Someday we're going to have completely reevaluate the role insurance plays in modern society. The idea is simple, get many people to pay into a collective pool and when crisis hits one that pool covers the cost.
The problem with insurance is that it comes with a profit sucking leach motive. not all of that money is available when needed and worse, the people most at risk are the first to be cut (they're the ones most likely to cut into profits).
The thing is we have an obvious alternative to the for profit insurance industry. An entity that collects funds from everyone and that has the ability to pay out when needed. That entity is the government. Taking on the for profit medical insurance industry has risen to a top issue, but really virtually ALL insurance should be in the cross hairs.
21
I suspect that we will soon recognize that the end of this endeavor to ever grow our economy will arrive with a non-renewal notice. There will be no greater fool to buy our beach front home - nor the one on that safe suburban cal-du-sac. The banks will be unforgiving, but they’ll have no better option. It will be no safer elsewhere. When the rain comes it dumps in buckets. When the wind blows, it will be unforgiving. There will be no safe place, from the weather or the banks.
Our debt is coming due, if not this decade then next - and maybe, just maybe, it will all come apart in time to give some long distant future peoples a better chance at a decent life.
We’ll put more C02 into the atmosphere next year, than this. We’ll set a new record after that, and so on. Until we don’t. Until we get that non-renewal notice. I suspect that will change a lot of things.
14
And we who had paid AAA, for 45 years, received a little letter, stating, we’ve done away with your insurance! No thank you for always your prompt payments, and allowing our CEO(s) a great fun filled life! Then because they dropped us, the CEA dropped us as well, also after years of on time payments! It’s seems we took the risks, while they took our funds, and when it became HOT, in board rooms, they did some laughing at us, and came up with a great heist!
14
If industry is now attempting to non-renew huge swaths of the insured population, one or both of two things must be true -- insurers did not know what they were doing when the initially wrote the coverage or they don't know what they are doing now when non-renewing in great numbers. To justify the non-renewals today, insurers would have to admit they didn't understand the risks they were insuring. The more reasonable explanation is that insurers are having a knee-jerk reaction to major claims events just as they have done in the past and Lara's moratorium is the right tool for the problem at hand.
2
The credibility of the insurance industry isn't good as they have historically cried 'wolf's even as they booked excessive profits. They will use any excuse to raise premiums while being slow to reduce rates when justified. Having said that we also can't force them to write insurance ar a loss over time. The insurance is giving everybody a more accurate insight into the real costs of climate change even if politicians are in denial. The fact is we have built in areas where there are known earthquakes, flooding or fires. If you want to build a mansion in a forest in California you should expect to pay a lot more for your insurance than someone living in a low hazard zones. Regulators should set rates that reflect insurers experience over a rolling five to ten year period.
6
If insurance companies are forced to buy out homeowners, the price should be the market value of a house sitting in the middle of a dry forest. (Policies only cover the value of structures on the land, not the land itself.) Otherwise, insurance companies are paying for the damage to market values due to climate change. Insurers can’t be expected to insure against climate change. In CA we also have the issue of assumption of the risk. Many people knowingly moved into fire prone areas and then made matters worse by allowing shrubbery to grow next to the house. I am more sympathetic to the people in Key West, who may also have to be bought out.
No state can force insurance companies to sell policies to its citizens. If Insurance companies are not allowed to increase premiums to reflect risks, they will leave. An insurance company cannot be forced to renew a policy if they have withdrawn from the market and are not licensed to sell insurance. See Florida. Some say that no insurer will stop selling homeowners insurance in CA because it’s a large market. If the premiums don’t cover the payout, they will suffer a greater overall loss in CA than if the same situation pertained in a smaller market. FL was a large market.
3
The problem with this problem is that the risks are not easily calculable, therefore the science of setting premiums gets turned on its head. Insurance is shared risk - for the collective to pay for the consequences of the covered events when they occur. The revenue comes from two cources: premiums and re-invested company assets. Climate change risk is notoriously hard to predict. In such circumstances, such as for risks of nuclear accidents, there are two common approaches: by regulation cap the coverage for an insured event, and/or provide for the public sector to pick-up the damages exceeding a cap on private sector liability. This approach recognizes that there are limits to what the private sector can be reasonably expected to tolerate without sending rates to totally unaffordable levels. Instead of the companies and the regulators battling each other over this, in California and everywhere else for that matter, creative solutions are needed. It is an international problem because the problem is universal and the Re-Insurance companies pool risk and premiums on a world-wide basis.
8
Interesting that there is little discussion of looking at the profits of the industry that created the problem in the first place. The fossil fuel industry has been handsomely rewarded while placing this, and other, huge parts of the costs of their business on the backs of homeowners, renters, and taxpayers.
8
In perusing the responses, and the original article, little is mentioned that it is the mortgage lenders who are insured, not the "homeowners". So if you live in a high risk zone and the built property is consumed by the catastrophe, the bank gets whole first. The "homeowner" still owes the loan differential between the mortgage and the insurance.
That's why living in Florida is so "made great" - the Florida Legislature imposes surcharges on ALL insurance premiums against the insurance bankruptcies that might follow a hurricane. This way the 90% who live within 5 miles of the coast can enjoy cheap rates at the expense of those who had the sense to move inland. It will happen, and just as in California, the banks and insurers will survive on the backs of the "homeowners".
7
The collapse is starting. The insurance companies are going to scramble to leave markets or to limit their liability. Tax-payers will have to step in and provide people with the money to rebuild their overpriced homes. We are facing utter ruin as a nation and we continue to allow the rich to build in risky locations under the assumption that the rest of us will make them whole.
15
@Willt26 Do you mean risky places like Oakland, CA? Or Chicago? Or the San Francisco Bay Area? Or Los Angeles? Or Tornado Alley? Or Galveston? Or Houston? Or New Orleans? Or Seattle? Or South Florida? Or the Outer Banks of North Carolina? Or (any address here)? Exactly where in the entire US/world is there NOT a risky location to live, and how would those few-and-far-between locations accommodate 8 billion people (and rising)?
4
"...the need to keep insurance companies from going out of business entirely."
Or simply leaving the State of California.
Now there is the problem.
You are demanding that these companies must spread the risk of fire across its entire California population, thereby charging the peasants of small urban suburbs for protecting the millionaires whose mansions are high in the picturesque mountains.
Oh joy, the splendor of unintended, Bleeding-Heart liberal, consequences.
4
What about risk in Florida, Louisiana, New Jersey, Alabama, North Carolina? You don’t have to be liberal to be at risk for climate change. We are all vulnerable. All of us
3
@Good John Fagin bleeding heart liberals??? Insurance execs are heart and soul of republican "profits above people" creed. Get educated! Get real!
4
"...the need to keep insurance companies from going out of business entirely."
Or simply leaving the State of California.
Now there is the problem.
You are demanding that these companies must spread the risk of fire across its entire California population, thereby charging the peasants of small urban suburbs for protecting the millionaires whose mansions are high in the picturesque mountains.
Oh joy, the splendor of unintended, Bleeding-Heart liberal, consequences.
1
California is a nice but not very cheap place to live.
If you want to be in a picturesque place, and have strong genes, you need to have money to rebuild your house and rebuy your belongings 3-4 times. These days it's easy, you digitize your photos and papers and put them in the cloud. You try to save your cat.
That is all there is to it. It has nothing to do with climate change, and all to do with economic change.
If you cannot afford it, you move elsewhere.
I stayed once overnight at the Malibu Inn on the coast, and an elderly family who lived in the canyon above told me they were in their twice rebuilt house, ready for the next rebuild if it came to it.
4
CA only allows insurers to price based on prior losses, not on expected future losses. That pretty much says all you need to know. That model works fine for auto insurance. It fails miserably for homeowners in a changing climate. Every future decade will see losses at least double over the prior decade, potentially much higher multiples. This is a formula for the end of private insurance. So they're going to have the state take over utilities AND insurance now. CA tax rates will be rising rapidly and within a decade the states credit rating will be downgraded to junk as it assumes more and more liability that the private sector flees. Leave while you still have money and can sell your inflated houses folks.
9
@Eb How's the weather in Ithaca, NY? Get any snow lately? (No thanks). I, along with countless other Midwesterners and East Coasters, left those lousy-weather states decades ago and headed to California for its temperate climate and magnificent beauty. We'll figure something out, but going back to those brutal winters isn't an option.
3
A few decades ago, insurance companies pulled out of states with problematic auto sectors until there is reasonable reform. California could backfire when companies realize insuring at risk area could cause existential threat to the companies themselves.
4
Having had the experience of being denied insurance, though never having made a claim, because my home was allegedly in a hurricane zone (in Yonkers on the Bronx border no less), an insurance company decision reversed eventually by NYS, I am incredulous that insurance companies expect consumers to absorb the costs of their miscalculations. They lost the bet but they want a business that only wins them money and never pays out.
5
The Dems rigged it or Hillary last time and they lost. Now they are rigging for Biden that may also be a loser. If they want to win, they need to let the people pick the candidate.
@RK Rowland Investigators in both parties have determined that it was the Repubs and Russia who did the rigging for Trump. Trying to distract from that fact doesn't change it.
4
Insurance companies have made millions over the years and now they have to pay some money because of fires so they want to end policies. Shame on them. Their greed stinks like the stench of the fires. Perhaps they will get some lobbying going to fight climate change, one of the reasons for the fires.
3
No need to fret. Our ingenious, debt-savvy President is at the helm. He’ll come up with an elegant solution and all will be fine. He’ll turn these mean, nasty risks into sweet, beautiful rewards (cue the balloons and confetti). Believe you me, he’s the only one that can.
hooray for California!!! the insurance companies take your money for years and when it is time to pay they look for any way possible to NOT pay. and if they are forced to pay the premiums skyrocket or more likely they kick you to the curb.
1
It's really hitting the fan, now. Here's where the rubber meets the road. The chickens are coming home to roost.
Eventually, reality will prove that the climate change deniers were nothing more than paid charlatans, or people literally in denial. The smart money will accept it and deal with it.
That land in Florida is about become a lot cheaper.
7
Who should pay? Republicans who have been denying climate change.
5
watch as most companies leave California all together
3
We must retreat from flood and fire prone areas. We should not rebuild. Insurance for those areas should be revoked. That would help clear the land for natural processes. Wake up folks! There is no “new world” anymore, just the same, rapidly deteriorating old one. My advice: stop breeding and building. Develop an economy not based on “growth”. There is only one planet and finite resources.
16
Big business (including the energy sector), the military and the insurance industry all take climate change seriously. They need to influence our laggard and corrupt political sector to come around to reality.
5
For those of you outside California, this policy change is merely a one year moratorium to give the interested parties a chance to come up with some options NOT a permanent policy forced upon the insurance industry.
So don’t get your Republican free market feathers all up in a tizzy.
Furthermore, you citizens in flood zones in red states who expect us California taxpayers to constantly rebuild your house when you don’t pay market rate federal flood insurance premiums tied to risk (I’m talking to you Houston), people shouldn’t throw stones who live in repeatedly flooded houses.
Lastly, you farmers with your 16 billion and 14 billion dollar subsidies from my tax dollars because the president you voted for ruined your export market, don’t talk to me about “maybe I should have thought about climate change when I bought my house 25 years ago.”
My neighbors are getting their insurance policies cancelled and we don’t live in the middle of a forest. We live in San Diego county. There were no fires in our area 25 years ago.
13
Republican climate change deniers are going to be schooled by market forces that big too long ago they worshipped as the only sound basis for public policy . Once lenders start red lining at risk areas , following the insurance industry’s lead , and their donors can’t sell their beachfront mansions and mountainside condos , the spell of willful ignorance regarding climate change may be broken .
6
As heartless as it sounds, I actually think that only immense human suffering will motivate our country to finally take climate change seriously. The voters who put Devin Nunes in office will only learn when their pocketbooks are directly hit. Yes, his voters are not in wildfire areas (yet), but make no mistake, climate change will touch each and every one of us. The longer people are shielded from those effects, the less chance we have to mitigate them.
17
Here's my question: Is this a Law or a State Regulatory fiat?
Second Question: WHO of the California Legislature was instrumental in getting this Ban set forth? How many of them were 'Conservative' Republicans?
Because most intelligent people know how the economic model called INSURANCE actually works: It's a scheme wherein everyone pays into the pot...and if the statistical run of bad luck remains predictable and low...there's enough money to take care of and 'make whole' the unfortunate few who are OCCASIONALLY hit with calamity while holding the virtual umbrella of financial safety over everyone else.
Meanwhile, there's enough money remaining in the pot to re-invest and grow the fund and pay the Insurance company for the cost of it's operation.
