TLDR
- California insurers declined to renew 2.8M homeowner policies between 2020-2022
- Economic losses from recent LA fires estimated at $135 billion
- Many insurance companies are dropping coverage or refusing new policies
- The state’s FAIR Plan (insurer of last resort) faces potential funding shortages
- Insurance costs are rising dramatically for California homeowners
California homeowners face an intensifying insurance crisis as major carriers continue to exit the market and remaining insurers raise rates in response to mounting wildfire losses.
Between 2020 and 2022, insurance companies declined to renew 2.8 million homeowner policies across California, with 531,000 cancellations in Los Angeles County alone. While some policies were voluntarily dropped by homeowners, insurance companies initiated most of these non-renewals.
The recent Los Angeles fires, which have forced thousands to evacuate, are expected to worsen an already strained insurance marketplace. Early estimates place economic losses from these fires at $135 billion, adding pressure to insurers already reluctant to maintain coverage in high-risk areas.
Mark Newman-Kuzel, president of The Mark Newman-Kuzel Agency in Los Angeles, reports that at least six of his clients have lost their homes in the current fires.
“Insurance is going to be even harder to come by and it is going to get incredibly more expensive than it already is,” he said.
The impact extends beyond areas directly affected by fires. Insurance companies are increasingly viewing entire regions as high-risk, leading to policy cancellations even in areas that haven’t experienced recent wildfires.
One example is the case of 90-year-old Los Angeles County residents whose insurance was canceled after 75 years with the same provider. Their daughter, Lynne Levin-Guzman, was forced to defend their property with a garden hose during recent fires due to lack of coverage.
The California FAIR Plan, the state’s insurer of last resort, is experiencing increased strain as more homeowners turn to it for coverage. Consumer advocates warn that the FAIR Plan could face funding shortages, potentially requiring it to seek additional funding from private insurers operating in the state.
This potential funding requirement could create a negative feedback loop, as private insurers might become even more hesitant to write policies in California if they face additional FAIR Plan assessments.
For homeowners who can maintain coverage, insurance costs are rising sharply. Many residents report premium increases of several hundred percent when renewing their policies.
The California Department of Insurance data shows the scope of the crisis is unprecedented in the state’s history. The 2.8 million non-renewed policies between 2020 and 2022 represent a substantial portion of the state’s insured properties.
Insurance agents across the state report increasing difficulty in finding coverage for their clients. Many are forced to piece together multiple policies to provide adequate protection, often at much higher costs than traditional single-policy coverage.
The crisis affects both urban and rural areas, with some regions seeing nearly complete withdrawal of major insurance carriers from their markets.
Recent fires in Los Angeles have only accelerated these trends, with insurance companies reviewing their exposure in real-time as fires continue to burn.
The most recent data shows that thousands of homeowners are being forced into the FAIR Plan each month, despite its higher costs and more limited coverage options.
Current estimates indicate that insurance premiums in high-risk areas have increased by an average of 300% in the past three years, with some homeowners reporting even larger increases.
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