It just got even more difficult to place homeowners risk in California.
State Insurance Commissioner Dave Jones announced Tuesday that many more policyholders can expect to be dropped from fire coverage as wildfires and drought continue to ravage the state.
Phil Stokes is just one resident who has been dropped from his insurance company. Although Stokes’ home is surrounded by a concrete driveway, is located one mile away from the nearest fire station and the wild grass is cut short, Liberty Mutual
sent Stokes a letter last week saying his policy will not be renewed because of an “unacceptable risk of wildfire.”
And he is hardly alone. Already, several homeowners have found themselves served with non-renewal notices and no other choice but to seek out expensive coverage in the excess and surplus lines market.
“There are currently no laws in California that prohibit an insurer from non-renewing a homeowners insurance policy,” Jones told local news station KCRA-TV.
Jones attributes the widespread phenomenon to the ongoing drought in the state, emphasizing that insurers are just trying to protect themselves from costly risk.
Making those costs soar even higher is the dearth of firefighters on the West Coast. Although more than 32,000 firefighters are actively working to contain fires in California and the Pacific Northwest, the US Forest Service has had to shift more than $250 million to other accounts to pay for firefighting costs – which are now $700 million over appropriation.
Faced with that reality, many agents in the area are increasingly placing accounts with the non-admitted market. In fact, the Surplus Line Association of California estimates that 91% more homeowners policies were written by this market in 2014 than in 2011.
“In the past two years it’s really taken off, and most of that is really driven by the fires,” said Andy Fletcher of wholesale broker Scottish American.
Fletcher already writes about 2,500 policies a year – a number he expects to grow beyond 3,000 next year following this round of wildfires. About 80% of those policies are for homes in high fire areas, where homeowners can expect to pay about twice as much as they would for a standard policy.
All of that, of course, leaves independent insurance agents with a hard message to deliver to clients. Jones advises consumers to look at it as an opportunity to “shop around,” while Colorado Springs, Colorado agency owner Dave Mellinger urges greater sympathy from agents – particularly the ones who have had losses.
“Be caring and understanding and know that the people who are taking these losses just lost everything,” said Mellinger, who advised clients when wildfires ravaged the area in 2011. “They just want someone to talk to, and brokers are the first person to listen to them.”