But if EVERYONE turns to the pot and grab holds of enough cash to 'Make themselves whole'... you could end up with an empty pot.
Wildfires don't pay attention to 'statistical probability' when they burn. Neither does the Weather. Lightning STRIKES. The Winds BLOW and the Fires BURN. And all people can do is run for their lives.
The Capitalistic Scheme called 'Insurance' stops working when EVERYONE reaches into the pot to rebuild not just ONE house...but every house in the entire county.
How many Republican lawmakers pushed for this ban? Because most of the areas burning to the ground don't tend to be very 'Liberal' in their voting patterns.
5
@Lonnie This is a good description of how the whole notion of 'insurance' works. And, as an aside, the reason why relying on insurance to pay for healthcare is so problematic - everyone dips into the money pot, and most people need some kind of healthcare regularly. Antithetical to the financial premise of insurance.
I hope The Times will do a follow-up story on the steps communities are proactively taking to deal with the home insurance and home hardening issues, along with the development of clear escape routes to save lives.
We are all continuing to learn from these recent fires. The West is front and center in experiencing climate change impacts. Fires, of nearly unimaginable scope twenty years are becoming commonplace in communities not far from where we live.
Those of us living here, especially those of us living in or near what is termed the WUI (Wildland-Urban Interface) are well aware of these risks.
In Marin County, about 59,000 homes are situated in the WUI. Communities like ours are actively taking steps to mitigate the risks. For example, we are placing a $0.10/sq. ft. home tax ballot measure for our upcoming March election.
Its purpose is to form a county-wide Joint Power Authority to coordinate the work between 17 separate fire and community districts in a coordinated fashion.
The environment knows no boundaries. We need to address this on its terms, not ours. The success of this work will need to be measured in decades.
4
@Larry Minikes The West is front and center in dealing with fire. But the East has sea level rise, stronger hurricanes. The South has those on the coasts and tornados and drought. The Intermountain West and Alaska markedly higher temps.
No one escapes, really. Some areas more dramatic than others. But the migratory and economic hits will be much bigger and frequent the more we get into this. Miami Beach, Hurricane Sandy, wildfires, Syria, Iran, migration in Europe, floods in southern Europe...these only foretell the world to come. And the US dithers in corrupt denial, playing its gotcha capitalism fiddle.
4
@Rocky Please refer to our outstanding president's "it's all a hoax" Message for clarity and comfort.
3
Here's an idea: The state of California should sue the fossil fuel companies that have engineered climate change denial for the past several decades. Then use the winnings to help relocate residents and/or ameliorate properties where relocation is not feasible.
5
We in California have been experiencing some of the worst wildfires in history, not necessarily related to where housing is built. The town of Santa Rosa is not a wildland fire area, the Tick fire recently extended into a city which is not a "forest" or wildland area. There are natural disasters around the entire US, yearly tornados in tornado alley, hurricanes on the East coast and Southern gulf coast. Parts of the country not usually experiencing wildfires are now doing so, Georgia, Florida, etc. Global warming is here. We have to look together to solve the insurance issues, not just throw certain parts of the country under the bus. This affects more than California.
7
The refusal to allow insurance companies to price risk accurately is going to produce a case study in moral hazard. We have a generation of comfortably housed Californians who have vigorously resisted infill housing and density. These obstructionist policies are direct contributors to sprawl, which begets greater emissions and have forced people further out into fire prone areas. We do need to stop subsidizing sprawl and pricing insurance accurately is an important step.
9
They can price it accordingly. however they cannot just drop it.
@Isabella Chu Redwood City is part of the sprawl AND sits right on the San Francisco Bay. When the Pacific rises, so will the Bay. My Santa Cruz Mountain home is threatened by fire, your home by water. Where shall we move? Las Vegas? They're perpetually worried about running out of water. Let's all stop the blame game and start working on solutions.
Am I missing something here?
Can't an insurance company simply specify a prohibitively high premium charge and thereby comply with this law?
As a CA resident, I'm grateful, but this strikes me as nearly as irrelevant as the annual offer of earthquake coverage that I get from my insurance company (and ignore): the premiums and deductibles are so high that I can't imagine anyone actually acquires earthquake coverage. Nice idea, but the insurance companies gamed this one well long ago. This new proposal looks to be more of the same.
3
These folks who voted this law are obviously not convinced that gravity is NOT the most important force in the universe. Why would any insurance company offer insurance in CA? The Left is not being realistic. Heaven help us all.
1
Climate change -- or building bigger and more where we know there have always been problems? It no different vs beach houses along the east coast IMO. Our little house on LBI is now a 3 story twin monster ...
Companies will just leave the state ... it happens all the time when states pass laws creating policies that don't make a profit. You can't make up loses with more losses.
We need to stop building houses in poor spots -- that's why the land is cheap.
1
What climate change? Half the US population doesn’t “believe” in it.
I’m looking forward to the day when everyone views geophysics, ocean science and chemistry as similarly valid as statistics and actuarial tables.
1
I chose to responsibility purchase a home in CA, specifically avoiding high wildfire risk, high landslide risk, and high earthquake liquefaction risk zones. Looks like my insurance premiums are going up to subsidized the home purchasing decisions of the unwise. Sounds about right the times.
5
How is selling someone protection you can revoke at will acceptable as a legal business practice in the first place?
@Randall it is sold for a fixed term not in perpetuity . Same for most forms of insurance like health insurance . The cost for non cancellable insurance would be astronomical in situations where the risk covered is subject to change over time. Insurance which doesn’t compensate for the risk taken would not have many solvent insurers participating in the market .
3
@Randall
Insurance protection generally cannot be revoked at will. Policies are issued for a fixed term, usually one year for Homeowners. The insurance company's ability to revoke coverage during this term is quite limited. The company can choose not to renew the policy but must typically give sufficient notice.
3
“Hitting the pause button on issuing non-renewals due to wildfire risk will help California’s insurance market stabilize and give us time to work together on lasting solutions.” Ricardo Lara's comment strikes me as ludicrous because he assumes climate change, responsible for the fires and flooding, will stabilize in the near future.
3
@jmilovich not really . It allows for actuaries and reinsurers to get a better sense of the risk and for laws to be changed in order to allocate risk of loss among parties , including utility companies .
4
Involuntarily, I said “Oh, my God,” when reading this article and what it says about two bad fire years wiping out 25 years of profits for the insurance agencies.
If the people whose business to predict risk can so utterly fail to predict the hugeness of this risk, how likely is it that we, as a society, are accurately predicting the hugeness of the risk facing our stewardship of this planet?
This is absolutely terrifying.
10
@T terrifying? Only if you're paying attention. Come with me into the Republican rabbit hole of delusion and denial, and all will be well
1
Florida dealt successfully with hurricane insurance through the creation of a state owned reinsurance company, called Citizens Property.
Florida has extensive systems and policies in place to deal with flooding and high winds.
This arrangememt provides a positive feedback loop to Florida: implememt sensible policy to make sure Citizens stays in business and is able to keep writing new policies.
It looks like California policy makers currently face no economic consequence for bad policy, such making it difficult clear brush from forrests, and allowing new construction in fire prone areas.
Fixing the insurance problem should not be this hard. If we can do it in Florida, you can do it in California!
2
@William Florida changed its building codes after Andrew and Ca needs to do the same re earthquakes and wildfires.
1
@rgoldman56 I believe we do have laws regarding building materials for new construction. By replacing old, fire-prone materials on existing buildings with fire-resistant ones, we can start solving our problems. Perhaps Floridians and other coastal residents can plan on living in houseboats in the future. (No joke...some of them are luxurious.)
This is another case of California and its extreme liberal policies causing harm with regulation, just as its errant energy regulation led to Enron, speculative energy investments, and massive governmental debt. In that case, California should've just allowed market forces to decrease consumer demand for energy instead of "protecting consumers" and leading to market distortions (and ironically, overuse of energy in an environmentally conscious state). Here again, California is "protecting consumers", who are likely millionaires if they own real estate in California, instead of allowing insurance pricing to rise, acting as a market signal of increased climate risk, and encouraging people to move from fire-prone areas.
I'm a little disappointed by NYTimes for its sympathy to the consumer in this article. NYTimes attempts to present a balanced viewpoint here, but it doesn't sufficiently acknowledge the market distortions that arise from regulatory interference.
2
@Sam Sun, I can't imagine people would move for insurance they can't afford. They would more likely go without insurance and then lose everything if a fire hit.
Do you support eliminating government subsidies for energy companies?
@Sam Sun How's your move from Houston going? It's obviously going to be flooding regularly from now on. We all need to act as a united country, as in United States, rather than a country divided by regional politics and petty jealousies. I assume you probably love Texas as much as I love California or you wouldn't still be living in flood zone. So let's stop bickering (as I've been doing) and work on solutions to our particular problems. We're all Americans here.
1
Cheap insurance allows people to live where they should not. This will now change.
8
Why worry California?
AOC said it'll all be over and moot in 12 years.
Unless climate change affects one in afterlife.
No let's not make this complicated, we'll all be at bliss soon. AOC assured us that. She better be right on this. Or we'll all be very disappointed.
Prepare to defend yourselves California. Set up networks of infrared laser detectors throughout the state. I've noted that you have suffered many fires but surrounding states far fewer. It may be sabotage from above.
Apparently the insurance companies have been buying into climate change denial. Should the President share the responsibility for the mess they’re in? Or are these companies at fault for being dumb enough to believe the President of the United States and Fox News?
The solution? A retroactive fee on fossil fuel companies who profited from the release of greenhouse gasses, despite knowing that there would be a catastrophic impact. They should reimburse homeowners’ premiums, or the insurance companies losses.
3
These losses will be peanuts compared to what will happen after the next big one.
1
The other part of this is the ridiculous prices that contractors and suppliers can charge now to rebuild - which just drives the price up for these areas. So many disasters so fast mean that the ability to upcharge for rebuilds is almost unlimited. So this also drives up the cost for the insurers. At the end of the day, the state needs to make some hard decisions about where they will guarantee a sustainable insurance company environment and where people who want to live in the wilderness can buy the risk on their own. Basically, in wilderness areas, if it takes $500K to rebuild, the insurance company should start to charge 10K per year, because in 50 years it is a guarantee that those homes will be burnt.
1
Let's not put the responsibility on anything concerning these fires on anything other than massive mismanagement by the State of California and their regulation of their licensed utility PG&E, because that is what has and will continue to be the cause behind the start of these fires. Preventing the cutting of brush and trees has been idiotic on part of the state. Forcing PG&E to pour their capital into renewables verses the grid, is the rout cause behind the fires. The State of California should have allowed electricity rates to be high enough to do both!
1
CA Governor Gavin Newsom has consciously avoided this critical problem facing homeowners. This 'moratorium' does little except buy time.
Climate change isn't going away. Time to act. Dialogue with insurance carriers and underwriters, whatever it takes to reach a solution. So far he has dodged this growing problem. Forget Trump and DC and show some leadership.
2
Way too many people building houses in areas they should not exist. This goes for coasts threatened by rising seas as well.
You want to be in a high risk area? Okay, but know that in a few years you will self insure. The writing is clearly on the wall.
6
Poor insurance companies! They are not in the business of paying claims. They sure were happy to collect all those premiums.
This is kind of laughable, I’m sure insurers can find some other mechanism to drop whomever they want wherever. A tree branch a half inch too close to the roof. . . . Cancelled.
By reputation, no reinsurance company does a better job of accurately pricing risk than Berkshire Hathaway. I think we need to hear from the calm, steady voice of Warren Buffet. Wish The NYT had gone there for this article.
1
Climate change is everyone's problem. Not just the people in Paradise California. It will be you or your sister or your aunt or your kids next, who are affected. Insurance companies picking and choosing who they will or will not cover is like health insurance companies not denying coverage for pre-existing conditions (which is illegal). Wildfires are a part of the California landscape but not like they are today. Today's wildfires are bigger and harder to control. People who have lived there for 30 years didn't have this type of wildfire when they purchased. To say they knew the risks when they purchased is ignorance not wanting to be bothered. Yeah California! Lead the way!
3
Thank you, California !!! Chalk up one for ethics and fairness. The bean-counters in the Corner Office can take a hike on this one.
Here on the West Coast, we all have seen and felt the destruction of massive wildfire. Let's all fight Global Warming - rate payers and Insurance Companies - together, rather than "just" see our premiums go way up, or simply just get cut off.
Why should people who build houses in places with high risk due to wildfires, hurricanes, or whatever, have their risk subsidized by others? There is some pooling of risk, obviously. But if you want to live in a fire prone landscape, make your house of concrete, or deal with being burned out.
