As climate change continues to wreak havoc across the country, some people in the most vulnerable areas that have already seen massive destruction say they are being left behind.
Greg Bolin, the mayor of Paradise, California, said that in the five years since his town was devastated by a massive wildfire, many of his residents are still paying the price on their home insurance. In 2023, companies such as Farmers, Allstate, USAA and State Farm have restricted any new business in California.
In addition, seven of the state’s top 12 home insurers have suspended or imposed harsh restrictions on policyholders, in some cases raising premiums nearly tenfold.
“They say it’s like paying another mortgage,” says Bolin.
Experts say the situation has been exacerbated for a number of reasons, including insurers arguing that the risk of doing business there is simply too high because of the increased risk of wildfires, and California laws that restrict how insurance companies can price their policies.
California is one of 32 states and the District of Columbia that offer a state-run fair plan.
“So in a period of high inflation, all the insurers are bumping up against that limit. And what that’s led to is insurers leaving the state in a very public way and trying to renegotiate the terms under which they can operate,” Ben Keys, an assistant professor of real estate at the Wharton School at the University of Pennsylvania, told ABC News Live. “They want to be able to raise premiums much more dramatically than the state rules currently allow them to do.”
In September, Governor Gavin Newsom issued an executive order asking state Insurance Commissioner Ricardo Lara to implement a sustainable insurance strategy to help rebuild a failing market.
The proposal would, among other things, make it easier for insurance companies to use climate modelling projections to determine appropriate insurance rates and allow companies to charge a higher price for high-risk areas.
Paradise homeowners Shawna and John Love, who rebuilt their home after the fires, said they saw their insurance jump by 1,039%.
“I felt very defeated,” said Shauna Love. “It was $13,424 for a year for a two-bedroom, two-bath, 1,400-square-foot house on a corner with egress. It’s a brand new house. It has all the fire safety requirements.
Another homeowner, Heidi Lange, said she had to file an appeal after being denied coverage, only to find the insurance company had sent a renewal offer that increased from $1,191 a year to $9,754 a year.
“It took my breath away, to be honest, I couldn’t afford that if I wanted to,” she told ABC News Live.
The situation has become so bad for Paradise residents that they have resorted to other short-term solutions to protect their homes, including barriers and concrete around their homes.
“For a lot of people it was a very difficult decision to come back or not. For me and my wife, we’re just going back. And that’s where we want to be. That’s home,” Bolin said.
Officials in Colorado, which has also seen an increase in massive wildfires, are trying to avoid California’s mistakes. The private market is still intact in the state, but Colorado Insurance Commissioner Michael Conway is looking to implement a state plan by 1 January 2025.
Conway told ABC News Live that he knows there is a potential for those private companies to pull out because of the increased climate dangers threatening the state.
“We’re going to have to find new solutions to those problems to make sure that we have the robust competitive market that everybody wants, both consumers and industry,” he said. “I think you’re going to see regulators start to wrap their arms around what this modelling means and how it affects our markets. And I think it’s imperative that we do that.”
Keys said Colorado has a good chance of getting its programme right.
“So I think it’s a state that has experience with catastrophes, has an awareness of catastrophes, but has the advantage of being able to put one of these programmes together in a way that’s a little less pressured,” he said.
