The glut of homes in increasingly fire-prone places has created an insurance crisis in California, with many big insurers pulling out of the state to avoid more losses.
Nearly 500,000 Californians have turned to the state’s insurer of last resort, the FAIR Plan, which has doubled in size over the past five years. The state is now exposed to nearly $458 billion in potential damage, a figure that has nearly tripled since 2020.
The neighborhoods in the path of the Palisades and other fires burning this week have been among some of the hardest-hit by insurer defections in recent years. The 90272 ZIP code of Pacific Palisades experienced 1,930 policy non-renewals between 2019 and 2024, according to a San Francisco Chronicle tally, or 28 out of every 100 policies.
Pacific Palisades is also the state’s fifth-largest user of FAIR policies, with nearly $6 billion in exposure. Even a fraction of that amount would exceed the capabilities of FAIR, which at last report had about $700 million in cash. Additional damage can be passed on to private insurers, which would pass those costs immediately to their less-risky customers.
California Insurance Commissioner Ricardo Lara last month announced policy tweaks to encourage insurers to come back to the state. They can now use catastrophe modeling to set rates after long being required to consider only historic losses. But part of their modeling must also include fire-defense measures property owners take. Insurers can also now pass the cost of reinsurance on to their customers.
Providers lured back to the state by these incentives must cover risky areas at a rate of 85% of their statewide market share.
.Here are the top political news stories for today.
@5RL43X3Republican1yr1Y
Prepare for news stories about "evil insurers" that don't tell the whole story.
Proposition 103 in California makes it illegal to accurately price fire insurance. Insurers can only use historical data, not projections.
So insurers did the rational thing: they dropped customers
“Proposition 103 in California makes it illegal to accurately price fire insurance.”
And that, of course, is the main problem.
In a free market, a home abutting the forests would have astronomically high insurance, discouraging construction (or encouraging mitigation).
Insurance is a scam. I don’t care about their reason, extracting profit from a pool of money makes that pool of money useless. Same story in healthcare. Insuring sick people is bad for business, so **** them, right?
@MAGA_Deplorable1yr1Y
You don't mean to say HUMAN BEINGS -- those altruistic angels -- act SELFISHLY sometimes? Who knew!
But before you blame the private insurance system, consider that governments have a track record of doing far more harm in every conceivable area than private interests ever did.
@B2BS7DT1yr1Y
These fires are the consequences of 80 years of climate destruction coming back to bite us.
The widespread beliefs that you can magically fix supply & demand problems by capping prices or by making a scarce good “free” are a genuine hazard to civilization.
Join in on more popular conversations.
