If you live in California, you are already more than familiar with the severe wildfire crisis that has been troubling the state for the past several years. Over the past few years, the fires have only become worse resulting in hundreds of thousands being evacuated and thousands of homes and businesses being destroyed. The massive increase in the number and size of the fires is the result of a combination of several things, among which are current forestry practices, climate change, and of course the never-ending desire of human beings to continue expanding into more remote locations and those that are highly prone to wildfires.

Perhaps one of the most significant issues facing us is the imminent threat of fire insurance crisis. Some steps were taken by the state legislature and State Insurance Commissioner Ricardo Lara to that protected the victims of the massive fires that ran through Ventura County, Wine Country, and areas of San Diego County. Those suffering under the unparalleled wildfires of this fire season may also benefit from the changes made.

Specifically, the change that extends the period in which an insurer may not cancel a fire insurance policy in an area that has been destroyed by fire from one to two years. The clock only starts ticking when the governor declares a state of emergency.

Okay so now we have protection for those who have already lost their homes, but nothing was done to protect those whose properties have not been burned.

To be sure, it is always in an insurance company’s best interests to do everything they can to minimize their risks. The insurance industry is a primary backer of several essential bills such as the one that would have allowed utility companies to skip their liabilities when their equipment is responsible for fire damage. Then there is the bill they are trying to kill that would require insurance companies to cover all living expenses as are necessary for the claimant to continue living at the same standard as they were before the fire.

While these cases are not settled, it is easy to see where insurance companies’ interests lie. The largest of these cases, that of the utility company may take years to resolve as negotiators work to find a solution that will not bankrupt utility companies, but at the same time will not drop the most significant share of the cost on homeowners.

This problem is nothing new, in fact, former Insurance Commissioner Dave Jones saw this crisis coming quite some time ago, “The companies must renew policies for a time on homes in fire disaster areas,” he said. “But they don’t have to renew policies in non-disaster areas when they expire, and they don’t have to renew homes in disaster areas beyond the time limits.”

So, as you can see, the crisis has indeed arrived. However, it won’t be like it was back in 1994 after the Northridge earthquake. At this point in time, many property insurance companies stopped writing new business and home polices and refused to renew existing ones anywhere in the state. After two year the state created the California Earthquake Authority (CEA) and at the same time eliminated the rule require insurance companies to offer earthquake insurance with their property insurance. Today the CEA writes the bulk of earthquake insurance policies in the state.

Called the Fair Plan, these policies offer homeowners a safety net in the event their insurance company does not renew their coverage. Much like the CEA, they must underwrite anyone who applies, but the premiums are significantly higher. Prior to the fires of 2017 the rate at which Fair Plan issued policies was going up at a rate of about 1,000 per year. This number continues to rise exponentially and is expected to do for the next couple of years.

As you can see the “fire insurance crisis” is less about not being able to find fire insurance coverage and more about being able to afford it. Yet, no matter how you look at it, it is just as painful either way for those who have to foot the bill.

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