More SLO County homeowners are losing their fire insurance. What are their options? [The Tribune (San Luis Obispo, Calif.)]

Mar. 8—In early February, Don Gaede got the same news more and more homeowners across California are hearing from their insurers: His Farmer's Insurance homeowners coverage plan was being dropped in June.

The reason: Fire risk.

Gaede and his wife moved from Fresno into their home on Fixlini Street near High School Hill around two and a half years ago, hoping to settle down and retire in a house with panoramic views of San Luis Obispo, he said.

Instead, the Gaedes are facing a steep jump in homeowners insurance payments from around $1,200 a year to more than $5,000, according to their insurance agent's projections.

Like an increasing number of San Luis Obispo County residents, Gaede now has few competitive insurance options to choose from and said he will likely have to turn to the California FAIR Plan, the "insurer of last resort" offered by the California Department of Insurance that insures higher-risk homes against wildfire and smoke.

"Insurance companies see this coming, and they're going to try to protect their bottom line," Gaede told The Tribune. "I don't blame them for getting more picky about who they're going to insure."

Built in 2018, Gaede's home is backed by a lush, densely forested patch of open space along the foot of High School Hill and looks out over southern San Luis Obispo from its elevated location.

The view is beautiful — well worth the approximately $1.7 million the Gaedes paid for the home in 2021, he said.

Whether or not it's worth paying the FAIR Plan's higher cost remains to be seen, he said.

"Fortunately, we can afford to pay the increased cost, but if we move to another house in the future, I'd look carefully at the fire risk before buying," Gaede told The Tribune in an email. "My agent could not explain why we were being dropped; I don't think it's her decision to make."

More SLO County homeowners using FAIR Plan

Just a few years ago, Gaede's home on the outskirts of San Luis Obispo would not have needed the FAIR Plan.

Established in 1968, the FAIR Plan has grown more and more prevalent across California over the last five years, with the number of policies rising steadily as the increasting threats from climate change and inflation raise pressure on insurers to pull out of the state.

Though less than 3% of California residents use the insurance today, the program has grown from fewer than 127,000 policies in 2018 to more than 350,000 today, according to the CDI.

As recently as 2021 — the most recently available year for data tracked by the CDI — San Luis Obispo County was home to 621 renewed and 385 new FAIR Plan policies.

That's a big jump for a county that has historically accounted for a relatively small share of the overall number of FAIR Plan policies written in the state; in 2015 the FAIR Plan wrote just 50 new policies and renewed 103 in the county.

As non-FAIR Plan policies have become more difficult to find, the past year presented a "hard market" for consumers and brokers to navigate, Goosehead Insurance broker Tina Donaldson-Jazinski told The Tribune.

During the COVID-19 pandemic, the California Department of Insurance did not raise auto insurance rates, and many clients received auto insurance refunds during a period with vastly reduced car use, Donaldson-Jazinski said.

Though the CDI has allowed auto insurance rate increases since then, those unprofitable years — and stunted insurance rate growth over the past four years — have led to losses at many carriers, Donaldson-Jazinski said.

Combined with increased wildfire risk and inflationary pressures on production and supply costs for commonly insured property such as autos and homes, it's led to several larger carries pulling out of writing policies because it's no longer profitable, Donaldson-Jazinski said.

Now, these compounding effects are hitting some consumers, Donaldson-Jazinski said.

Many of the remaining carriers are non-admitted — meaning they're not backed by the California Department of Insurance against financial failure — and are facing an increase in requests to write new policies as clients look for someone to cover their property, Donaldson-Jazinski said.

"I talked to people that say literally every day, 'I'm trying to find insurance, but nobody will insure me,' and I say, 'Listen, you're not calling the right people, because there are carriers out there,'" Donaldson-Jazinski said. "I will exhaust my (admitted and) non-admitted carriers before I go to California FAIR Plan."

Donaldson-Jazinski said that's because adding individual pieces of coverage to a FAIR Plan policy a la carte is usually more expensive than the bundles offered by major insurers.

