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Lloyd and his wife later bought a house in Hidden Valley Lake, a town that has taken serious steps to reduce combustible vegetation, but their insurance premiums are more than $4,500 a year, three times what they were on their last home in Kansas. Lloyd is worried that his insurance company will raise his premiums under the new rules.
Other states in the west like Colorado and Oregon are also seeing insurance opportunities come up after the wildfires, although their problems are much smaller than in the Golden State. In Colorado, for example, state officials recently implemented a state fire insurance backstop like California’s FAIR Plan, since it’s been the last few years where most customers have been dropped. The big success in California and the insurance industry provides a policy for other countries: If you want to eliminate gaps in coverage, you must give insurers the power to increase prices.
Even this may not be enough. The last few years have also seen the elimination of wildfires like those that occurred in 2017 and 2018, but this week’s fire in the Los Angeles area could cost billions of dollars, compared to an event like the Camp Fire.
Joel Laucher, a former director and fire insurance expert at the consumer advocacy group United Policyholders, said the damage from the Los Angeles fires could lead to higher premiums and more opportunities.
“This is going to be a huge loss,” he told Grist. “Some areas will have new challenges, until insurers are able to pay what they believe these areas should be paying.” Laucher said insurance companies would not refuse to renew as many policies as they would have under the previous law, but they could avoid selling policies in some affected areas.
Frazier, an insurance broker, expressed similar concerns. He said that another fire risk on the scale of 2017 and 2018 could drive the state’s insurance companies out of business, despite the change in commissioners.
“If we were to have a couple of unprecedented years, all bets are off,” he told Grist.
