Los Angeles fires will put California’s new insurance rules to the test

Lloyd and his wife later bought another home in Hidden Valley Lake, a town that took ambitious steps to reduce flammable plants, but their insurance premium was still more than $4,500 a year, more than three times what it was at their last home in Kansas. . Lloyd is concerned that his insurance company will raise his rate further under the new rules.

Other states across the West such as Colorado and Oregon are seeing gaps in insurance coverage emerge after large wildfires, although their problems are less severe than those in the Golden State. In Colorado, for example, officials recently created a site State support for fire insurance Like California’s FAIR plan, since it’s only in the last few years that the number of clients there has declined en masse. California’s grand deal with the insurance industry provides a blueprint for those other states: If you want to address coverage gaps, you have to give insurers broader authority to set rates.

Firefighters battle the Eaton Fire near the Altadena area in Los Angeles County, California. The fire exploded violently earlier this week amid a ferocious wind storm in Santa Ana.

Photography: Josh Edelson/Getty Images

Even this may not be enough. The past few years have seen a respite from major wildfires like those in 2017 and 2018, but this week’s fires in the Los Angeles area could cause billions of dollars in damage, on par with an event like the Camp Fire.

Damage from the Los Angeles fires could lead to further price hikes and more availability gaps, said Joel Loescher, a former regulator and fire insurance expert at consumer advocacy group United Policyholders.

“These will certainly be significant losses,” he told Grist. “Certain areas will certainly face new challenges, to the extent that insurers will be able to charge the rate they believe those areas are worth paying.” Loescher said insurers may not refuse to renew as many policies they had under previous state rules, but they can still avoid selling policies in some affected areas.

Frazier, of the insurance trade group, expressed similar concerns. Another round of megafires on the scale of 2017 and 2018 could push the insurance industry away from the state again, despite the commissioners’ reforms, he said.

“If we have another unprecedented two years, all bets are off,” he told Grist.