SJW’s Screeching That Insurance is Unfair in 3, 2,…

After the Camp Fire, it seems some insurance companies are revisiting their actuarial tables. ‘Sticker shock’ for California wildfire areas: Insurance rates doubled, policies dropped.

Here’s a hint: If Lloyd’s of London won’t insure you, you are screwed, because they traditionally are the insurer of last resort. They will make you pay, but they will take your bet. Only not in this case.

Jennifer Burt knows she lives in a fire-prone community. That’s why she’s done everything she can to fire-proof her home in Meadow Vista, in the bushy, densely wooded Placer County foothills, even installing a sprinkler system on the roof.

Yet a few weeks ago, her insurance carrier — Lloyd’s of London, known for insuring high-risk properties — told her it was declining to renew her homeowners’ policy. Lloyd’s also dropped coverage on two rental properties Burt owns in Graeagle, a heavily forested community northwest of Truckee.

As I mentioned earlier, people are re-building homes in Paradise, California with no thought to improving the fire resistance of the structures. OK then, no one will want to insure them. Or any of the existing homes in other areas prone to wildfire.

“It’s really sticker shock for people to see their homeowners’ (premium) go from $1,200 to $3,600,” said Richard Harris of Harris Insurance Services, an independent agency in Grass Valley. “They can’t afford these increases, and they leave crying. We can’t help them. You can only have so many people leaving your office crying.”

If you read the fine print of your mortgage (I know, it’s crazy to assume people actually READ the contracts they sign) you will find that one of the requirements is that you have to maintain minimum insurance coverage. If you pay escrow every month, it’s because your lender doesn’t trust you. They collect the fees (taxes and insurance) every month and pay them on your behalf. Because something you did (credit score or small down payment) made it so that they don’t trust you.

Cal Fire – and probably a few other organizations – is trying to get enhanced forest management through the California legislature. Any bets on whether they will succeed? Or will the environmentalists claim, as they have for the past decade and more, that cutting down the dead and dying trees would be wrong. Or something.

The screeching. It’s there in the article linked at the top of this post. As for the reality…

Insurers have complaints of their own. Homeowners’ coverage, an $8 billion-a-year business in California, has become an unmitigated disaster for carriers: For every $1 they collected in premiums from Californians last year, they paid $1.70 in claims, according to data collected by the Department of Insurance.

California lawmakers are probably going to ignore the reality of economics. But however you slice it, the amount of money paid for insurance premiums needs to pretty much double. And then you have to ask, is it fair for people in non-fire-prone areas to subsidize those who live in the forest?