Climate change is real and it is serious. The effects will not be managed by massaging insurance premiums or jawboning companies. We've squandered the opportunity for gradual adaptation and mitigation by decades of inactivity. Take a look at the Keeling curve and try to locate the point at which we took serious action on carbon emissions. Hint. There isn't one. Welcome to the future.
Greta is right. Our collective house is on fire.
6
In Canada, the government often buys out the home owners in flood prone areas. Often if the government funds a rebuild it is once only or that is the way it is developing in flood prone areas. I am not sure about our wild fire prone areas.
I have read that Texas practices no zoning control. In BC zoning control is widely practiced.
2
How about building much smaller and more fireproof homes? If the houses weren't so big, they'd cost less to replace. If they were built with stones and bricks, wouldn't that help the pretty people stay pretty?
4
The insurance industry should sue the fossil fuel industry.
We were all mislead.
Time to recover from the real culprits.
5
I'm in the Bay Area, in one of the few parts of the state with a statistical risk of wildfire of basically zero, but I made the mistake of asking my insurance company if damage from a neighbor's tree roots would be covered. It was not--but it apparently put me on their radar and they canceled my homeowners.
So this new measure wouldn't have done a thing for me, because my zip code isn't near where the fires have been at all. I'm mentioning this so that others know, if you can manage with not filing a claim right now, don't. Just don't.
3
"Ricardo Lara, California’s insurance commissioner, said he’s wary of letting insurers use models that may not be accurate."
Apparently, they've already been using inaccurate models; they've just favored homeowners rather than insurers.
However this plays out, it's clear that rates are going to go up substantially.
6
I live in a non-fire prone part of California and last year AAA used the fires elsewhere to raise my premium by $500. What's the difference between this and illegal price-gouging before and after a hurricane?
2
@Someone else Insurance is not about an individual. It's about collective risk.
1
I'm a retired casualty actuary and unless something has radically changed in the past ten years, it looks like there is a misunderstanding of some techncal words and techniques. Ratemaking is prospective in nature. We may begin with past experience but it must be adjusted to estimated future conditions including such things as inflation and trends in claim frequencies. Hard to think CA would make this illegal.
7
I believe that insurance companies are well justified in ways to manage their risk.
If you live in a high risk area, either you should pay multiples of your current insurance (which the government doesn’t permit in many states) and be comfortable that it forces the rest of “safe” homeowners in that state to bear the cost of risky properties. Or you should forego insurance and ride it out.
Regulation is required, but more along the lines of canceling insurance for folks who choose to live in areas with likely harm to property, climate change or otherwise.
California trying to force insurers to stay in the state with uninsurable properties is silly. The smart companies will either leave or charge crazy premiums next year. The others will close shop.
10
Might a solution be to build with the expectation that the structure will periodically be threatened or destroyed by Nature? What new ways of Architecture and Design might such new thinking lead to? It's almost the opposite of how Architects are currently trained to think. The closest thing that comes to mind right now are old MASH episodes, where everything was designed to "bug out" if danger approached.
4
The problem with the State's action is that those who survived the wildfire, don't really need fires insurance since everything burned already. What we really need is a law that forbids insurers from refusing to provide insurance based on the possibility that their home would be burned.
Here in California what we need is for the Federal Government to reduce the fire danger in our National Forests. Almost all of our catastrophic forest fires have started on Federal land. The other thing the State can do is to hold the power companies liable for every dollar of damages caused by the fires that start from sparks generated by their power lines. PG&E which through abysmal failure to keep vegetation and trees away from their powerline should never have been allowed to go into Bankruptcy right after they paid out almost a billion dollars to their top management and their big shareholders.
We have little hope for federal management of the National Forests. After all Trump publicly blamed the State of California for the Paradise fire when the fire started and burned mostly Federal land until it reached and destroyed Paradise.
4
If one buys a house, would the bank-required insurance policy on the newly purchased home be new? If so, and insurance companies stop issuing new policies in moderate to high risk until the whole mess is sorted out, who is going to be able to buy (or sell) a home in those areas?
Will banks lend money knowing that in a year the house may not have insurance? Will there be any new second trust mortgages?
It's not just the insurance companies!
6
@Dean -- those questions are going to keep getting more important throughout the West, as well as along our rivers and shorelines around the country.
First off, asserting that a fire or other natural disaster is the result of "climate change" is pure speculation.
Second, this does nothing but encourage people to build in areas where maybe they shouldn't be building. It will also raise the cost of insurance for people everywhere else. Why should I pay for people to live in fire prone areas of California or hurricane prone areas of Florida?
6
@Dave climate scientists are now able to link individual weather events to climate change. The rising number of fires is also a direct result of climate change. So in fact we can assert the a natural disaster is the direct result of climate change.
I agree with your second point however!
7
Insurers should be allowed to charge rates that reflect actual risk. Face it, there are regions of this country where rates should be very, very high in order to discourage people from rebuilding in fire and flood prone areas.
That is life under climate change and we had better get used to it and stop subsidizing people's poor decisions.
23
The insurance cancellations are out of hand. My insurer has cancelled my 47-year-old homeowner policy on grounds I live in a dangerous area and my home is subject to fierce wildfire ember storms that will burn it down.
This is total bunk. I live in a city with the approximate wildfire danger of mid-town Manhattan. There's no wildland source for an ember storm. We're hundreds of miles from the big fires of recent years. There's zero credibility to the insurer's claim. Even fire maps don't support it.
But we're stuck with the outcome. The insurance industry needs a lot more regulation.
11
without insurance would banks issue a mortgage? That would definitely change things.
6
@Paul. Back in the 80's mortgage lender required flood insurance. 100 year flood plain by a creek off San Pablo Bay. Did my research. Historically low fluid risk. Wrong.Flooded a year later caused by dredging errors by the Army Corps of Engineers. Consider myself lucky. Now homeowners can't get insured by these types of government infrastructure errors out of their control.
3
@Paul Definitely not. No bank is going to take the risk of an mortgage on a property that isn't insured.
4
We all reap the harvest we have sown. Every single homeowner who knocked down trees, laid asphalt and cement over fields, and who built a home with more than 1 bedroom per person or couple is guilty, but those who built in vulnerable areas are guiltier than others. I live in a small hovel that would have made Raskolnikov claustrophobic, near mass transit, but, still, my carbon footprint is probably too great.
11
Hurricane Michael survivor here in the Panhandle of FL. Our insurance company advised us two months ago that they will not renew our policy in May of 2020. We have a new roof, new windows, doors, ceilings and very few trees left on our property (the trees caused the most damage). We are likely less of a risk than we were when Michael struck. I wonder how folks in NC and the Midwest are doing with their insurance companies after their disastrous weather in 2018/2019. Would be a good story. It’s not just California.
10
I live on Long Island. Allstate stopped insuring homes here a decade ago. ALL major insurers won't touch a home within a half mile of the coast, pushing us into the arms of relatively tiny insurers who gouge prices and will be lucky if they survive an event where they pay out rather than just collect premiums.
Our State's response? Silence.
8
We’re going to have to find a better approach to this. Going forward, just in the US, climate change is going to do all kinds of damage. Fires out west, flooding in the south east, drought in what was once the dust bowl. Terrible deluges with flash flooding near where I live in Maryland. If you don’t like it, and it’s a weather extreme, your future probably features more of it, more often. Many Americans still live in complete denial. For these people, rising insurance premiums will be one of the first warning signs that might actually get through.
15
Ask Florida how self insurance pays off, it is now a general revenue expense. The insurance companies are not obligated to do business in any state they deem a financial disaster in the making. The state will be on the hook for all of the expenses. Just another reason to leave California. - Steven Pettinga.
5
@Steven Pettinga Steven, I grew up just north of Indianapolis, and it was Indiana's mean-spiritedness (along with the awful weather) that made me leave as soon as I finished high school and ultimately live happily in California. Thanks for reminding me.
Why focus only on climate change ? Historically, earthquakes have caused far more damage in California than climate change, and there is nothing in known technology that can prevent them or make them less severe.
Yet, the vast majority of California homeowners are priced out of the earthquake insurance market. Earthquakes present the far greater potential to destroy huge areas of population and development. If the San Andreas fault lets go, it could cause wanton destruction and loss of life and complete economic disruption in a metropolitan area of 15 million people.
Every day, millions of we California residents face the risk that we will lose everything, maybe even before I finish this comment. Short of moving ( to where?), we have no protection.
From the standpoint of urgency, this risk is far greater than climate change. No matter what we do, we cannot reduce it or prevent it and it could happen suddenly and without warning at any time.
So please, if you are going to force insurance companies to provide protection without a prohibitive cost to homeowners,
include earthquake insurance.
My house might be under water in 50 years, but it is more likely that it will first be destroyed in an earthquake.
4
And we are not required to have earthquake insurance to hold a mortgage, but what about fire insurance? I AM required to have it... so how about just requiring lenders to lend regardless of insurance. Then I assume all risk and so does anyone who wants to buy a house.
@Gene Gambale Have you investigated the non-profit California Earthquake Authority insurance? I pay $110 a year, which is a huge bargain, and has a lower deductible than private EQ insurance.
2
The real question is now whether any insurance companies will continue to do business in CA for homeowner polices. Once you tell the company that they must insure, and can't raise rates because of changing conditions, they have little choice but to cut risk in every way possible. While I feel the plight of the homeowners, they chose to build or buy in areas impacted by forest fires, such as Paradise.
It's not different than the homes in Louisiana that have been rebuilt three times in ten years from flood damage.
38
@Ernest Montague It's not simply Paradise, a great many of the areas surrounding cities in California are exactly like that. The Oakland Hills fire a couple of decades ago and the chronic hill fires near L.A. occur in areas that are not forested. They are simply hills with relatively low brush, typically chaparral. The brush burns easily after 6 months of no rain, and there is no way you can rake it. Areas not subject to burning are often not habitable either, like desert. The 6 month dry season in California is what makes many normal areas vulnerable to fire if one gets started.
10
@Ernest Montague
Except in flood zones, flood insurance policies are subsidized by the federal government and flood zones have been better understood for a much longer time.
3
@Ernest Montague
As the article points out, California is too big a market for the insurance companies to stop covering homeowners.
4
Insurance from wildfire damage should be an optional coverage, just as earthquake and flood insurance are. Uncoupling wildfire damage from the standard homeowners policy will allow insurance companies to price coverage according to risk and assign the true costs to homeowners who live in fire prone areas.
69
@Maureen R
While true... the incidence of fire damage to a home is much higher and more frequent then earthquake damage.
That said.. I do think that eventually fire hazard insurance will get decoupled from homeowners policies if insurance companies start to pull out of the state if forced to underwrite fire insurance coverage. This is the same thing that happened about 30 years ago when we had a couple bad earthquakes and the insurance industry simply refused to underwirte earthquake insurance anymore.. so the state set up it's own insurance fund for earthquake coverage, and it's reserves are fully funded by policy premiums.. AND it is non-profit.
9
@Chuck All it takes is one bad earthquake and those reserves turn into obligations paid by taxpayers. That's the underlying fact of all government run insurance programs. Federal flood insurance is a prime example, charging rates that later turns out to not cover the promised payouts. Yet repealing it or changing the rates to more accurately reflect the likely claims is a political minefield and so the situation keeps getting worse.
14
@Diane Merriam While you are correct when it comes to federal flood insurance, that's not the case with earthquake insurance from the California Earthquake Authority. California taxpayers are not on the hook if there are insufficient funds to cover all claims. Instead, insureds won't have their claims paid in full, or will have payments delayed. They make that very clear when you sign up for CEA insurance.
5
People are alarmed that insurance companies have temporarily lost their ability in California to cancel insureds in areas of high fire risk. But please, let's all be alarmed that municipalities permit construction in the thick of high fire risk without mitigating risk by removing vegetation or policing maintenance or facilitating emergency egress or insisting on needed changes to municipal or privately owned energy grids. This is why Paradise, CA burned and hundreds lost their lives. And this pattern of growth, development and neglect repeats itself all over the state (and all over the country for that matter). This is not an insurance crisis. This is a crisis of policy , law and public administration of which insurance is simply one inevitable part.
66
@RNW Actually, a big reason why Paradise had such a loss of life is that their city government had succumbed to the latest fad among city councils, traffic calming, wherein they put barriers where there had been traffic lanes to try to slow down the cars. Only half as many were able to get out of there in the face of the fire as should have been able to. People were stuck.
Chico and my town both slapped traffic calming on major thoroughfares after that fire! If not reversed, the day will come when people will die. I will vote locally for anyone who runs on a platform of yanking those barriers out.
