As affordable property insurance options plummet for people in the mountain communities, county officials on Tuesday asked Sacramento to declare a state of emergency.

"Something has to be done. Folks are frustrated," said San Bernardino County Board of Supervisors Chair Dawn Rowe.

Rowe said she and her field representatives hear it said in every community meeting they attend: "My insurance is getting canceled, I cannot get insurance or I am being forced into the FAIR plan."

Kevin Kennedy, owner of Big Bear Insurance, said insurance companies continue to cancel or limit policies in mountain areas.

"For the most part, only the FAIR Plan is writing fire insurance in the Big Bear area," Kennedy said.

"It doesn't mean people can't get homeowners insurance, but they have to buy the FAIR Plan and then they have to buy a wraparound policy."

The California Fair Access to Insurance Requirements, or FAIR, Plan covers basic hazards, but if you want coverage for theft, liability or water damages, a wraparound policy is also necessary, he explained. "The two of them together make a complete homeowner policy."

The bottom line, Kennedy said, is it's not hard to get insurance, but it's more expensive than it used to be.

Big Bear is one of the hardest hit areas in the state when it comes to reliance on the more expensive FAIR Plan. The California Department of Insurance released a list of areas of wildfire hazards more than 15% of policies are written by FAIR. The Big Bear area is on that list.

Trying to get everyone on board

The county resolution adopted Tuesday states the lack of property insurance makes it even harder for Californians to buy and maintain property — including affordable housing.

Rowe said she also fears that if there is a large-scale catastrophic loss in California, the FAIR Plan will not be able to cover its expenses.

A county resolution adopted Tuesday requests that California Insurance Commissioner Ricardo Lara, Gov. Gavin Newsom and the state Legislature take immediate regulatory action to strengthen and stabilize California's marketplace for homeowners and commercial property insurance.

"We're trying to get the Legislature, the executive branch and the governor on board with the insurance commissioner to direct regulatory change," Rowe said.

She wants state officials to look at regulations in California and compare them to other states. One of the main differences is the use of catastrophic modeling — programs that evaluate risks to a property using both past incidents and future forecasts. Insurance companies elsewhere in the U.S. are allowed to consider those future models when setting rates.

"In California, they are forced to use 20 years of historic loss data, so rates are only based on past losses, not what the future losses could be," Rowe said.

Unable to consider the likelihood of future fires, flooding and other hazards, it may make business sense for insurance companies to pull out of California, she added.

The insurance commissioner, Lara, introduced a new regulation earlier this year to let insurances use catastrophe modeling. He also unveiled a regulation designed to speed up the Insurance Commission's review of proposed premiums.

But the county says those reforms won't take effect soon enough — not until at least 2026 and possibly later.

The county's resolution asks state officials to take immediate action to improve the efficiency and speed of the Department of Insurance's rate approval process and maintain the solvency of the FAIR Plan.

Insuring the insurers

Kennedy said other actions are being considered as well to make California more attractive to insurers.

"Most insurance companies purchase re-insurance, so if they do have a really bad year, it gets covered by another insurance company," he said.

But they can't write off the cost of that re-insurance as a business expense. "Right now they're not allowed to factor re-insurance costs in their premiums that they apply for from the Department of Insurance," Kennedy explained.

"Part of the negotiations with the companies is to allow them to write off those expenses."

Harden your home for discounts

The insurance market ebbs and flows, and Kennedy hopes the future promises more options for California property owners.

"It's kind of a mess here in California right now and we hope things will sway back the other way," he said.

In the meantime, there are some things FAIR Plan customers can do to keep costs as low as possible. It offers discounts for property owners who protect their structures from fire as much as possible.

"There's a lot that people can do," he said.

However, if you want the discount, you have to do everything.

There are two kinds of discounts, for lowering the risk to your home and to surrounding property against fire. "Each of them has a list of things you have to do and you have to do them all," he said.