In an email to The Tribune, CDI senior deputy press secretary Madison Voss said FAIR Plan policies tend to be more expensive, but she could not specify how much a FAIR Plan policy costs on average, as the CDI does not record that information.

"Insurance companies are increasing their rates under outdated regulations, with no benefit for consumers in making insurance more available," Voss said. "Today, there are many people who cannot find insurance at any price except from the FAIR Plan, which is expensive and limited coverage."

The Tribune reached out to multiple major insurers for comment but did not receive replies.

Rural properties contend with higher risk, scrutiny from insurers

Gloria Fiscalini, a San Luis Obispo County homeowner and cattle rancher based on the North Coast, said she's seen plenty of her friends and neighbors in the county's more rural spaces lose their insurance and scramble to find alternatives before going with the FAIR Plan.

Her ranch includes plenty of grazing space for her cattle — which keeps her grass and fire risk low — but is isolated from most fire services.

Fiscalini got the same call from her provider as Gaede around four years ago due to fire concerns related to brush maintenance on her property, but she has been able to keep her property covered in the following years.

Even with a policy in place that fits her property, she's worried that like many of her friends, she'll soon be paying "a lot more money for less coverage" through the FAIR Plan.

Fiscalini said several of her friends have reported receiving emails from their insurance brokers warning of increased scrutiny from insurers, who are less likely to insure homes with issues like chipped paint, missing railings on stairs or decks, trampolines, certain dog breeds, trees that overhang the roof, vegetation surrounding the structure, overall roof condition, cracks in exterior walls and debris around the home.

The email advice from Morris and Garritano also warned that insurers are in the process of conducting exterior inspections of policyholders' properties, including sending in new photos of the home, third-party inspections and obtaining aerial photographs of roofs to update their risk factors, though this varies from carrier to carrier.

To comply with the new audit standards, Fiscalini said she'll have to make expensive changes to her property, including removing plants from within 5 feet of the home and replacing her wooden deck — changes not every rural homeowner can afford.

She said that while she understands the threat presented by wildfires, her property's relatively low risk and history without wildfires should factor into whether all fire mitigation measures should be necessary for every property.

"If I get a letter and have two months or three weeks to get everything put together, I am not going to be a happy camper," Fiscalini told The Tribune.

Mitigation efforts no longer sufficient

As an alternative way to insure a property against fire and smoke, the FAIR Plan leaves some things to be desired, Donaldson-Jazinski said.

She said the plan's main issues for consumers stem from generally higher costs, a recent system redesign that has extended policy writing times from less than a week to as much as a month , and the need to purchase individual insurance policies for other forms of protection, as the FAIR Plan strictly covers homes against fire and smoke and does not cover flooding, earthquakes or other natural disasters.

Homeowners can generally lower that premium by implementing mitigation and protection measures such as central smoke and carbon monoxide alarm systems, cutting vegetation such as trees and bushes at certain heights and distances from the structure, or simply by being near a fire station or hydrant, she said.

Donaldson-Jazinksi said it's important to note that no two FAIR Plan policies will look alike due to the variety of risk factors that could be at play and what mitigation measures a homeowner might apply.

The FAIR Plan's viability for homeowners ultimately comes down to how much they're willing to financially invest in their homes, with premiums under the plan going as high as $20,000, Donaldson-Jazinski said.

"I have some people that think that $500 is high, and I've got some people that don't think it's high until it hits $10,000," Donaldson-Jazinski said. "What is a high premium?"

Gaede said he'd be "more than willing" to spend time and money performing whatever mitigation was needed to keep his coverage — such as trimming trees 6 feet up from the ground, spacing out bushes and doing around $10,000 in landscaping — but ultimately such measures would not have been enough to let him keep his plan.

As an environmentalist, Gaede said he thinks there should be more incentives to take proactive steps against wildfires and other climate-related disasters.

"I think there should be some ways to get certified that your house has been armored against wildfire, but then there should be some guarantee that you've covered," Gaede said. "I really think from climate change, we're all going to have to harden our houses against wildfire in California."

This story was originally published March 8, 2024, 5:00 AM.

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