Fire insurance getting harder to find

Fire insurance getting harder to find

04 December 2018

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USA – Wildfires continue to exact their toll in the state, this time in the form of the rising cost or non-renewal of fire insurance policies in El Dorado County by many carriers.

The result is homeowners are now having to look further and are paying more for insurance.

Others are getting sticker shock as they find out what it will cost to buy fire insurance for a home they planned to purchase.

Ken Calhoun, a real estate broker in Pilot Hill, said the risk of catastrophic fire and difficulty of getting fire insurance is the biggest threat to rural areas, saying we are moving toward a world where it will be difficult to get all kinds of insurance because of the risk from fires and other catastrophic events.

Other insurance brokers contacted agreed, saying that while rates have been steadily climbing over the last few years, it was when brush mapping came along that the price of fire insurance or the inability to get insurance took off, especially in rural areas like El Dorado County.

Robert Lenoil, a broker with Robert Lenoil Insurance Agency in Placerville, said it was around 2011 when the wildfire scoring system based on brush mapping came into use.

“They started to use satellite imaging to give a unique score to each property,” he said. “Before then, insurance companies didn’t know what the wildfire risk was. They relied on how close people were to a fire hydrant and stuff like that, which doesn’t differentiate between a house in an urban area and one in a rural area.

“Once these wildfire scoring systems came into effect, insurance companies had the ability to set criteria where individual houses got a score so they could say that one person’s score was too high and another was low enough to insure. So things started to get tough.”

The most widely used brush mapping program is called FireLine. It uses state-of-the-art GIS technology and satellite imagery to provide information to insurers on three wildfire risk factors — fuel load, slope and access — to determine a home’s individual score.

Lenoil said insurance companies are also lowering the cut line for what they will insure.

“When FireLine first came along, Farmer Insurance, for example, would insure anyone up to a score of 11. Now the cut line is down to a score of three in Placerville. They weren’t alone in this and now it’s next to impossible to get insurance because the FireLine score is not something you can change,” he said, although many people try to make their property more fire safe by creating a defensible space around it.

Debbie Barr, an account manager with Vaught, Wright & Bond Insurance, Inc. in Placerville, agreed, as she urged people to be proactive in this regard.  “You’ve got to maintain your property if you want to get and keep insurance,” she emphasized. “In the past if people kept their land cleared that’s all insurers cared about but now it’s area wide. Carriers are expecting people to maintain a 100 to 200 foot clearance around their property including underbrush, trees trimmed up and debris off the roof. ”

However, Lenoil said that may not be enough, adding that the FireLine score looks at a quarter-mile radius around a house, not just 200 feet.

“So you could create a defensible space around your house and it still doesn’t matter because insurers are looking beyond that and that’s why it’s hard for a homeowner to move their score because it’s literally a matter of the entire neighborhood clearing out their respective area,” he said.

Another factor making insurers nervous is that dry conditions and winds can carry embers that ignite a fire in an area thought to be safe. In one example, Lenoil cited the fire in Santa Rosa last year that destroyed the Coffey Park neighborhood. “It burned to the ground even though it was rated a one because of embers from a fire burning a mile away,” he said.

Lenoil said the risk has become so great that one company, American Reliable Insurance Company, recently decided to leave the state and stop renewing existing policies here altogether.

“Most mainstream carriers have pretty much abandoned El Dorado County although most of El Dorado Hills is still insurable,” he said.

Insurance options 

Because of the heightened risk of wildfire, the brokers estimate the cost of fire insurance will increase at least 30 to 50 percent over what homeowners are currently paying.

“The median price is difficult to estimate because each person’s property is so different but generally it may cost between $1,000 to $2,000 while in the past it was $600 to $800,” Barr said. “Even I was non-renewed by one of the big carriers and had to find a different carrier.”

Because of all these factors, Barr said homeowners may have to broaden their search for a carrier and should start searching for one before their existing policy lapses or is non-renewed.

One outlet for insurance is what are called surplus line carriers such as Lloyds of London and Scottsdale Insurance Company. However, the brokers said people should expect to pay more because of the additional risk these insurers are taking on.

Another option is the state-sponsored FAIR Plan (Fair Access to Insurance Requirements) which has been around since 1968. But FAIR only covers the structure and not its replacement cost or anything inside the home. It also does not include liability coverage. Homeowners would need a separate policy for that.

However, Lenoil warned people not to see the FAIR Program as some kind of panacea because it’s not cheap as they use the same FireLine scores as rating factors. Instead he urged people to look into surplus line carriers because they can offer better coverage for the same price as a FAIR policy plus one covering liability.

So the bottom line is that people who want to continue living in the county are going to pay more for insurance.

It’s also complicating the process of buying a new home as anyone with a mortgage must have fire insurance.

“It’s not that they can’t get insurance,” said Lenoil. “It’s just that they are going to pay a lot for it,” saying he’s seen home deals fall through once people learn what they will have to pay for fire insurance.

The brokers also advised people that once they are notified of non-renewal of their policies to start looking right away for another carrier and to blanket their search as different agencies serve different markets.

As for the future, Calhoun said because of the cost, there is a trend of people going uninsured or of taking out policies with high deductibles. He said the effect on housing is still too early to tell but he expects in six months to a year sales will slow down as people who want to move to a rural area start to have second thoughts about the risk.

Lenoil agreed, saying that in response to a slowing market, the real estate lobby will pressure the Legislature to do something.

“I don’t think it will happen overnight, but in time I expect it will happen,” he said. “Those in the private insurance marketplace may decide the risk is too big for them and similar to flood and earthquake insurance, wildfire insurance will end up being a government program. I think that will happen, but it’s several years off.”


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