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Mountain Area Homeowners Battling Sky-High Insurance Rates

MOUNTAIN AREA — Even local insurance agents are calling it a “crisis” — the sky high price tag attached these days to homeowners insurance in large parts of eastern Madera County.

Many area residents have recently been notified their homeowners insurance is going up — for some, by as much as 450 to 500 percent.

And lately, according to local Realtors, many would-be home buyers considering properties in eastern Madera County are deflated after learning how much their mountain dream home will actually cost to insure.

The tsunami of premium increases and cancellations aimed at homes deemed to be in “high fire” risk areas has been hitting eastern Madera County homeowners hard the past few years.

“This is a huge issue,” said Supervisor Tom Wheeler, whose own homeowners insurance has been cancelled twice in the last two years.

“Lloyd’s let me know last month they weren’t renewing me. Luckily, I’ve still got a few months to find a new policy. Right now, I’ve got three different agents looking for me.”

Wheeler has spotlighted the insurance issue at recent Town Halls. He’s also testified in Sacramento about the impact on area homeowners and the need for reforms.

“It’s time for the Legislature to step in and do something,” Wheeler said this week.

Warning bells

Even local insurance agents are sounding warning bells. “We’re in a real crisis,” said Marilyn Rigg at State Farm.

Rigg and a half dozen other local insurance agents met this week at the Oakhurst Grill. Oakhurst agency owner Brian Harper, who took part in that discussion, calls the situation “extremely dire.”

“Up until around 2012, consumers had many choices, as it was still pretty much open season on insurance,” Harper said.

A group of local agents met this week in Oakhurst to share ideas and best practices for dealing with eastern Madera County’s escalating insurance “crisis.” From far left: Brian Harper, Shannon Nichelmann of Allstate, Liz Winterton of Foster & Parker, independent agency owner Robert Guerrero, Doug Reeves and Marilyn Rigg. (Photo courtesy Marilyn Rigg)

“But starting around late 2012 through 2014, mainstream carriers changed underwriting guidelines to limit exposure in wildfire prone areas by being selective when it comes to taking homes in the mountains, or not taking them at all.”

The underwriting changes also coincided with the peak of California’s multi-year drought — and the beginning of the bark beetle epidemic, which choked many forested areas with additional fuels for wildfires.

As insurance companies became more selective and premiums continued to rise, Harper said many agents began turning to what is known as the surplus-lines market.

“Surplus lines or non-admitted carriers are generally deep-pocketed insurers that don’t participate in the state-level rules and regulations,” he said. “But they aren’t protected against insolvency like admitted carriers are.”

Until the recent fires, Harper said surplus lines carriers like Lloyd’s of London, Scottsdale, Lexington, and Markel/Evanston would compete with each other for “high risk” home insurance business in the area.

But those times are long gone.

Wheeler’s now been cancelled by both Hartford and Lloyds.

“After all these fires, our rates have been really getting jacked up,” he said. “If Measure L would have passed, it would have created two more firefighters” per station in North Fork, which Wheeler said would lower the area’s so-called ISO fire rating, the key metric used by insurance companies to calculate premium rates in a specific area.

Recent wildfires across the state have put some of the smaller insurance companies out of business. And Harper, who is affiliated with Farmers but also has access to specialty lines, said no new carriers have entered the California homeowners insurance marketplace in 2019.

“After the Camp and Woolsey fires, surplus lines carriers took huge losses. Many responded by either discontinuing programs, or surcharging quotes and renewals 300 to 400 percent,” he said. “This is why you’ll hear of some local residents complaining about $8,000 insurance premiums.”

Harper said he’s also getting 10 to 15 calls per week from people who received a notice of non-renewal.

Dwelling fire policy

When searching for an alternative for hard-to-insure clients, many agents are turning to a type of coverage called a “dwelling fire policy.”

“That policy, issued through the California Fair Plan, is coupled with a Fair Plan Companion Endorsement, sometimes referred to as a ‘Differences in Conditions Endorsement,’ wraparound policy, or simply a wrap,” Harper said.

“The way it works is that the Fair Plan covers fire, lightning, explosion, wind, hail, vandalism and a few other perils, but excludes water damage, liability, theft, and other important perils. The wrap would pick up the slack, and covers those perils, but won’t cover anything the Fair Plan covers, like fire.”

“Between the two [policies],” Harper added, “you have a normal homeowner policy that is protected against insurer insolvency. If you have a fire, you file a claim with the California Fair Plan. If you have a liability claim or a burst pipe that floods the house, you file a claim with the company providing the wrap.”

This combination of coverage, according to Harper, “is almost always less expensive” than more standard plans.

But on April 1 of this year, even those on the California Fair Plan saw their rates increase by 30 percent.

Harper said he tells his clients “it will likely take legislation or other action from the California Department of Insurance, state government, or even the feds.

“They will have to create a completely new solution, modify the Fair Plan in some way, or model a program after something in the Midwest meant to address tornadoes or the Gulf Coast meant to address hurricanes. Because the climate is changing, and the fires aren’t going to stop.”

Last month, the Rural County Representatives of California (RCRC), a service organization that represents 36 rural California counties, including Madera County, took note of the issue and formed an ad hoc committee to investigate the rapidly rising cost of homeowner’s insurance.

The committee will issue a report by August 2020. Potential solutions could include trying to attract more insurers to rural areas like eastern Madera County and revising California’s Fair Plan.

Harper said there are still loopholes that allow some homeowners to get reasonably priced insurance “for one reason or another, maybe due to their location, or the way they use the home.”

Meanwhile, more and more area residents are receiving unpleasant rate increase and cancellation notices from their insurance companies.

“This is why people are moving out of state,” local Realtor Don Mandy said on a lengthy Facebook thread detailing local residents’ challenges and frustrations with the situation.

“Consumers have a right to be angry,” Harper said. “Most of my clients are level headed about it. But they also want to know when relief will come.”

Homeowners with ongoing insurance issues can call the CA Department of Insurance Consumer hotline at 800-927-4357 or visit  www.insurance.ca.gov.

This article was edited on July 26 to include more accurate information regarding Measure L’s potential impact on firefighter staffing in North Fork. 

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