Insurers take wildfires, high tide flooding and other issues into consideration before selling a policy.
California home insurance is becoming increasingly challenging to find for many homeowners affected by climate-related disasters. Insurers are using climate science to estimate the risk associated with a property when it comes to a number of different perils.
Insurers are no longer assuming that homes that were once in low-risk areas continue to be so.
The last few years have shown that homes never affected by climate-related disasters are not immune to those events. High tide flooding and wildfires are being taken very seriously before California home insurance policies are issued.
As a result, many homeowners have found it challenging to obtain affordable coverage for their properties. A recent interview with California Insurance Commissioner Dave Jones showed underscored this increasing trend. He pointed out that areas that have historically been known as low-risk neighborhoods are now labeled as higher risk. Jones gave Santa Rosa as a prime example of this occurrence.
As California home insurance premiums skyrocket in some areas, it is becoming cost-prohibitive.
A recent KQED Science interview with the commissioner showed that climate-related disasters are already affecting the Californian insurance market.
Jones pointed to the nonrenewals trend as an indicator of the impact of climate-related disasters on homeowners insurance customers. He examined the data for wildland urban interface counties from 2015 to 2016. That data showed “about a 15 percent increase in nonrenewals. Now, that doesn’t mean that those 15 percent can’t find any insurance. But the company they did have decided it was too risky to write insurance for them and decided not to renew them,” he said.
That said, Jones also pointed out that insurance companies in California are not allowed to use losses from a catastrophic incident to justify massive rate increases. He gave the record-breaking wildfires of 2017 as an example. He pointed out that those fires led to $12.3 billion in insured losses within the state. However, insurers are “not allowed to take those $12.3 billion and shove them into next year’s rate.”
Instead, California home insurance companies apply it to an overall catastrophic load in the way they develop their rates over time. In this way, rates can be increased more fairly and appropriately when based on the actual risk and cost of covering a property.