4
Many comments fail to understand that insurance companies have been dropping coverage from hundreds of thousands who live within 2 minutes of fully developed metropolitan areas in what is often referred to as "brush fire zones". For example, there are thousands of homes in Los Angeles (yes, in the city of Los Angeles, not some forest area) next to such brush fires zones. Bad maintenance of power lines have cause fires. Proper maintenance or underground power lines would have prevented all recent fires, small and large. The argument that homes should not be built in those zones is totally invalid and based on misinformation. The solution is for power lines to be properly installed and maintained. In the meantime, what are all these hundreds of thousands of homeowners are supposed to do with home insurance? As a matter of fact, only a small fraction of affected homeowners, at least in California, actually live in forest areas where indeed, building homes is a bad idea in the first place. The state did the right thing. Now let's see how the insurance companies are going to react to this.
4
@Kostas Insurance companies are not the only ones; hospitals now have "committees" to determine who is a good bet on surviving surgery. Diabetes, obesity, prior compliance to medical recommendations, and having sued you physicians or Doctors often are denied surgery. They are also video taping entire operations in case they get sued. Seeing an operation that goes bad is much more compelling than emotional testimony.
1
@Kostas - looking at CALFIRE's 2017 Redbook shows that while electrical powerlines are a large source of fires, they are by no means the only one, so your "would have prevented all recent fires" is simply not true.
And Los Angeles is a densely populated area with steep, brushy canyons and mountainsides and annual bouts of extremely dry, strong winds. That causes fire conditions.
So here were the causes of 2017 fires in Los Angeles County
69 Undetermined
44 Miscellaneous
25 Equip.Use
10 Arson
10 Smoking
8 Debris Burning
6 Campfire
3 Elec. Power
2 Ltng.
Less densely populated areas might have bigger problems with power lines, and yes, burying them would reduce the number of fires, but wouldn't by itself stop smokers, campers, arsonists, lightning and other sources of flame.
Paying a lot to bury power lines will reduce, but not eliminate, fires in an area where the vegetation is so well evolved for seasonal fires.
https://www.fire.ca.gov/resources/
So let me get this straight: the state of California doesn't allow insurers to price their policies based on anticipated future risk and doesn't allow insurers to not renew policies on properties where the anticipated future risk is so high that payments can't be reasonably expected to be covered by existing premium rates. What does California expect to happen when insurers have to pay out more then they've collected in premiums? Answer: the insurers go out of business & the policy holders don't get paid for their losses.
86
@gjm
If insurance companies were allowed to charge the costs that would be needed to cover the damage caused by climate change, no one except the ultra rich would be able to afford it.
And that’s the point. Climate change is not something that you can just “deal with.” This is going to impact hundreds of millions and eventually billions of people.
There is no government or corporation on the planet that is ready to deal with the catastrophic level of events that accelerating climate change is going to cause.
71
@Austin Ouellette But that is precisely what responsible insurers are supposed to do: "charge the costs that would be needed to cover the damage..." That's how they stay in business. If California forces them to charge less then the cost of covering the damage, they will logically go out of business. They can't pay losses with money they don't have.
17
Have they gone out of business or are they simply keeping profit margins at a comfortable rate so as not to potentially impact shareholder value.
24
There seems to be an incongruity here between recognizing the right of insurance companies to decide whom they will insure and holding PG&E liable for every fire that starts near its poles.
One can imagine that PF&E would love to cherry pick which territories it would like to serve and which it would like to cut loose.
In either case, society is wrestling with the task of finding people to blame for what are essentially Acts of God, even though the driving force behind global warming is humans. You can’t just sue all humankind, so we seem to be locked into this never-ending spiral of looking for scapegoats to blame.
Yes, PG&E could station an infinite number of lawn care workers under each of its light poles 24 hours a day to make sure no weeds ever grow, no limbs ever get blown around, and no fire could ever start.
But realistically we as a society are going to have to reach societal solutions to societal problems instead of just scapegoating the first selective litigation target that comes into view.
It is also worth noting that the blame against those who build in “fire zones” (which is really the whole state) arises in a state with a chronic housing shortage and housing prices that exclude the poor.
Perhaps California should stop suing and start doing.
2
While all states have weather problems of some type, California has a whole collection - wildfire, floods, mudslides, and earthquakes. Most of the threats are widespread, and (except for earthquakes) have to do with California's 2-season climate, very dry, then very wet. Insurance coverage can be really problematic. For example, insurance companies a number of years ago were denying coverage for water-related damage, and it wasn't so much due to flooding as to the old stucco housing stock in many areas. The vapor barriers in such houses are deteriorated, and any pinhole opening in the stucco can produce an interior soaking in the driving rains typical of winter.
So a statewide moratorium on insurance cancellation combined with serious analysis has at least a hope of producing a realistic solution going forward.
3
Too many people (and companies) aren't concerned about climate change if it doesn't affect them right now.
But sooner or later, it will affect everyone. Food prices rise, buildings destroyed. Refugees fleeing famine into your country. More flooding. More fires. Stock markets crashing in reaction to the financial impact.
Bottom line: everything becomes more expensive for everyone.
Or just plain disappears.
Sadly, as anyone who has been paying attention the last 30 years, we knew this was coming; with the cost of dealing with it rising every year. We have been the boiling frogs for 3 decades.
And here's the kicker:
Carbon released into the atmosphere 10 years ago is affecting climate today. And sooner or later, we will indeed be past the tipping point - something you only know after you've past it. Saying we have another ten years to "do something" overly optimistic.
5
@Jamie The 3C scenario by 2100 is evaluated by the IPCC as reducing worldwide GDP by about 8%. Given that with reasonable growth numbers that would reduce an average (in constant dollars) of about $90,000 per capita GDP in 2100 to about $82,000 per capita GDP.
There is a direct correlation between rising temperatures and the increase in wildfires. Low humidity is also a result of extreme heat, making parts of CA a tinderbox during wildfire season.
97% of world climate scientists agree that climate change is real, and largely caused by human activity. The wildfire season in CA is now more than 100 days longer than it was in the 1970's.
The only solution to this crisis is to actively work to address the causes of global warming. And do so immediately. Time for all to recognize that climate change is science, not politics - and is affecting all of us.
9
@Sue In the past 1,000 years, there have been several 20 year droughts and one 200 year drought. When California was building up in the 1900s, they didn't know that, didn't even know enough to ask the question, much less how to look for an answer. The 1900s were an unusually *wet* period, so everything was built on the assumption that that was normal.
Now California is reverting to its normal climate with the global warming up top of it. The fact that they didn't know changes nothing about the reality of what has to be dealt with.
4
@Sue I guess it may be unclear to upstate New Yorkers how California's climate works. We have no rain from April to late October or November. This has nothing to do with climate change. It's just how our climate works. Of course wildlands get dried out in all those months! That's been the case throughout history. How could they not? We've always had a spate of fires in the fall. That's how it is. It's really questionable how much recent fires are due to global warming, and how much is the product of poor planning and a spell of bad luck. Nobody really knows at this point. And I'll spare you the trouble of a retort: I have dedicated my life to resilient planning and am not a denier. ee
As areas of the state become ‘uninsurable’ due to extreme costs or coverage cancellation, we will be forced to build and live in areas that are less risky.
Or, if you choose to forego insurance, it’s at your own risk and the taxpayers shouldn’t be picking up the tab.
5
If I have a home that is at such a high risk of fire/flooding/other disaster then there are several options.
1. Insurance has been made so expensive due to the risk that it is unaffordable
2. Insurance risk is so high that an insurance rate that is affordable would force the insurance company out of business
3. It would be much too risky to live here without insurance at all, given the risk
Well, then I think the solution is not to have my house in that location at all. I think that’s the answer that we will have to grapple with as climate change is still not taken seriously. Consumer protections are great, but that’s no long term solution if it just runs all the companies either into the ground or out of town.
5
I thought global warming was a hoax, so what's the deal with all the insurance companies going out of business? Maybe its time for the business community & the Republican party to stop their fantasy denials, and instead start working to find a solution to climate change. Perhaps it takes this kind of financial shock to get the deniers on board with planning for the future instead of simply imitating ostriches while thinking about their stock portfolios.
13
@What, me? - You mean the underbrush that the California legislature voted to keep in place, the fire hazard, is now climate change? Nah, that is just poor forest management.
1
@What, me? I thought California was a Democrat state. Solid blue. Run by Democrats. But now I know it's the Republicans who are somehow starting all the fires. Thanks!
In the parallel case of hurricane damage, insurance companies somehow got permission to raise rates in less-imperiled areas farther north, to defray losses in Florida and the Gulf Coast. Expect California insurers to raise rates on everyone, whether in high-risk fire areas or not. Expect insurance regulators to go along with it.
It would make far more sense to base insurance rates on case-by-case actuarial hazards, and let development respond to the market. That would minimize costs to society as a whole. We will know society is taking climate change seriously when things like that start happening.
3
Climate scientists have consistently underestimated the effects of global warming, but a growing number now warn that devastating feedback loops are already set in place to trigger more and more disastrous climate events. Mass migrations throughout the world are predicted moving forward, and one might have to occur in those parts of California most susceptible to hellish firestorms like the Camp Fire that consume houses and human life in an instant. The future promises to be grim.
10
Way to completely undermine the very concept of insurance, California. Force the coverage of extreme risk, bankrupt the insurance companies, watch the remaining few flee the state and then take on the responsibility yourselves, bringing California even closer to the brink of insolvency.
9
If insurers refuse to insure certain zip codes, won't developers just stop building in those zip codes? If a house is destroyed, the house doesn't get rebuilt. I would think insurers, buyers, and developers would all pay very close attention to where housing is located. Isn't that the point? The accurate reflection of risk. Otherwise, why have an insurance industry at all? The government becomes the insurer of first resort.
I think that's the point we've reached. Insurance companies have outlived their contribution to society. If your job is to accurately assess risk and you can't do that anymore, what good are you to anyone? The government is going to end up picking up the slack for mass climate related displacement anyway. Home owners shouldn't pay insurance companies at all. They should just pay taxes for emergency relief.
6
We used to live in CA in the East Bay. CA subsidizes earthquake insurance. I bought it for our house since the Hayward Fault literally ran through our back yard. The cost of insurance measured against the risk was incredibly inexpensive -- less than $1,00/year. The government could subsidize fire insurance but I'm betting it thinks the risk of fire is greater than the risk an earthquake would pose.
4
@Steve I had a type in my comment -- it should have read "less than $1,500/year."
2
This is incorrect unless your policies were purchased a long time ago. After the Northridge earthquake many insurers would not write earthquake policies. The legislature created a non-profit entity called the California Earthquake Authority which insures for damage against earthquakes ( the policies are bought through regular private insurance companies). CEA is not publicly funded. The only money it has I believe are the premiums paid for by people. There is some question about whether it would have enough money if there was a lot of damage. These policies are much more expensive than the standard insurance policies for fire etc (which one must carry in addition).
3
Well, if you build a two-million dollar house in the middle of a fire zone, how often will insurers have to pay up?
2
"insurance industry’s miscalculation" Not the miscalculation of the costs of climate change but the miscalculation of the friendliness, actually lack there of, of the State Government toward businesses.
Just like utilities the State tightly controls those rates. So companies will be faced with one option. Filing for bankruptcy protection. Hopefully most of these companies are operating separately incorporated businesses within the state to shield the parent company from the State Government's incompetence.
3
I’ve been watching the impact of climate chaos on insurance for a few years now. The increase in premia based on increasing risks and uncertainty was inevitable. The arrival and extension of subsidies (Florida and Federal flood insurance, respectively) has now been augmented by command and control in California.
Adios to the existence and participation of market insurers in California and probably the US. It’s time for “Stay lucky or go broke, climate chaos edition.”
1
States should disincentivize continued development and residential/commercial activity in flood prone and wilderness areas. California appears to be doing the opposite.
24
@Clint By removing the moral hazard they are rewarding risky behavior. As you mentioned, home owners will continue to build and rebuild in flood zones as long as someone (the taxpayers) keep baling them out.
7
@Clint -- building in fire-prone areas, often without much attention to things like making sure new developments have several exit paths, is happening throughout the arid western states, not just California. This puts more lives at risk each year, and with the increase in length of wildfire season, makes it harder for different locales to share resources.
How about the fossil fuel industry picks up the cost difference?
17
@Dunning Kruger Because the fires are from poor forest management and that is on the voters in CA.
@Dunning Kruger How about every driver? How about every steel mill? How about every concrete company? How about every utility company that operates hydroelectric? How about every rice farmer? How about every cattle rancher? How about every chemical plant?
Why do people think it's only fossil fuels that are the problem? Shoot, you exhale CO2 with every breath you take, as does every other animal on Earth.
