California Homeowners Insurance
By: Sophie Riley, AHT Insurance
Homeowners insurance in California is becoming increasingly difficult to place, and many insurance carriers have been non-renewing policies in wildfire-prone areas. On Dec. 5th, California Insurance Commissioner Ricardo Lara issued a mandatory, one-year moratorium on insurance companies non-renewing policyholders in certain ZIP codes to help combat this growing concern.
At this time, there are very few options for homeowners insurance in California when placing new business, and the policies that are being renewed are seeing exorbitant rate increases to keep up with the increase in claims. Several of the premier insurance carriers have notified us that they needed these rate increases due to their loss ratios and how difficult wildfires are to underwrite. You see, there is not much modeling that can be done on these wildfires because they are unpredictable and burning much more intensely than they have in the past. A power line can spark, and we won’t know the weather conditions, such as if there will be high winds, a lot of dry trees and shrub creating fuel, etc., making it very difficult to gauge a wildfire exposure. Underwriters informed us that perils, such as hurricanes and earthquakes are relatively simple to model because you can use factors, including distance to water, elevations, construction type, soil type, etc. However, there is almost no modeling that can be done on wildfires in California at this time.
Additionally, claims costs are much higher when full communities burn because of factors, such as increases in additional living expenses and skilled contractors being booked for longer periods of time. Learn more about this topic.