Lloyd and his wife later bought another home in Hidden Valley Lake, a town that has taken ambitious steps to limit flammable vegetation, but their insurance premium is still more than $4,500 a year, more than three times the amount of their last home in Kansas. Lloyd worries that under the novel regulations, his insurance company will raise his price even further.
Other Western states, such as Colorado and Oregon, also face insurance gaps after enormous wildfires, although their problems are less severe than in the Golden State. In Colorado, for example, officials recently created a platform protection from state fire insurance like California’s FAIR plan, because it’s only in the last few years that customer numbers there have massively declined. California’s grand bargain with the insurance industry is a model for other states: If you want to eliminate coverage gaps, you must give insurers broader pricing power.
Even this may not be enough. Major wildfires like those that occurred in 2017 and 2018 have been mitigated over the past few years, but the fires that occurred this week in the Los Angeles area could cause billions of dollars in damage comparable to an event like bonfire in the camp.
Joel Laucher, a former regulator and fire insurance expert at the consumer group United Policyholders, said the destruction from the Los Angeles wildfires could lead to further price increases and wider affordability gaps.
“These are definitely going to be major losses,” he told Grist. “Some areas will certainly face new challenges to the point where insurers will be able to charge at the rate they believe those areas deserve.” Laucher said insurance companies can’t refuse to renew as many policies as they could under previous state laws, but they can still avoid selling policies in some affected areas.
Frazier, of an insurance industry group, expressed similar concerns. He said another wave of horrific wildfires on the scale of 2017 and 2018 could push the insurance industry away from the state once again, despite commissioners’ reforms.
“If we had a few more unprecedented years ahead of us, anything is out of the question,” he told Grist.