It is the insurance companies that are finally going to convince conservatives that climate change is real. The Federal government already subsidizes flood insurance on the East Coast.
The only good solution to this problem is to start seriously dealing with climate change.
18
@zebra123 And the premiums the Feds charge are far too small for the payouts. Yet every time they even talk about raising the rates commensurate with the risk, there's a political firestorm (pun intended) and nothing changes.
If somehow the US went completely green tomorrow, it would only reduce temperatures by 0.18C. Of course, we'd go to living in the stone age and 99% of the population would die, but Hey! We'd be a tiny bit cooler while doing so.
3
@Diane Merriam -- the goals of eliminating fossil fuel use aren't to reduce current temperatures - and you probably know that by your stone age funny bit. ha ha...
If the world stopped burning fossil carbon tomorrow, temperatures wouldn't start to drop for decades if not a bit longer. It's a big planet, and a big slug of CO2 doesn't just disappear.
The goals for ending fossil use are to limit future changes in climate and the increases in sea level and acidification of surface waters. Lessen the damage is the best we can do.
So when we transition away from dangerous continuation of fossil fuel addiction, we'll have efficient homes, efficient appliances and hey, our air and water will be much much cleaner!
@zebra123 You seriously think that signing a piece of paper is going to stop wildfires in California? That's naivety in the extreme.
1
Wow, the adverse impact of climate change is really hitting now. I hope this really is a moratorium, as in, it is temporary for the state to work out a reasonable solution.
I can see how insurers need the ability to either drop policies or raise prices. Forcing insurers to underwrite money-losing policies is not only constitutionally questionable, it doesn't work. I think all except the most extreme leftist realizes that reality.
But on the other hand, uninsured homeowners really are in a bind. They can't just pick up their house and move. And to be fair, many if not most of these houses were not in high-risk areas when they were first built.
So hopefully, the state finds a workable solution. It could set a longer time-frame for dropping a policy, such as 2 to 5 years. Allow greater premium increases. Allow policies with less coverage. Use assessed taxable value as the insurable amount. Make building in now high-risk areas much harder while making in-fill projects easier.
3
I sold my house almost 10 years ago because I saw this coming and had my premium rise after a cancellation. It will be interesting to see if any insurance company wants to take the risk of fire insurance in these zip codes once it's over. It's really hard to see anything other than a sharp rise in premiums and an exodus of insurance companies from the state. The interior areas of California are essentially uninsurable - just like the flood zones in New Orleans - but they are bereft of federal money for the fire equivalent of levees, not to mention ineligible for any form of federal insurance.
2
Building in fires zones should be as uninsurable as building on flat barrier island. What this action does is push the cost of insurance for those who don't take such risks, forcing others to subsidize them.
If they were grouped separately, I suspect the cost of coverage would be so high that it would also act as a cautionary but in the end, the way re-insurance works everyone eventually pays for the losses incurred. There is choice involved and the commissioner should not be acting to promote foolishness.
Until there is a way to build homes that can survive a fire storm, they should not be supported by insurance or any other system that transfers risks to other.
9
Too little too late. My policy was canceled by AAA in November. Everyone in my zip code was canceled. It didn't matter that I made improvements to my home to make it more resistant to fires. It didn't matter that I have cleared defensible space around my home. No site visit, it was canceled by an algorithm, not a human being. There was only one company who was willing to sell me insurance, so I went with them, and have had to pay quite a bit more.
5
Presumably insurers can still raise the price on the policies they're not allowed to drop?
1
@APS As the article notes, not without regulator approval, and not based on future expectations.
1
@APS
Insurance rates are regulated by the state. They will not allow anything meaningful, in terms of providing relief to the underwriters, until they start closing shop.
The insurers should talk to their senators and representatives about it, especially the climate change denying ones.
If as President Trump says there is no problem; no need to drop policies or raise rates, right?
8
That's the key to the rethinking for the masses of climate change - the cost of insurance and the reinsurance industry. They can't really call climate change an act of God, since it's an act of human activity.
4
@Entre Not all of the climate change is human caused, especially in California, which is reverting to its normal, dryer climate from the unusually wet one of the 1900s. Also, there are aspects other than heat that are increasing the probabilty of large fires, plus the choices made by people as to where to live.
It's not just an easy, simple gotcha problem.
5
@Entre
That argument doesn't stand. What will be litigated is how much of an event if tied to humans (meaning companies) vs Act of God. Then comes the chase for the deepest pockets.
You can use tobacco as an example. There is no law forcing people to consume tobacco. It's strictly a voluntary activity, though there is an addiction component. Tobacco companies were held responsible, but only the ones with the deepest pockets were drawn into the fray.
So you can expect the same to happen with the O&G as well as Coal Industries. Because it's already started in NY. Put coal will probably get out of it since they are all on life support now, so no big money there.
@Mark Tobacco companies were made to pay for decades of lying, not because of the damage that smoking itself does. No one's talking about suing all distilleries and breweries for the damage caused by alcohol consumption which, in some ways, is even worse than smoking.
There are two major problems here:
1) Losses due to wildfires are increasing because of conditions that have not occurred in the past (weather, regrowth of the forest, increased housing at the urban-wildland interface). So it is impossible to 'prove' losses using history because the future will have different loss distributions than the past.
2) California makes it incredibly hard to adjust rates due to their specific insurance regulations.
So this policy, in effect, forces insurance companies to take uncompensated risk. They'll make it up in the future, if they don't blow up first, but a certain number will choose to leave the state or at least those zip codes once the door opens.
8
It’s time for the insurance industry to support improved planning to fight climate change. People are going to lose their homes, which is likely their largest asset. No government, ie taxpayers, can afford to rescue them. It’s going to hurt.
4
Maybe insurance companies should stop supporting a Republican Party that has made denial of climate change - that is, denial of reality - a core component of its platform.
Tax cuts for large corporations and deregulation sound great, until you go out of business due to a quickly unfolding cataclysm that our national government is pretending doesn’t exist. Reality always wins.
43
@David Most of the liability insurance companies are Mutuals, which are owned by the policyholders. They do not pay income tax but a premium tax. Increasing premiums increase revenue to the state. I think insurance companies have supported republicans in general because they are more likely to let them raise rates when they need to. Insurance companies are perhaps the most regulated companies on the planet.
Stock insurance companies also pay premium tax but also income tax on their earnings.
California is particularly hobbled because the insurance commissioner holds a lot of power and is an elected position - 8 of the past 10 insurance commissioners have run for Governor after their term as insurance commissioner runs out (although they all lose). The current insurance commissioner ran on fixing health care - he didn't even know that Health Insurance is not regulated by the state insurance commissioner in California - it is handled by the department of managed health care. He is getting a good education this year.
We used to only be worried about earthquake insurance....
2
This unfortunately sounds like the issue of government subsidized insurance allowing people to remain in areas that are highly at risk of flooding - when global warming is increasing the risk of catastrophic flooding. By preventing insurers from increasing rates or dropping policies, we are enabling homeowners, or even providing them with an incentive, to build and remain in dangerous areas. Market forces will force people to move. This is painful but is the only solution given our absence of response to global warming.
36
@DickH. As someone who has had to deal with a homeowner’s insurance company, I know you can lose everything in your home. Even if you decide not to rebuild, insurance is there to help you recoup from your loss. You pay enormous amounts of money to these companies over the years. They should help you out in your time of need.
7
@Ellen
Agreed. But perhaps they should stop issuing new policies in these areas, and start charging more for existing policies.
10
@Syliva They've been trying to, but on the rates, it's the government of California that tells them what they can and can't charge. They aren't legally allowed to make those business decisions for themselves.
3
California did the right thing by preventing insurance companies from cancelling people's insurance policies in climate-risk locations. HOWEVER: insurer's should be free to price that risk as they see fit. They should have been doing this all along!
Similarly, the national flood insurance program should be pricing risk accurately also, and a policy holder should be limited to one rebuild only in flood prone areas. It falls on the backs of taxpayers to fund the deficit of this program when people persist in rebuilding in areas that will ever more frequently be prone to increased flooding in the future.
People need to get a clue about climate change and start moving away from areas that are increasingly at risk of climate catastrophe.
18
@Kent "People need to get a clue about climate change and start moving away from areas that are increasingly at risk of climate catastrople." And move where? To Planet B?
1
When California's "public" utilities were allowed to operate with profit making as part of their "public" mission, it was easy to see that fire protection would be the undernourished baby bird cast out of the nest. Utilities executives and shareholders cashed in at the expense of line maintenance and now it's the insurance industry's turn to play their cards. It's not clear how many aces they have, but no one is predicting they will go quietly to chapter 11 or 13; perhaps we need more numbers in the bankruptcy suites.
7
In the riskiest exurbs, hilly and brushy areas beyond today’s major suburbs where wildfire risks are often highest, new homes are built because there is land and it is relatively cheap. But if prospective homebuyers are unable to buy fire insurance, they will not be able to get mortgages, and developers will not be able to develop questionable lands. Overall, this could turn out to be a good thing if it’s managed, but if just left to fester, it will make California’s housing crisis even worse.
15
The United States, through the Republican Party, does not think climate change is a priority or represents a serious risk.
I am going to assume that most insurance company executives and higher ups are conservative and Republicans.
Therefore, the State is California is well within their right to hold the insurance executives to their own personal values and voting patterns around climate change. The insurance companies should have to hold pricing and continue offering coverage.
10
@Practical Thoughts Many wealthy people are Democrats, so I wouldn't make that assumption. But if they can't raise rates and they can't cancel, then they go bankrupt. Who does that help?
6
@Diane Merriam
They won't go bankrupt. They will stop selling policies in ca.
New world people. We have to let insurance companies abandon areas if they want. Otherwise, people will continue building in unsustainable areas. This is a bad move -- my brother is out there in wine country, his house has barely survived 3 times in the last 5 years. This isn't going to work anyhow longer term...
12
@BarryG California ruling is about canceling policies already held by people in fire-prone parts of the state. Insurance companies ARE permitted to stop issuing policies in fire-prone zip codes. It is important to make changes in unsustainable areas. But that should not include cancelling policies of people who have been paying into them for years. I know insurance companies do this. But it is not right.
1
Halting the issuing of new policies will bring a halt to the market. No insurance means no mortgages. So it’ll be cash deals only. How strange.
3
Two years after retiring, my husband and I moved back to California and almost immediately lost everything in the 2017 wine country fires.
I cannot emphasize enough the scope and impact of such a calamity on our lives. My husband is has made many good (and some not so good) decisions over the years, but the best decision he EVER made was for us to have truly excellent homeowners insurance. Don’t get me wrong: I’m no fan of the insurance industry overall. But, in having such excellent coverage on our home and belongings, we were able to blunt — even cushion — the impact from our catastrophic loss.
At age 69, the best advice that I can offer that’s drawn directly from life experience is to buy the very best homeowners insurance you can and thank whatever force you prefer every night that you didn’t have to use it.
20
Bad idea — if you care about stopping development in places that have serious climate change risk. Doing this will decease the incentives on climate change deniers to face facts. If you can’t get insurance to build because of climate change risk, you build in that location. That’s a good thing. Why is it a good policy to make insurance companies responsible for paying for climate change denial and climate change itself? Allowed to function, the market for property insurance would redirect development away from climate change sensitive areas. Guess that’s a problem when your whole state is a climate change sensitive area.
8
@jkk Fine to stop building in risky areas, but how about the houses that were built there years ago when the risk was low? Are we to abandon these people?
4
@Mark Carbone Let the insurance companies go to market rate. You want to postpone the inevitable -- pretend their risk assessment isn't real, just ignore it. Climate doesn't care.
2
@Mark Carbone, California has always had a dry season, a fire season. The risk was never “low”. Developers pretty much built subdivisions wherever, after the houses were sold it was no longer the developers problem and they could move on to the next project. Houses built where a sane approach to zoning should have prohibited the build or added natural disaster preventative measures, are now a serious liability for the insurance companies. Rebuilding in these places shouldn’t be encouraged or treated as heroic. But what to do? The population continues to grow larger and poorer and has to live somewhere. Somewhere profitable to build and likely to burn.
6
I agree that insurance shouldn't be dropped for existing homes, but if/when the homes are burned in the future, that payout should be the final. Time to end the delusion that humans can go wherever they want without any repercussions.
50
This is quite intriguing since it was the insurance industry, a conservative political force, that first raised the alarm about climate change in the 80's. It offered seminars, informational programs and statistics about the social, geographical and geopolitical consequences of global warming. Insurance companies led the way by seeking carbon neutral business models for themselves. SwissRe, quoted here, began a carbon neutral plan on a per-employee basis nearly 20 yrs ago by looking at all aspects of its business from improved technology, alternatives to travel and better workplace locations to reduce its carbon footprint.
