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