California’s Home Insurance Market in Crisis
California’s property insurance market was already facing significant challenges before the recent devastating wildfires in the Los Angeles area. The fires, which burned thousands of homes, have exposed a deepening crisis, leaving many homeowners without the means to rebuild.
A home in Altadena destroyed by the Eaton fire.
Before the blazes tore through communities like Pacific Palisades and Altadena, insurers had already begun non-renewing thousands of home insurance policies in fire-prone areas. This trend, driven by rising costs and increased risk, left numerous fire victims without sufficient coverage to rebuild their lives.
Rising Costs and Limited Options
Francis Bischetti, a resident of Pacific Palisades, experienced the dramatic increase in insurance costs firsthand. His annual premium with Farmers Insurance was set to skyrocket from $4,500 to $18,000, an amount he couldn’t afford. He also found it difficult to obtain coverage through the California FAIR Plan, which offers fewer benefits. One of the FAIR Plan’s requirements was the removal of 10 trees near his roof, which he also considered too expensive.
As a result, Bischetti made the difficult decision to go without insurance, hoping that watering his property would provide sufficient protection. Sadly, his home, where he had lived most of his life, was destroyed in the recent fires, highlighting the risks homeowners are taking.
“It was surrealistic,” Bischetti said. “I’ve grown up and lived here off and on for 50 years. I’ve never in my entire time here experienced this.”
Insurance Companies Pulling Back
Bischetti’s situation is not unique. Many homeowners in fire-prone areas have struggled to maintain their insurance coverage due to rising costs and insurers’ decisions to limit their exposure to wildfire claims. Several major insurers have reduced their presence in the California market.
Chubb and its subsidiaries stopped writing new policies for high-value homes with higher wildfire risk in 2021. Allstate ceased writing new policies in 2022, and Tokio Marine America Insurance Co. and its subsidiary Trans Pacific Insurance Co. withdrew from the state last year. Liberty Mutual has also faced legal challenges related to policy cancellations.
The difficulties in obtaining coverage are reflected in the growth of the California FAIR Plan, which saw its policy count increase from just over 203,000 four years ago to approximately 452,000 as of September, 2024. FAIR Plan’s website states that its claims exposure in Pacific Palisades alone is nearly $6 billion.
Personal Stories of Loss
Peggy Holter, a retired television journalist, lost her Pacific Palisades condo in the fire. State Farm declined to renew her condo insurance because of the condition of her roof. She is now facing uncertainty about rebuilding, as the homeowners association’s master policy from the FAIR Plan provided limited coverage.
Matt Knight, a Covina elementary school teacher, experienced similar struggles to maintain his coverage, also. Even after making significant repairs to his property in accordance with his insurer’s requests, he was unable to secure affordable insurance.
Community Resilience
Despite the devastation, communities have shown resilience. Residents like Knight, who had his insurance, were still impacted. Knight and his family were displaced by the fires. He and his neighbors were forced to pack up and leave, not knowing what they were going back to.
Burned homes and cars in Altadena.
The fires are a sharp reminder of the growing challenges facing California homeowners. These challenges are not limited to the immediate threat of the fires. Many residents are now facing difficulties rebuilding due to the insurance crisis. These individual stories highlight the broader issues within California’s property insurance market, and the urgent need for solutions.