Sadly the world was slow to listen, now even reversing the few gains made due to ignorant denial of climate change. This is from poor political leadership. All that insurers predicted some 35 years ago has come to be, but our other leaders want us to think we will be great by denying it. Now the insurers are being criticized for responding to the increased risks and losses they warned about.
Mr. Kousky makes some very legitimate points about insurance costs and the costs of recovery, but I disagree with his assertion that insurers over-react and set premiums too high. They see the data, the loss ratios and the risk patterns sooner than anyone. They know the risk potential and loss costs best. If insurers undervalue the risk and go out of business, the economic loss to all is catastrophic. We voters need to address this not blame insurers.
22
@Peto It's very true that reinsurers like Swiss Re have been talking about this for a long time. That's one more reason I always found the deniers so non-credible. The people with the most to lose knew something dangerous was happening.
Who is going to pay for this? The homeowners who live in places that are not remote nor prone to fire and flood damage?
9
@Stuart Utah's already giving most of its water to California, we'll probably end up paying their insurance, too.
One might hope that insurers could simply adjust rates to reflect the risk. However, it seems that California government regulators are telling insurance companies how much they can charge. I wonder why this structure is necessary. Wouldn't market forces dictate the premiums, as they seem to do for example for auto insurance (based on all the advertisements for lower rates)? Maybe there are not enough competitors in the house fire insurance market. Is that the case? Maybe the companies would collude to all raise rates? Is that the case, and are there any anti-trust laws preventing that? Do the California insurance regulators fear that they don't have enough means to increase the number of competing companies offering house fire insurance in California, and therefore they must directly control the insurance rates? Seems like this situation requires a bit more analysis by the NYTimes!
9
Stories like this are bullet points on the timeline of the end of the capitalist economic order. No company, insurance or otherwise, seems willing to, or able to, or forced to, look forward and assess and price in danger from or damage to the environment, be it local and short term such as California wildfires or worldwide and climate change driven such as sea level rise. As the economy figures all this out there will be huge disruptions. That's probably why the ultra wealthy are looking to buy real estate in New Zealand so they can hide from the chaos that might be coming.
6
Why should New Zealand be exempt? They have climate and seismic issues like everyplace else... and perhaps their real estate salespeople adept at convincing the rich they don’t. Or perhaps it’s a tax issue? Now, what about Greenland? A megabillionaire could probably buy the whole place and make his own rules, like a Bond villain.
4
@ws
Trump tried to buy Greenland, but in the face of global warming, Greenland has a future even brighter than Erik the Red noted back in 1000 AD when he was forced to move there from Iceland due to a murderous temper. Barring a mini-ice-age, Greenland is the place to be!
After doing some home shopping in Northern Cal ,
I started getting insurance estimates because I had been made aware of the issues .
Altho insurance was offered , the rates on the places I was looking at had jumped from approx $900 last year to $9000 this year . No clue about what 2020 would bring .
The new rule says Insurers have to keep offering a policy ,
It does Not say anything about the rates .
With the new rule , it is the homeowner who 'drops' because the new rate is many levels above their budget .
5
We live on a half-acre lot in an urban subdivison in the Central Valley between Lodi and Sacramento. We have public water and sewer, a fire hydrant fifty feet from our property (which the local fire department uses for training exercises), and there has never been a significant fire in this area. Ten days ago we received a letter from our Connecticut-based carrier "requesting" us to remove all trees, shrubs and plants from within five feet of any side of our house including decks and detached structures. Failure to comply and submit proof by December 20, "could affect" our future insurance with this company.
In order to comply we would have to remove all irrigated landscaping from our house including day lilies, geraniums, a dwarf lemon tree, and several other evergreen shrubs. We are currently shopping for another insurance company
4
@Roger Gombert Shop away - it's your right as a consumer. Just like the Insurance Company should have rights to help reduce their risks/liability of insuring your property.
5
@Roger Gombert
Roger, you are not facing the realities of climate change!
And of course removing all vegetation from within 5 feet will only protect from grassfire-type events and not from tree-crown-burning fire-nado type events. Welcome to your brave new world. We should all be more sympathetic to a carbon tax, even though it is probably too late for your landscape plants.
1
I have never filed an insurance claim in the State of CA, yet my rate for car insurance skyrocketed after the Thomas Fire.
My insurance company, Ameriprise, told me it was because I moved 10 miles away to a town near where they had claims 1.5 years earlier. The claims weren't in my town, because we didn't have a fire or damage, but a neighboring town.
Home insurers have denied most claims here in Santa Barbara, after the Thomas Fire, claiming the damage wasn't from fire or floods, but from mudslides.
They have even gone after people here for reimbursement for paid claims because they subsequently found a loophole and want their money back.
Insurance companies have made billions for decades, now with a loss, they bail on people.
20 billion is the amount of claims filed, NOT paid.
They already jacked up rates, denied claims, and dropped insurers.
Why continue this saga? Drop them from doing any business in CA. Other companies will emerge
OR
the ST of CA will have to offer Fire insurance, similar to the government's flood insurance in certain states.
7
@Gus . . . I believe Cal does offer thru the Cal Fire plan but it ' ain't cheap ' . Offering coverage does not mean the coverage will be affordable .
3
@Gus
Blame the rich people that own the insurance companies. In fact blame all the stockholders including those with stocks in their pension funds, when it comes to being on the other side of the fence, all they want is PROFIT with much less regard for the ethics. It is called "maximizing shareholder value" and most companies embrace it. The companies are in it to make money. Period. Pensioners want this. But when they are the consumer, they feel very different. Climate change will be very expensive. Who will pay? Sounds like consumers of insurance policies will be one of the groups that will pay. Welcome to that group. Maybe you should not vote for poltiicians who ignore climate change.
7
@Kathleen ... Cal Fire is only available to those that live in a Cal Fire area of responsibility. Insurance companies are dropping coverage or demanding unrealistic acts of compliance in urban areas under the companies' own sets of rules.
2
....so no more new McMansion gated compounds on extreme wilderness fire zone hilltops in California? How sad for the rich but good for the environment.
13
@David . . . The rich can build all they want because many of them pay cash for the home then self insure , do Not get policies .
It is the regular Joes who moved to the country & got burned out of entire neighborhoods that are taking the hit . They need mortgages and lenders mandate insurance for the loans .
Of course there are quite few things that homeowners could do to protect themselves. Don't use vinyl siding. Don't use asphalt roofs for a start. Trim hubs around the house. a more serious response would be to use tile roofs and concrete stucco siding along with steel studs rather than wood.
6
@Eugene . . . that worked back in the old days for low fires but the new 100 ft fire walls burning thru dry forests is an entirely Different ball game .
A concrete building might survive but the new fires are hot enough to disrupt & melt water lines .
What is a house worth once it no longer has water service ?
3
Yes, no insurance equals no mortgage.
No mortgage means no rebuilding.
But we still have a political party who is sure there is no such thing as climate change, and the Insurance industry contributes almost exclusively to that party, effectively purchasing their own marketplace loss.
Perhaps the insurance industry should start to understand that almost every home is vulnerable to significant risk from climate change. Not writing insurance to avoid losses means no revenue stream for insurance companies.
Who will build homes or apartments if they cannot be insured? Blame climate change. Who is ensuring that the worst possible outcome is mandatory from climate change? Blame the Republican Party. Saudi Arabia, Russia and Koch (and petrochem) own and operate the Republican party.
The insurance industry is funding their own destruction. And the destruction of middle class suburban American home ownership.
15
I have been terrified for a long while that this would happen to me, so the ban comes as a huge relief.
I had a concerning interaction with an insurance consultant earlier this year, during the fire season. Got a phone message from a man who said he was from my insurance company and was going to do a drive by of my house just to “confirm some things” about the exterior. He said “of course” he would knock in the door and say hello (i.e, presumed permission to enter my property). My house is not viewable from the street (he would know this from Google Earth and from my file), so I ignored the call because I was suspicious. He left several more messages asking me to phone him, never giving his true identity. Only when I finally phoned the number he gave did I find out that he was with a consulting group (Mueller Reports) that produces risk assessment reports for the insurance industry. I left a message telling him to email me an explicit request to inspect my property, pointing out that he had been dishonest about his identity and telling him to detail his true intentions for the home visit. He never responded. Later in the year a different man phoned, again identifying himself as an employee of the insurance agency. Etc.
I looked up the legal rights for the insured in California, and found very clear language stating that insurers must always act in good faith. My insurer tried to trick me. I was lied to. That is not acting in good faith. It’s a filthy industry.
38
@Passion for Peaches
Capitalists are often filthy, and the very rich are almost always that way because they use the grey areas of the law to maximum advantage. Rule of law cannot work unless there is campaign finance reform and then new laws to prevent legal cheating.
2
Lack of ability to obtain insurance also prevents people rom obtaining loans. The whole ecosystem breaks down when risk is left unmitigated.
7
@Ira in risk-prone areas, why on earth should one build or buy in the first place? The unfortunate fact of the matter is that when an area is prone to disaster, it should be abandoned. In my part of the country there are certain flood planes where people cannot obtain insurance. Some choose to build anyway, but they are well aware that they do so at their own risk. Difficulty obtaining insurance is truly unfortunate for folks who built when they believed they were safe, and for those individuals I am deeply sorry. That being said, there certainly should not be any new construction in those areas, nor should there be continued deforestation into those areas where fires are prevalent, as there has been in the last decade or so. I hate insurance companies as much as anyone else, but even an idiot can see that government can’t force a company to remain in business when its losses exceed its gains. Californians, many of whom do not live in fire-prone areas and whose premiums will now skyrocket to accommodate the cost of insuring disaster-prone homes, would be vastly better off if their legislators worked up a bailout package of sorts to assist homeowners who’ve purchase uninsurable properties to buy new homes in safer areas.
When you build right at the bottom of a steep, snowy slope, you get avalanches and rockslides coming down on top of you.
When you build at the top of a dry, semi-desert slope covered in desiccated tinder you can get fires running up to you.
This isn’t rocket science and it’s not global warming. This stuff has happened forever. There are plants in that part of California that need fires before they will seed. The fires are a way of life and had been since the glaciers disappeared.
The difference is that Americans don’t have 2,000 years of oral history telling of all the times that the fires happened before. And hey, it’s a great view until the fire happens, right?
California’s solution is not sustainable.
Clearing the dry, overgrown brush off the hills with controlled burns and hungry goats, now that might help.
And stop building on top of windswept desert hills.
19
@Vote For Giant Meteor In 2020 Thank you! It's as if there is no common sense left anymore. I appreciate reading this.
This is how it all ends. All the denialism, all the irresponsibility, all the lies. All that lobbying. The insurance companies will have the final say, as they always do.
California's "whistling past the graveyard" last-ditch reprieve for homeowners in fire-prone areas won't last past the next big fire (next week?). The state can't force private companies to write money-losing coverage indefinitely. There will be a reckoning, and it will probably involve an insurer refusing to cover homes in the fire zone, followed by California suspending their license in the state, followed by all or most property-casualty insurers departing.
Then we move to property insurers on the Gulf Coast and the Atlantic. Very expensive oceanfront homes and businesses wiped out by a series of storms. Insurance companies say "¡No mas!," which means these properties can only be re-sold for pennies on the dollar, if that.
When tens of billions of dollars of value is destroyed with no recourse, value held by private citizens, people will take global warming very seriously indeed. And the lobbyists and GOP denialists can hang.
73
Since Trump does not believe there is a climate change, let him enter the insurance business with his own money, and apply present days premiums...
6
This is a frightening example of short-term thinking in the face of a climate crisis that will only get worse. We should not be encouraging people to build homes in fire prone areas. Forcing insurance companies to insure such development is insane....
9
@A. Gallaher
I think the law only refers to existing policies.
Since when is every fire in California proof of climate change? Four years ago, there was a drought and fires. This year was very wet, which led to a lot of vegetation growth, and fires.
So the point of stopping climate change, at a cost of $1 million/family (that is what the $30 trillion/(over average income family) comes to),
is that point making the climate more wet, like now, or more dry, like four years ago?
What about people building extremely expensive houses in picturesque, flammable landscapes in California?
5
@novoad Over the past 1m000 years, there have been several 20 year droughts and one 200 year drought. The 1900s, when California was "built" up, was an unusually wet period, but they didn't know or even think to know how to try and find that out. The state is now reverting to its more normal drier climate, and that's without putting climate change on top of it.
