FAIR plan fire insurance rates to increase next year | TheUnion.com

FAIR plan fire insurance rates to increase next year

After reliably obtaining homeowners insurance on the voluntary market for more than 30 years, Laurence Stewart’s coverage was not renewed last year due to high fire risk.

Since then, she’s been forced to purchase insurance from the FAIR plan, California’s insurer of last resort, at triple the cost for substantially diminished coverage.

“When you’re retired, it’s just terrible,” Stewart said at the time. “I’m sure next year it’s just going to be more expensive.”

This month Stewart’s prediction came true when FAIR plan president Anneliese Jivan announced its rates would increase statewide by an average of 15% starting Jan. 1, with rates in rural areas expected to increase even more. The insurer just under two years ago increased rates by an average of 20%.

FAIR plan usage has increased dramatically in the last several years as more customers are receiving non-renewal notices from traditional insurers, particularly in areas of high fire risk.

According to the California Department of Insurance, Nevada County is one of the worst area when it comes to models insurers use for assessing fire risk, with about 70% of homes in areas designated as “high”or “very high” fire risk areas.

Non-renewals in counties with the highest exposure of homes in high to very high fire risk increased more than 200% from 2018 to 2019, even before the most recent catastrophic fires.

The number of residents who were left to purchase FAIR plan insurance in those counties increased over 550%, according to the Department of Insurance.

But even if customers are able to find coverage on the voluntary market, rate hikes have increased threefold since 2015, according to Department of Insurance data.

In an effort to mitigate the fire-fueled non-renewal surge, Insurance Commissioner Ricardo Lara announced a one-year moratorium on non-renewal notices for areas affected by recent fires, including several Nevada County zip codes.

Nevada County supervisors previously sent letters to the insurance commissioner calling for increased transparency and regulation of the risk models used by insurance companies to determine coverage eligibility.

According to a study published last month by the National Association of Insurance Commissioners, insurance companies would be able to take on customers in fire prone areas through a mix of “structural modifications” to insurers’ investment in location-specific data approaches to risk assessment.

“From a benefit-cost perspective, we demonstrate that for a number of the modeled locations, the relative risk reduction, if enabled within insurance products based on wildfire risk-based pricing, would provide economically effective incentives at promoting mitigation with pay back periods from 10 to 25 years,” the study concludes.

To contact Staff Writer John Orona, email jorona@theunion.com or call 530-477-4229.

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