Across Plumas County local insurance agents are scrambling to help their customers secure homeowners insurance.
Some agencies report processing as many as five to 10 policy nonrenewals for their clients every workday. And then there are the people who are trying to buy homes or property and discover during escrow that they can’t find insurance coverage.
“It’s ruining home sales as well as business sales,” Mike Flanigan, of Flanigan-Leavitt Insurance Agency, said during an interview last week.
His office has hired two more employees to assist clients in finding coverage, which increasingly is becoming the California FAIR Plan — a homeowner insurance plan of last resort — which was relatively unknown to many homeowners and not utilized much by local insurance agents until just a few months ago.
But now, as insurance carriers refuse to write new policies on homes considered at risk for wildfire, and, as homeowners that have been insured are receiving nonrenewal notices, this often is becoming the only option.
The state legislature created the FAIR Plan following the riots in the 1960s when insurers abandoned inner cities. The plan offers basic coverage that doesn’t include theft or liability insurance and is funded by a pool of insurance carriers, not the state. FAIR Plan rates are more costly than traditional plans.
Flanigan described the situation of a local customer who received a nonrenewal notice from Lloyds of London for a plan that had cost $2,500 annually. (Previously companies such as Lloyds of London were the go-to agencies for difficult-to-ensure properties, but that has changed also.) The FAIR Plan now costs that customer $3,800 annually plus an additional $1,000 per year for what is called a “wrap” plan or one that provides what the FAIR Plan does not cover.
He also has seen premiums with traditional carriers that were $1,000 three years ago, increase to as much as $5,000 now.
Dana Lambert of Lambert & Lambert Insurance Services in Portola said that her office is also turning to the FAIR Plan to assist their customers, in what sometimes seems to be arbitrary nonrenewals.
“We have had cancellations right in Portola,” Lambert said of an area where there have historically been no issues with insurance coverage, unlike other more rural areas in Eastern Plumas. “Sometimes one house will be insured, but three doors down another will be cancelled.”
According to Linda Rouland who with her husband Bob, represents Farmers Insurance and other carriers in the Lake Almanor Basin, that’s because “every single property across the state of California is assigned a Fireline score.”
She explained that until recently insurance carriers relied on ISO ratings for an area, and a property’s proximity to fire stations and fire hydrants, but now it’s more about topography.
Bob Rouland said Farmers isn’t canceling existing customers, but is only writing new business on properties that are rated 3 and below.
“Three and below are often accepted, while 4 and above are not,” Rouland said of the carriers that his firm represents. That doesn’t bode well for the East Shore, Peninsula or Pratville where properties are rated a 6 or above.
As a result, the Roulands are also turning to the FAIR Plan, which they describe as “basic coverage only.”
But not every insurance office is an authorized writer for the FAIR Plan. Richard Stockton, who is a State Farm agent in Quincy, said that State Farm has not canceled any of his current customers, but that he is limited on what he can write as new business. “We are still writing in downtown Quincy, Greenville and Portola,” he said. Stockton’s office does not sell the FAIR plan.
But the FAIR Plan is also having its challenges. Flanigan said that he has seen some applications rejected. “They are being overwhelmed,” he said.
Inspections and advice
Most agents reported an increase in inspections, with carriers sending out inspectors to look at properties and determine whether they have been cleared of fire dangers, though that doesn’t mean coverage will be granted even if conditions are met.
“They are sending out inspectors on any new business,” said Flanigan. “Even the California FAIR Plan sends inspectors.”
Homeowners who are already insured may also be inspected. Some receive notification in advance; others do not.
As for those who are currently insured, Flanigan offers the following advice: “Never be late in your payment; write your check. Homeowners shouldn’t give insurance companies any reason to not renew a policy.”
The insurance issues facing Plumas County residents aren’t limited to this area or even rural northern California. It’s a statewide problem, as well as a national issue, that requires a concerted response.
“It’s time to address the impact that more severe weather is having on Americans instead of fighting about climate change,” Allstate Chief Executive Tom Wilson said recently in announcing its pullback from California. “It is now time to come up with longer term solutions, such as ensuring power lines are properly maintained, homes have natural fire barriers and building codes reflect increased severe weather.”