1
@Diane Merriam
Thanks. I know this very well. So do the Californians, who during the fires, commenting here, just skipped the climate change nonsense. I have a small place in CA too, but on the very wet coast...
California has very little usable wind, only in a few canyons. So they import most of their electric power from neighbor states coal plants. Through those big cables through the dry woods...
Anyway, I stayed once in Malibu. An elderly couple who lived in the canyon above said they had a nice life, but they had to rebuild twice, and they were ready to do it once again if it burned again...
Since when is every fire in California proof of climate change? Four years ago, there was a drought and fires. This year was very wet, which led to a lot of vegetation growth, and fires.
So the point of stopping climate change, at a cost of $1 million/family (that is what the $30 trillion/(over average income family) comes to),
is that point making the climate more wet, like now, or more dry, like four years ago?
2
@novoad Climate change, aka human-caused global warming, tends towards extremes (more energy in the system), so we may get wetter storms dropping more moisture than ever on California (more floods), but it comes all at once, but more vegetation growth, then drier summers (more to burn and more likely to burn).
1
@BarryG What you didn't address was the fact that people are building in areas they should have NEVER built!
@BarryG "human-caused global warming, tends towards extremes"
California has drought records in tree rings, since it has 1000 years old trees. There were droughts which lasted 200 years, The recent drought lasted 5 years.
Since when is a 5 year long drought "more extreme" than a 200 year long drought?
Why are politicians not honest, and promise us to bring back 200 year long droughts in California, the dust bowl in the Great Plains, and the 1923 storm in the North East, which wiped every house and tree in its wide path, so that a hundred years later now the places were it passed haven't recovered yet...
That is the kind of brutal honesty we need!
Since when is every fire in California proof of climate change? Four years ago, there was a drought and fires. This year was very wet, which led to a lot of vegetation growth, and fires.
So the point of stopping climate change, at a cost of $1 million/family (that is what the $30 trillion/(over average income family) comes to),
is that point making the climate more wet, like now, or more dry, like four years ago?
2
Yes, the miscalculations, made by those that would argue climate change is not real and as such denied themselves the opportunity to be proactive against our addiction to fossil fuel, may in the end cost them more than a few pretty pennies.
PG&E is in the same predicament. While struggling with a massive, and outdated, infrastructure, they have allowed corporate greed, rather than fiscal responsibility, to govern their path forward, while hoping, against all odds that the Republican party's misguided wish that climate change is a Chinese plot to undermine American security would bare fruit.
Hopefully regulators will allow these behemoths to live or die by their decisions to not face the reality as it came crashing down upon us all. Fire, floods, by the book, by the climate scientists book, we have only begun to see the results of our inattention to these grave matters. And those that have bet against their warnings should be allowed to loose their bets and fade away.
And hey, if the American electorate continues to bet so irresponsibly, they too shall suffer the consequences.
4
@dakine And just like PG&E, everything the insurance companies have done was approved and controlled by government regulators. It would be nice if people remembered that and started putting more blame with those actually in control ... government regulation and government regulators.
The tree huggers in California have put their population at risk by not cutting down more trees in fire prone areas and now they're punishing insurers for it.
6
@Mark
Out there in Texas Trump's misinformation runs rampant apparently. Most of CA's fires start in open brush land and 57% OF OUR FORESTS FEDERALLY MANAGED. High winds (due to changes in weather patterns) contribute to larger fires.
But we do our best to keep "raking the forest floors" . . .!
6
@Lee
The forests in California are being managed by Californians, not people in Washington D.C.. The policies they’re following are largely dictated by state and local politics.
3
Insurers know that climate change is real, islanders watching the sea rise know it too. The Pentagon has been planning on it for a couple of decades now.
Seems like the White House and oil companies are the last holdouts. (almost forgot to include Faux News!)
9
Since when is every fire in California proof of climate change? Four years ago, there was a drought and fires. This year was very wet, which led to a lot of vegetation growth, and fires.
So the point of stopping climate change, at a cost of $1 million/family (that is what the $30 trillion/(over average income family) comes to),
is that point making the climate more wet, like now, or more dry, like four years ago?
What about people building extremely expensive houses in picturesque, flammable landscapes in California?
3
This is absolutely ridiculous and should be challenged in the courts.
It's California's outdated zoning laws that have allowed developers to build and build without taking into account the dangers posed by climate change.
Now that insurers want to send a signal to the market that these homes shouldn't be where they are, the government is demanding otherwise to cover its own missteps.
Instead of forcing the rest of CA's sensible homeowners and policyholders to subsidize the insurance costs of people who willingly opt to live in dangerous hinterlands, perhaps CA's politicians should do their jobs and update zoning restrictions.
8
Last summer just a 2 hour drive from me the Camp Fire incinerated the town of Paradise, California. The thoughts of one woman stuck in traffic trying to flee the fire as it surrounded her “I’m going to die in melting plastic”.
That could be my town’s fate before long as I live in the same foothills of the Sierras.
If you are a rancher who has lost their cattle to drought, or a homeowner who has lost their home to wildfire or flood, or an island nation going under the waves then dangerous climate change has already arrived.
When it arrives for you may be sooner than you think.
9
years ago i was selling in a small town. stopped at the local insurance agent....He was in trouble with his main office because a tornado had recently did a number on a community near by. Seems he had written policies for pretty much everyone in that area and now his insurance company was taking it in the shorts. Insurance companies like to make money not the other way around. I do not see a good solution. Just happy it is not me
1
The picture in the article of the house sprayed with fire retardant - why is the retardant sprayed on a tile roof and a concrete driveway, and very little on the walls of the house?
1
@Scott Werden
The picture shows the results of an aerial drop (application) of Phos-Chek, a fire retardant dropped by either fixed-wing or rotary-wing aircraft. The fire retardant on the driveway and sporadic application on the house confirms that the application was from an aerial drop that spread the retardant in a wide non-specific pattern. Aerial Fire retardant is applied ahead of wildland fires to vegetation and homes. The red color of the Phos-Chek aids aircraft in evaluation of the drop location. There are Class A Foams and Fire retardant Gels that are applied directly to the outside of structures by ground crews but this picture does not show that application.
A sea change in policy to combat global warming/climate change is needed--otherwise a real sea change multiplying disaster relief exponentially is forecast to happen. And not in the too distant future. Folly not to act now.
The U.S. doesn't lead because of our bought off Congressmen. The laughable Trump/Fox/RT TV show is but a distraction from this.
4
Climate change?
These fires have happened forever in California. The difference today is that houses are built where they shouldn't be built, and the state, for some crazy environmental excuse (Spotted Owl?) refuses to do controlled burns.
Also, an inept PG&E has nothing to do with climate change.
6
@Erik You’re partially right, but it’s both. Together — unsustainable development and climate change make for exponentially greater risk.
4
This legislative overreach is a good example of why no sane person with considerable assets should establish a business, or even live, in a socialist state like California (or Venezuela).
3
After reading today's paper my conclusion is don't buy or build a house in Florida or California or anywhere near the ocean.....or a forest.....or a desert for that matter.....
5
PG&E paid $11,000,000,000 dollars to insurance companies for wild fire damage.
https://www.nbcbayarea.com/news/local/PGE-Agrees-to-Pay-Insurance-Companies-11-Billion-for-Wildfire-Damage-560290631.html
Insurance companies are NOT losing money in California!
2
Bravo, California!
1
'Climate change'? From what I've read recently in your paper, the cause of most of the wildfires has been PG&E's exposed and geriatric electric wires, arsonists and idiots who build their homes within densely forested hillsides. That sounds more like human error than 'natural' or climate causes. Doesn't it?
3
Allow me to be sarcastic. First most Insurance Co. owners are probably republicans. Republicans official position, (and that of toe-spur trump) is that climate change is a Democratic made up story mostly by Al Gore. So, therefor, dropping or raising insurance rates should not be allowed because the climate change argument is only in their minds. They don't really believe in it so it doesn't really exist. It's just random fires, that's all. It's like the hurricane argument here in floriduh. And the insurance industry claims of loss, (a quarter century of profit lost, please) is also a lie of convenience. All the insurance companies did here was create "pup" companies and claim they are losing money as if they are independent companies which can't be further from the truth. Nationwide Florida still has to share it's profits with Nationwide in Ohio it's real headquarters. This very paper ran an article after Hurricane Katrina about how much profit the insurance companies made in the fourth quarter after all losses were paid out! It's all a dirty little shell game. These people are not losing money at all. So, there you have it, no climate change, so reap what you sow!.. Otherwise admit your lies and buried science, read Exxon, and make republicans admit there is climate change and make big business pay up.....peace and coexist.....
13
It’s time to face the fact that living in the wildland interface outside safer urban areas is not economically feasible. The costs to our society are just too great and our woodlands are so limited and precious. Gradually life in wildfire invulnerable areas will become untenable and once that happens and folks clear out of these areas we will be a lot better off as a community.
7
I suspect that a couple major insurers will be leaving the California market pretty soon.
5
This is economics at work. The state should not block insurers from dropping these plans because these homeowners and home builders never should have built in these high risk zones. By preventing insurers from responding to environmental and market forces causes a distortion in the market and the burden will be picked up by folks who are not in high risk areas.
In the end this is another example of the state subsidizing home owners in risky areas.
6
Interesting that the insurance companies are cancelling policies near major burns. Compared to houses in areas that have not experienced major burns, these houses are at less risk (all other things being equal). A major burn will have removed most of the fuel needed for another fire and/or will provide a firebreak against a major fire. This would suggest that houses near a major burn are a better bet than houses in areas that haven't burned in many years.
6
@Rob-Chemist Wrong. Heavy rains next spring will bring catastrophic mudslides bringing more death and devastation followed by new brush growth fed by the water. The mudslides caused by current land clearing will continue for the next 9 years unless it just happens to quit burning. The new brush will dry out mid summer fueling more fires next fall. etc,etc. It's a no win situation now in the Cali mountains for those million dollar views. It's Time to jump off of the Cali ship.
2
It seems to me that if we were to revisit Northern California in 50 to 100 years, the habitat would resemble Baja--desert, cactus, yucca plants, etc. We see this in the frequent droughts which place the forests of Douglas Fir and Ponderosa Pine at risk from bark beetle invasion, and therefore, after their death, a huge source of forest floor fuel for wildfire. Once change takes place in rainfall and temperature, the older species do not return.
In a sense, problem solved. There isn't a problem with fire insurance in Baja, to my knowledge. There also aren't very many houses.
One might ask what we plan to do with a population that seems to add multiple millions every year, from around 16 in 1960 to near 40 million today.
Will the Humboldt County desert be able to support 10 million people in 2090?
3
The situation with fires in California is similar to the situation with hurricanes in Florida.
In the end, because the losses are so large, but also so intermittent, the structure of the insurance agencies makes it difficult to insure the losses. Car insurance is predictable, because payments are so frequent, and we have a very good actuarial assessment of the cost of a policy. For fire and hurricanes, losses are much larger, and much harder to predict.
For catastrophic weather events, in the end we will need to states to be the insurer of last resort. Unlike a company, a state can't go out of business, and has the ability to raise taxes to pay back rebuilding bonds. But it takes a significant change in outlook to replace private insurance with public insurance. Florida has made some small movements, but more will be needed in many areas.
4
These homes are built in disaster-prone areas because we do not account for the true costs upfront. Look at Houston, Mississippi River flood zones and California exurbs. If we allow insurance rates to match the actual risk of these areas we will incentivize more rational development and housing strategies. It's going to be a tough pill to swallow for those already in these areas, but ultimately we need to adjust to a changing climate or it will force the issue.
16
No problem. Just spread the risk around all policyholders in California. They certainly don’t expect people in other states, far from their problems, to subsidize the cost of the risk.
4
@John Bowman
Right! After all, there are no forests ready to burn and hurricane risks in any other state, even Illinois.
Is it the fault of the insurance companies that CO2 emissions from China, India, Africa and other places are skyrocketing?
Guess everyone's rates in CA will be going up because houses that should not be rebuilt will be rebuilt thanks to this law.
3
@Erik
Rebuilding houses requires far higher fire resistance today than even a few years ago.
The iconic forest home surrounded with trees, built with wood shake shingles, is not buildable anywhere in the state--and has not been for some time.
Just as the new houses in Florida along the road to Key West are built with the first story just pilings to minimize damage from the high-water storm flooding, so, too, CA building codes require fire-resistant construction and safe spaces between combustible landscape and the home.
However, in many Republican dominated political regions, it is forbidden to even speculate on the climate change induced risks to infrastructure and housing.
4
If the Bay Area wasn't endless sprawl for almost a hundred miles in every direction outside of San Francisco, the impact of these fires would be significantly lower. The long term solution is to depopulate a large amount of these areas, and densify the inner cores of our urban areas.
