When Mary Morse’s insurance company declined to renew the policy for her Pine Cove home, she found herself in a difficult situation common among homeowners in the mountain communities and other fire-prone areas of Riverside and San Bernardino counties.
Morse, who has lived in her home for 13 years, said she has never filed an insurance claim. She has a fire hydrant in her front yard, and there’s a fire station two blocks down the road.
But due to recent wildfires across California, there’s been a surge in insurance companies declining to renew policies, or hiking premiums, in areas with higher risk of wildfire, like Pine Cove in the San Bernardino National Forest, leaving homeowners with few options.
“There’s a lot of people up here having the same issue,” Morse said of her community in the San Jacinto Mountains in Riverside County. “They’ve had insurance for years and years and all of a sudden (the insurers) wouldn’t renew.”
The trend isn’t limited to the Inland Empire.
New data from the state Department of Insurance revealed that insurers declined to renew policies for 350,000 homeowners living in wildfire-prone areas across the state between 2015 and 2018. Nonrenewals have gone up in areas served by Cal Fire, especially in the ZIP codes impacted by wildfires in 2015 and 2017, the data shows.
The data, released Aug. 20, does not reflect the full impact of fires in 2018, such as the Camp and Carr fires in Northern California and the Woolsey/Hill fires in Los Angeles and Ventura counties. The effect of these fires on the insurance market could appear this year and later, insurance department officials say.
The data did not show how many people who lost their insurance were able to purchase it elsewhere or how much more it cost. It showed, however, that the total number of new and renewed insurance policies increased in high-risk fire areas during the same period.
While insurer initiated nonrenewals were up across the Inland Empire in 2018, a breakdown on the rate of nonrenewals for the high-risk fire areas was not immediately available.
The insurance industry, meanwhile, noted the number of nonrenewed policies remained fairly steady year-over-year and said many insurers are still offering policies in high-risk fire areas.
Rates are periodically adjusted to reflect historical loss trends, as well as things like increased costs for building materials and labor, Luis Sahagun, spokesperson for Farmers Insurance, said in an email.
“When statewide base rate increases occur, it is not unusual for some consumers to experience a higher than average adjustment, while others see a lower than average increase,” Sahagun said.
Morse, like other homeowners dropped by their insurers, found coverage through the California FAIR Plan, a shared market plan that provides last resort coverage to those living in higher risk areas, but it requires an additional wrap policy to ensure full coverage.
Coverage is also limited to $1.5 million on one property. Nearly 57% of these policies are written in Cal Fire service areas, which is up from 47% in 2015, according to the state insurance department’s data.
Morse’s annual premium jumped from $792 for one policy to $1,365 for the California FAIR Plan and wrap policy, she said.
“That’s really the only option they have that’s affordable and will provide the coverage that they need,” said Bob Severns, owner of Severns Insurance Agency in Hemet.
A bigger problem
Homeowners in the mountains and other fire-prone areas have been dealing with the fallout from wildfires for a while.
Larger insurance companies stopped writing policies in the forest areas years ago, Severns said, so homeowners turned to subsidiaries or out-of-state insurers for coverage. Now, even those policies cost more or they are not being renewed, Severns said.
“In 2019, we saw the largest expansion for the nonrenewals go across Yucaipa, San Bernardino, Banning, Beaumont, Cherry Valley, Hemet and other areas and now it’s expanding into Riverside County as well,” said Brenda Meyer, a real estate broker with Cozy Cabins Realty in Crestline in the San Bernardino Mountains. “They’re looking at the close proximity to where they have had fires and there’s higher fire risk.”
To help, Meyer said, the $1.5 million limit under the California FAIR Plan should be raised to $2.5 million. She also would like insurance companies to take into consideration a community’s efforts to reduce fire risk. Currently, communities recognized by the wildfire-reduction Firewise USA program get a 10% deduction on their insurance, Meyer said.
“The San Bernardino Mountains have a very restrictive policy and ordinances on reduction of fire fuel surrounding the properties, more than any other area within California, yet we’re penalized” because the area is deemed a high-risk zone for wildfires, Meyer said.
Some homeowners have resorted to selling their homes due to the increased insurance costs, Meyer said.
“With people just trying to survive, a lot of them are choosing to sell because their insurance more than tripled,” Meyer said. “We are seeing homes come on the market specifically for this issue and (the owners are) choosing to move out of state.”
Shelli Wimmer, an independent broker and Crestline resident, blames fire-risk assessments for insurance companies choosing to cancel policies or raise premiums.
The Fireline Score, for example, ranks a property from zero to 25 based on fuel, slope and access. Homeowners living in the same neighborhood may end up with different scores and different premiums as a result, Wimmer said. Scores also can’t be rebutted by homeowners, she said. The score for her own house, for example, doubled from a 6 to 12, which also sent her premium skyrocketing. Meanwhile, her neighbor’s home is ranked a 6, she said.
“I really hope that we’re going to be able to come to some kind of solution so that people can get fair insurance,” Wimmer said.
Turning to the state for help
Wimmer, who mapped about 600 homes in the mountains, sent Assemblyman Jay Obernolte, R-Big Bear Lake, her findings. Obernolte, along with San Bernardino County Supervisor Janice Rutherford and Sen. Mike Morrell, R-Rancho Cucamonga, has asked state Insurance Commissioner Ricardo Lara to hold a community meeting with residents to discuss the issue.
Obernolte has been working with the insurance industry regarding possible solutions and also has collected a case file with many examples of properties in his district where rates have increased substantially without justification, said Teresa Trujillo, Obernolte’s chief of staff.
“He is also very concerned about the increasing use of automated scoring systems to generate fire propensity scores without human oversight, and he’s shared examples of cases where this occurred and errors were made with the insurance companies involved,” Trujillo said.
Assemblyman Randy Voepel, R-Santee, a member of the Assembly Insurance Committee whose district includes the San Bernardino National Forest areas in Riverside County, said he’s determined to find a solution that ensures a stable insurance market and accessible and affordable coverage for all homeowners.
“I am deeply concerned with the lack of comprehensive, cost-effective policies available to my constituents who have been subjected to a loss in coverage,” Voepel said in an emailed statement. “My office has been assisting individuals in communicating with the Department of Insurance in regards to the loss of their policy and the prospects of obtaining a new policy through a different carrier.”
Meyer has been calling on state lawmakers and insurance companies to come to the table to find solutions because, the broker said, the problem isn’t going away.
“Your mortgage requires you have insurance,” Meyer said. “What if you can’t get it? Then do they foreclose? This has the potential for disaster if we don’t do something.”
The Associated Press contributed to this report.
