California Says Insurers Can't Cancel Policies For People In Areas Hit By Wildfires

Dec 11, 2019
Originally published on December 11, 2019 7:42 pm
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AUDIE CORNISH, HOST:

Wildfires in California have been incredibly costly, not just for homeowners but for insurance companies responsible for helping them recover. That's led a number of insurance companies to cancel people's policies. But as of late last week, the state insurance commissioner has declared they can't do that anymore in areas hit hard by fires, at least for the next year. We're joined now by California insurance commissioner Ricardo Lara.

Welcome to the program.

RICARDO LARA: Thank you. It's great to be on.

CORNISH: Before we get to the business end of this, can you talk about homeowners who have had their policies canceled?

LARA: It's become apparent now that insurance is becoming less and less available for so many Californians. You know, in Oakland, we've heard from - first-time homebuyer and his wife have been canceled for insurance three out of the four years, even though they are in one of the most urban areas in our state and two minutes from a local firefighter. In Jackson, Calif., for example, near Sacramento, we met with a realtor who was helping her client, a single mom, foreclose on a home until they got the insurance quote of close to $4,000 a year, four times what she expected. It pushed the buyer over the lending guidelines, and she lost her home. And this is happening throughout the entire state.

CORNISH: So now you decide to put this one-year ban on the cancellation of policies. How does it work?

LARA: The governor, in October, declared several of these fires catastrophic emergencies, which gives us an opportunity to go to the legislature and ask for real, long-lasting solutions that are going to be critical as we move forward to trying to address the ongoing wildfire situation that we continue to find ourselves every year and then give people an opportunity to better plan and make decisions for themselves and their families.

CORNISH: It sounds like you have the homeowners in mind in terms of giving them time. The flip side of this - the insurers. When you talk about catastrophic, they've taken a pretty big hit. I was reading in the Times that the wildfires in 2017 and 2018 alone wiped out a full quarter-century of the industry's profits. Are you concerned that they're going to raise their rates to make up for this?

LARA: In the time that I've been, we've already had close to a hundred rate filings from insurance companies where our actuaries are looking at their loss history and taking into account their entire portfolio.

CORNISH: So you expect, yes (laughter). It sounds like you're saying they've already been doing it.

LARA: Yeah. And we have been good partners with them in trying to say, look. This rate is justified, but we also know - and I'm pushing back, saying that rate increases are not going to be the sole solution.

CORNISH: What have insurance companies actually said to you, though, following this announcement? What kind of phone calls are you getting?

LARA: This is no surprise to them.

CORNISH: That doesn't mean they're happy about it, right? (Laughter) So what have they been saying?

LARA: They're saying, look. We also want to get together with you and work on long-term solutions.

CORNISH: We've been hearing a lot about the intensity of fires being a consequence of global warming and how insurers have struggled to anticipate and estimate costs as a result. What does that mean for people who do your job?

LARA: Well, you know, this is a tremendous challenge for us. No longer can you rely on historic information of a certain area to be able to determine what that risk is going to be because climate change is, essentially, upending everything. And the best thing for us is creating statewide mitigation standards for communities so that they know exactly what they need to do to protect their homes and protect their communities so that we can, at least at the minimum, come up with some minimum standards statewide that can say, OK, these are the things that need to happen so that we keep insurance in here and that we lessen the risk for a given community. Right now what currently exists is just a hodgepodge of different programs that, even if you as a homeowner still abide by all these, do all the recommended modifications, you're still getting dropped. So we're not - you know, we think it's a sensible way forward. We're not mandating that they cover everyone but that if you've done everything possible, that you're going to be able to obtain coverage in a way that's reasonable and affordable, which also, in terms, gives people incentive to do what is right to protect their property and protect their communities.

CORNISH: Commissioner Lara, thank you so much for speaking with us.

LARA: Thank you so much.

CORNISH: That's Ricardo Lara, California insurance commissioner. Transcript provided by NPR, Copyright NPR.

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