California Insurance Commissioner Ricardo Lara announced the state’s partnership with the United Nations to “create a sustainable insurance strategy and action plan that would tackle the growing risks of climate change.” California experienced its deadliest and most destructive wildfires in the state’s history in 2018, resulting in more than $12 billion in insured losses, making it the world’s costliest disaster last year.
“We have a historic opportunity to utilize insurance markets to protect Californians from the threat of climate change, including rising sea levels, extreme heat and wildfires,” said Lara. “Working with the United Nations, we can keep California at the forefront of reducing risks while promoting sustainable investments.”
While Flanigan has some concerns about exactly how the state will respond, he is optimistic about the future. “My optimism lies in the resiliency of insurance companies,” he said. “But it won’t be a quick fix.”
What is Fireline?
Increasingly, insurance companies are relying on Fireline scores, which measure the risk of individual homes, which is based on three factors:
Fuel — Grass, trees, or dense brush feed a wildfire.
Slope — Steeper slopes can increase the speed and intensity of wildfire.
Access — Limited access and dead-end roads can impede firefighting equipment.
Amy Bach, executive director of United Policyholders, a nonprofit group that assists consumers withinsuranceissues, said she has been getting more complaints lately about steep increases in rates and people being dropped by their insurance companies.
Bach said she’s concerned about FireLine scores because they come from a private company rather than the government, and they use complex algorithms that can seem arbitrary to homeowners.
“We don’t know enough about it,” said Bach.
She said she’s received reports of homeowners who live on the same block who have very similar homes, but have very different scores. She’s worried insurance companies will use FireLine scores to justify dropping more customers in high-risk zones.
“I’ve very worried we might be facing some rough waters for some homeowners in areas insurers see as high risk,” she said.
CalFire has issued the following information related to insurance
Can an insurance company cancel, non-renew or decline to issue a residential property insurance policy due to wildfire risk?
After the policy has been in effect 60 days or more, the insurer is restricted from canceling a policy before the end of the policy term except for limited reasons, including physical changes in the property that make it uninsurable. Depending on the reason for cancellation, the insurer must give either 10 or 20 days notice.
In order to nonrenew a policy (decline to renew for another term), an insurer is required to give the insured at least 45 days’ notice prior to the expiration date and must provide specific reasons for the nonrenewal.
Insurance laws allow insurers to set their own eligibility guidelines that apply to decisions to cancel, nonrenew or decline coverage.
However, the guidelines must be specific, objective factors that have a substantial relationship to an insurer’s risk of future loss.
What should I do if an insurer cancels, non-renews, or declines to issue my policy?
If you receive a notice of cancellation or nonrenewal, you may contact the insurer to find out if there are actions you can take to avoid cancellation or nonrenewal. If not successful, shop around. Different insurers may have different underwriting guidelines. One insurer may issue a policy when another insurer will not. We encourage you to contact multiple agents, brokers, and insurers to thoroughly investigate your insurance options. Contact information for agents, brokers, and insurers is available on the California Department of Insurance (CDI) website at www.insurance.ca.gov/01-consumers/105-type/5-residential/index.cfm . This website also contains guides, tips, and tools pertaining to residential property insurance.
What if I am still unable to obtain residential property insurance?
You may apply for coverage through the California Fair Access to Insurance Requirements (FAIR) Plan. As the insurer of last resort, the FAIR Plan should only be considered after a diligent search for coverage has been made in the voluntary and surplus lines insurance marketplace. You may contact the FAIR Plan directly at 800-339-4099.
The FAIR Plan policy covers fire, but does not include all the perils and coverages provided under a traditional residential property insurance policy, such as theft and liability. You may be able to purchase a “Difference in Conditions” policy, in addition to the FAIR Plan policy, that will cover these additional risks. An agent or broker should be able to locate an insurance company that sells this type of coverage.
What if I have questions or believe that my insurance policy was improperly canceled, non-renewed, or declined?
You may contact the CDI Consumer Hotline at 800-927-4357, or submit a consumer complaint online on the CDI website at www.insurance.ca.gov/01-consumers/101-help/. Dedicated insurance experts are available to assist you with questions on all aspects of insurance.