June 28, 2021

The Horrible State of the California Home Insurance Market

Brief thoughts othe condition of consumer property insurance in California.

When and if it will get better?

Property Insurance in wildfire areas has been getting more difficult for years, however in California, recently it has gone from bad to deplorable. Currently, I feel that there is no solution to the problem.

This post probably should have been written at the end of last year, insurance year 2020, but in the hopes that things would be get better, it was put off. However it is now in such a prolonged slump, it is hard not to publicaly state the situation.

What is the Problem with the California Home Insurance Market?

The California home insurance market is the largest in the United States in terms of population and likley in terms of policies in force. The state is also home to one of the largest wildfire areas in the United States. Other states may have larger geographical wildfire areas, but their sparse populations and construction in those areas, make the situation vastly different. Succinctly put, California has a large population living in homes that are in wildfire zones.

With the increasing severity of wildfires in the state, burning down more structures, the risk situation for the insurers is getting more extreme. The insurers need to maintain financial solvency, meaning they need to have enough money to pay out all legitmate claims.

Insurance companies have responded with several mechanisms to deal with this situation. Some of these methods include: Raising premiums, Increasing underwritig criteria for new policy issues, Issuing limited non-renewals for exisiting policies, and in some rare situations non renewing all policies in the state and leaving California. All four of these mechanisms are making home insurance painful for most Californians at this time. Either your premiums are going up, you are being non renewed, or you are diligently searching for property insurance for your new home. The situation is not pretty.

What to Do if you Live in a Wildfire Zone in California:

Frankly, there is little that consumers can do at this time if they are in a wildfire zone. The best single piece of advice that I can give out right now if you live in a wildfire zone – for most consumers – unless you have a poor home insurance policy – Stay with your current home insurer. I realize that this is an exceptionally broad statement, however the options available to many Californians are not great. I might add that you probably should speak with your agent/insurer to confirm that you have the proper coverages in place. Having enough structural coverage is or paramount importance right now.

If you are buying a new home and need home insurnace your options might be severly limited. The future insurer might be an insurance company that you have never heard of, or a non admitted insurer, or even the California FAIR plan. Regardless your options might not be terrific.

When will the California Home Insurance Crisis End?

I do not know when the home insurance crisis will end in California. I don’t even know if it will get better. What I can tell you is that the situation is dire. For many the increased cost and loss of proper coverage is/will be catastrophic, for others an inconvience and added expense. For all of us the West’s Insurance crisis is a huge problem moving forward. California is not the only state that will lose out because of this.