As wildfires spread, homeowners insurance retreats

Andy Uhler Oct 26, 2015
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As wildfires spread, homeowners insurance retreats

Andy Uhler Oct 26, 2015
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Earlier in October, insurance companies covering most of the nearly 5,000 claims from two September wildfires in Northern California agreed to give homeowners more time to document them and to speed up payments. But in one of the most devastating wildfire seasons in the West, some homeowners are finding it more difficult, and expensive, to find any homeowners insurance at all.

Simi Valley is a typical Southern California suburb of more than 100,000 people less than an hour’s drive from downtown Los Angeles. It’s mostly densely built gated communities on quarter-acre lots, separated by open grassland. It’s suburbia, but residents still deal with wildfires, like one that burned almost 200 acres next to Wood Ranch Country Club in August.

An air tanker drops fire retardant on a brush fire south of Vineyard Drive in Simi Valley. (Anthony Plascencia for the Ventura County Star)

Dave Hill and his wife have lived in Wood Ranch for four years. He pointed to a scorched hill less than a mile away and said this is the first fire he’d heard of coming this close.

“And it lit these whole hills up,” he said. “I was still at work. My poor wife was scared to death. The neighbors next door knocked on the door and said, ‘You got to come out,’ or they called her and said, ‘Come out to the front and look,’ and that entire hill was on fire.”

The fire threatened 500 houses in Wood Ranch but didn’t burn any down. Yet, Hill’s insurance company was quick to let him know he should start looking for another policy.

“And I just renewed in June. It’s a one-year renewal,” he said. “And when this happened, I think it was Aug. 14, about a week later in the mail I got a letter saying because of the recent fire, they weren’t going to renew me next June.”

A brush fire grows off Rustic Hills Drive in the Wood Ranch Area of Simi Valley. (Joseph Garcia for the Ventura County Star)

In recent years, millions of people have moved closer to wild land in the West. Warmer temperatures and drought have also expanded the fire zone. Homes that weren’t at risk last year might be today.

Cher Russell, an agent with Simi Valley Insurance, isn’t surprised to hear some homes in Wood Ranch aren’t able to get policies.

“Your premium could possibly increase, or you can get a nonrenewal letter because the company has decided not to write homeowners insurance in that area due to wildfire,” she said.

Insurance companies can do this because they have a lot more data. Ten years ago nobody would Google a picture of your house, but now it happens all the time. Russell said agents get updates from the companies they write policies for every day.

“And they tell us what ZIP code is not accepting new business for homeowners insurance,” she said. “Certain areas, we’ve been informed, cannot write new business.”

The insurance companies have access to data from Cal Fire and the U.S. Forest Service. They use it to develop models that predict what areas are at risk., which is why they eliminate entire ZIP codes at a time.

Firefighters battling a fire in the Wood Ranch area of Simi Valley back in August. (Joseph A. Garcia for the Ventura County Star) 

“That information allows the insurer to price the risk accordingly,” said Nancy Kincaid, spokesperson for the California Department of Insurance.

“Instead of spreading the risk among lots of homeowners where everyone maybe pays a little more, you’re able to single out those homes that are at greatest risk,” she said. “Those homeowners will pay more. And remember that insurance is still about business, and insurers are still in the business to make money and provide coverage for people, so it’s not the best for the marketplace if you’re not writing anywhere.”

Homeowner’s insurance is a mortgage requirement. In California, if property owners fail to get insurance, the last resort is a FAIR Plan policy. An insurance company in the state has to be a member of the FAIR Plan Association and contribute funds to it. It’s a pool of money to provide basic fire insurance for property owners who can’t get policies. Think of it as catastrophic health insurance for your house. Often, people under the FAIR plan who file a claim find that they’re underinsured.

Dave Hill doesn’t think his situation will get to that. But finding homeowner’s insurance is something he thought he was done with.

“I mean, it’s not like we’re in Big Bear, where we’ve got pine trees all around us and you are in danger of getting burned out,” he said. “And they started brush clearing back in the spring. But I’m dealing with it now. Well, it’s down the road, but I’m going to have to deal with it next June. I’m going to have to find someone else that will write a policy for here.”

Unlike flood and earthquake insurance, fire is still built into the homeowner’s insurance package. Making it a separate policy could be a tough sell for insurance companies. But as drought persists, fire zones continue to grow and more claims are filed, individual fire insurance doesn’t seem all that far off — at least not in the West.

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