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Something has to be done with homeowners insurance

Editor’s note: Ted Dobbs sent this letter to Governor Gavin Newsom and Insurance Commissioner Ricardo Lara. It is being printed here with his permission.

I am writing to ask for changes at the Department of Insurance level to increase insurance availability for “people living near trees.” A recent retiree from a 40-year career in the insurance industry, I hope to emphasize a problem for more and more Californians … homeowners or renters. The inability of property owners to purchase insurance in areas outside major metro areas in California is putting the brakes on investment, jobs, housing and small business up and down our state.

My wife and I have lived in the SF East Bay for 40 years. Fourteen years ago, with an eye to downsizing in retirement to a smaller community, we built a house in Plumas County. We were excited to find such vibrant communities in the exurbs and “rural” California.

Over the last eight years neighbors have asked me to talk to groups of property owners on how to calculate the amount of homeowners insurance needed on their homes or commercial property … from an underwriter’s perspective. Most homeowners are underinsured and getting it right will allow them to move forward in the event of a major loss, especially coming from someone not selling anything!  Scores of underinsured homes in the 1998 Oakland Hills Fire gave me a unique perspective. For the past three talks, the attendees numbered around 50.

On Sept. 20, over 200 people crowded into the Graeagle Fire House to hear the same talk; four times the number two years ago! The mood of the attendees was very different. In the crowd were both full- and part-time residents, renters whose landlords were pulling out, real estate brokers and bankers. People were angry, scared, looking for an answer.  I had limited advice to give. Some had insurance cancelled after 20-plus years with a company with no source for a replacement; some had to find different carriers every year for the past five years; some couldn’t buy a house (no insurance = no mortgage); Realtors can’t sell houses (buyers can’t find insurance), bankers can’t write mortgages without insurance. I have heard of landlords bailing out, unable to charge a rent that will cover their property insurance that has doubled in the last two years.

Explaining how insurance works — how brush maps work, how losing one house in a fire is manageable for a carrier but losing their entire book of business in one day means bankruptcy, how property owners spending time and $$$ making communities Fire Safe meant nothing to carriers — nothing helped further the conversation last week.

This year I experienced firsthand the audience’s pain.  I was holding a cancellation notice, calling 14 insurance agents and three companies to find insurance for a small cabin in the Central Sierras that our family has had since 1989. To no avail. I was told to go overseas to find a carrier to write a policy in California. The Fair Plan of California is now not the safety net, but the only carrier left for property outside of big cities.

The threats to California’s vibrant economy when housing costs and shortages make front-page news, as traffic clogs our lives in metro areas are REAL. We need our small towns and communities to grow. Without a plan to increase the availability of property insurance coverage for homes, these towns will dry up as will the small businesses they support around housing and services.

The most surprising call-out from the crowd was “Isn’t this Redlining?”  I had no answer to this except that “People-Living-Near-Trees are not a protected class at this time.” Perhaps it is time for the state government and the California Department of Insurance to consider it.

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