7
It has been obvious for some time that insurance companies have had their heads buried in the sand. Besides fire and flood risks there are the problems of rising sea levels and seafront homes.
One thing insurance companies could do to protect themselves and help the environment is to require homeowners to reduce risks to their property with fire resistent plantings, more fire resistant construction materials in risky areas, building on raised platforms in flood prone areas and similar requirements. If you do not comply you cannot find insurance, you are "self insured". and localities in disaster prone areas should require similar things before issuing building permits.
5
"the state forbids insurance companies from setting rates based on what they expect in future damages. Insurers are allowed to set rates only based on prior losses."
That is absolute insanity when we know future costs will greatly exceed past losses. If the state is worried the companies will inflate their estimates, the state itself could estimate future losses and then set rates based on those.
In the end, if the cost of an insurance policy is below the expected loss, the resulting loss of coverage is unavoidable.
6
Yet the GOP is in denial about climate change and unwilling to set policies that combat it. Republicans in the Insurance Industry are not doing enough to
educate the GOP or the GOP just can not be educated.
6
Says BBB from a country that is sending hundreds of square miles of filthy smoke into the air.
We know hurricanes, fires, floods, etc will continue to worsen. In those areas where we know destruction is imminent, it should be one and done. You get insured once, but if you rebuild, it is at your own risk.
11
After reading this article, I’m not necessarily clear on how insurers are “unprepared” for climate change. It sounds like many companies are simply making a business decision to raise rates or decline coverage when it is perceived as too risky. Sans regulation, that’s what would naturally happen. What is needed is to rapidly assess the regulatory oversight and requirements for insurers to support the ability to price risk appropriately, both for the citizens and insurers. Requiring insurance coverage provided at artificially low rates for properties that may be repeatedly at risk due to a shifting climate may not serve anyone in the long run. It drives home the significance of a changing climate on many ways in which society functions.
6
Insurance companies failed to realize the implications of climate change, and also the implications of their failure to fight climate change deniers the way they fight those who favor increased regulation or taxes. Any insurance company that supported candidates or parties that denied climate change deserves what it gets, and its investors deserve to take a massive haircut.
People who choose to live in the path of fires or rising sea levels should not be able to get insurance unless they are rich enough to afford expensive policies. People who have lived in such areas for generations deserve our sympathy, but newcomers do not.
5
For homeowners with mortgages, isn't there a contractual requirement for homeowners insurance? If CA insurers are unwilling to insure, does this mean that mortgage holders - usually banks - will become insurance companies? Or will they foreclose on properties?
8
@Teri Yes, there is. The lack of fire insurance policy availability is an absolute disaster for the real estate industry as homes can't be sold without mortgages and mortgages require fire insurance. If the author of this article dug a little deeper, I'm sure he would find influence from the powerful California Association of Realtors on Gavin Newsom's decision.
4
@Teri All mortgages require the property that serves as collateral for the loan to carry fire insurance. No insurance = a violation of a covenant in the mortgage which would allow the lender to foreclose.
4
@Teri
A homeowners policy is not required to secure a mortgage.
A policy that covers fire damage however IS. Same with a policy from the federal government for flood insurance if your prospective home is deems "in a flood zone".
2
You need insurance to qualify for a mortgage. How can anyone buy/sell house in these areas?
6
@Genevieve Rodrigues Not having a mortgage is one option.
2
Time for free contraception for all to stop population and housing growth in its tracks.
Time to transition away from manmade Gas Oil Pollution environmental collapse.
Time to transition away from insuring (and subsidizing) chronic flood and fire zones.
Time to start subsidizing more solar, wind, geothermal, tidal and alternative energy delivery and stop subsidizing Gas Oil Pollution.
67
"...it might prevent insurance companies from going bankrupt. But the effect would be to leave people less able to recover from disasters as climate change gets worse, Dr. Kousky said"
"Less able to recover..." meaning "if you do nothing." This should not be interpreted as Californian's (or the rest of us) having no options - we do. But if we don't start moving on some of those other options, Dr. Kousky's "Less able to recover" will mean "Unable to recover."
6
I was a builder of fire resistant homes, and my impression was the insurance companies did not care. the cities we built in made it very difficult also. The system we have makes it hard to change the way we build, homes that are susceptible to rot and fire. Maybe these problems will encourage us to change.
31
The California insurance industry might want to press for replacing the Pacific Gas & Electric Company, whose negligence, not climate change, has started many of those wildfires. A fire needs a spark; climate change simply spreads it faster. Also, we need someone other than private insurance companies to tell people where they really can't build a house because the area burned down once, or in some parts of Santa Rosa, twice before.
8
@Mike McGuire
Last I checked, PG&E is a state regulated utility. Every dime it collects in revenue and every dime it spends on dividends or CEO salaries is reviewed and approved by CA's politicians.
If you have a problem with PG&E's operations, you can blame the Democrats overseeing the work for all these decades.
9
@Jason W Except that's not entirely true. PGE was caught diverting millions over the past few years from safety and maintenance to bonuses and stock dividends. They also appear to have faked inspection reports.
31
@Mike McGuire, yeah, and then maybe replace the homeless who have started their share of them, and oh, yeah, the "rugged outdoorsmen" who just can't have a wholesome experience without building a fire in Yosemite in fire season.
And also? You're going to bat for the insurance companies who didn't do their actuarial due diligence? Are you aware that they were the very first people in the world to know about climate change, back in the late 1800s? That the climate change results published back in the early 1980s by NASA Goddard was based on insurance company data?
So why do the multibillion dollar insurance giants get your concerns and pity while the electricity company gets treated like a money pit?
8
“There’s just the shock of companies waking up to the liability that’s on their books,' said Rex Frazier, president of the Personal Insurance Federation of California, which represents the state’s insurers."
When they have year-to-year policies they always have the option not to renew the policies - until the State of California steps in and removes that option. So, up until California changed the rules, those insurance companies could shed that liability by cancelling policies in high risk areas.
So the lights are intermittent and homeowners insurance is in peril.
To quote the infamous rapscallion Jeffrey Skilliing "You know what the difference between the state of California and Titanic? - at least when the Titanic went down, the lights were on."
7
The only long-term solution is to stop allowing housing in places where natural disasters are occuring more often.
Either someone can afford to insure (or self-insure) their home, or they need to move.
77
@John Watlington Maybe you've missed that most of the state is a moderate to extreme fire risk area. Where are you going to move millions of current residents? Oh, and the rest of the state that isn't a fire risk is in an earthquake or flood zone so...
6
@John Watlington
CA is already over-populated with a housing shortage. Where will people go?
They can't just tear down everyone's home. Most people's retirements/futures are invested in their homes.
People live where the jobs or the good schools are.
If people are retired, or can work in another states, with good schools, they have been leaving.
The entire state of CA is now a high risk fire area. Lower FLA has been flooded for months.
Two very populous states. Where will people go? Back East to no affordable housing or jobs?
Build covered wagons and move around the country?
6
@Gus Only key Largo has had the flood and its the streets, Not houses.
2
Maybe climate change will spur enough people to leave California for other parts of the country until voting patterns shift enough to elect people who will actually take climate change seriously.
20
@Thad That made no sense since it's California that has elected officials that are doing more than any other state to address climate change.
1
@BWD
Because the current voters in California elected those officials but a single state can't tackle climate change, the eventual mass migrations that are coming when repeated climate induced catastrophes increase past the point it makes sense for the high risk areas to be densely populated the people fleeing to less high risk areas will be voting very much with that in mind despite their new neighbors complaints about not being able to afford their SUV and 4 ATVs because of whiny coastal know it alls attacking their way of life.
1
@A If California were a country, it would rank 5th largest economy in the world. Yes, the state can do a *whole* lot, if they choose to.
1
Not only are insurers dropping people in fire risk areas, they are broadly defining those areas to include my urban neighborhood that has never burned. Of course if my next door neighbor’s home were to burn, we might get caught but otherwise we are not in a fire zone. Yet we were cancelled and had to escalate to Sacramento to be reinstated.
7
Hooray for California! This is the proper step for the state to take. The same thing happened after Hurricane Andrew. Having run the National Flood Insurance Program I had ideas an=bout steps the state could take to ease the problem. So, I went to Miami to a hearing on Allstate's decision to not renew 300,000 home insurance policies in South Florida. Thousands of frightened homeowners showed up. I realized my ideas for reform needed time to put in place and needed to take care of the homeowners who were about to lose their policies. So, I dropped my somewhat testimony and called for a moratorium instead, one that would not allow terminating policies and stop rate increases until the state could put in place necessary facilities to take the dropped policies and could figure out a better way to determine prices for hurricanes (that led to CAT Models). The Insurance Commissioner said he lacked authority to impose a moratorium so I called Gov. Childs who acted quickly with the legislature to make a moratorium happen. Florida got through the crisis and people did not lose their insurance, although prices rose after models were implemented.
30
@John Hunter
Indeed.
The insurance debacle after hurricane Andrew in Florida is very much like this current issue in Calfornia, and will be resolved long term in a similar manner.
3
@JePense
No they will not.
California and insurance companies may however take the same approach they took with earthquake insurance 30 years ago, after a couple of major quakes spooked the insurance companies. The state enacted a state insurance program for earthquake insurance policies separate from normal homeowners insurance. And that insurance fund is state controlled and it's reserves continue to build.... funded not by tax dollars, but by premiums paid by owners who purchase an earthquake policy. And.. any owner that does not purchase a policy.. they are on their own.
4
I could not disagree more.
Never change policies for the good of the many in favor of the immediate hardship of the few. These regulatory distortions in favor of protecting consumers will just lead to more houses built in fire-prone areas, and more burnt-down houses next year or in 10 years. Instead, consumers should share financial risk, including and especially the risk of disasters like devastating fires. That's a signal for them to move to less fire-prone areas.
You were wrong then and you are wrong now.
4
These are the inevitable costs of climate change. Long term, CA can't force insurers to write policies any more than they can force In N Out Burger to sell burgers at less than they cost. No insurance means no mortgages and no mortgages means an economic catastrophe. The only way to solve this in the short term is to have the state or federal government re-insure the policies written. Long term? - a very slippery slope indeed.
9
@Andrew, this is about insurance companies not being allowed to DROP existing customers. Not about forcing them to write new policies. Did you read it?
3
@Passion for Peaches
What will be different a year from now when the policy that wasn't dropped won't be renewed. This gives a few months notice but long term fewer insurers will be willing to cover California homes in high risk areas many of which are under mortgage and the banks won't want to foreclose and will demand the state government step in to protect them or risk the home building market which encompasses several industries might collapse which puts Californian taxpayers on the hook and ultimately is unsustainable for the current population distribution in California.
Redoing zoning and building codes will take a generation that accelerating damages from repeat catastrophes have a decent chance of outpacing means serious economic disallocations are coming and only the severity is unknown that the actual approach of massive problems.
Buildings in California will get more expensive but there are many ways to reduce fire risk- if people will accept different looking styles and necessary mitigation on the surrounding property. The main problem is all the housing already existing that is highly flammable and in high risk areas which under current climate conditions include most of California.
2
@Passion for Peaches
I see your point but my view is that every policy needs to be renewed each year. I see that as writing a new policy. If CA won't allow them to drop existing customers then they are forcing them to write renewed coverage. My definition of a new policy here includes renewing an existing one.
As someone who's home is located in a designated high risk fire zone (due to a small canyon behind our house), this is a relief to hear. We are not in the middle of nowhere. We are in the heart of San Diego, but still considered "high risk". If a fire did hit our home, it would be unlikely to repeat, unlike the flooding and hurricanes that often hit the same locations. We deserve the coverage we pay for.
7
@Lawren I'm afraid the fire danger will return as soon as the vegetation has a chance to grow back, the days of summer dry it out, and the Santa Ana winds blow once again. Maybe not every year, but often enough....
4
@Pablo, My home is 70 years old and has never caught fire or been threatened by a fire. We have a huge firebreak and maintain our brush properly. But as I said, we are still in a designated fire zone simply because we don't have other houses on all four sides. I am exactly who this law is meant to protect and I am again thankful for the progressive policies of my state.
1
I agree that climate change is real, but not that it is the factual reason these fires occurred, or the intensity of the fires. there have been big fires before, but usually in the woods where little damage was done, except to the trees. Now people want to build more homes than ever in the midst of dry trees........or the same for those who build at the beach. Rates should reflect the real risk, whatever that is estimated to be. Companies leaving an area to reduce their exposure has happened for many, many years in Florida gulf coast, southeast coast, etc after major storms. Now it is happening in other places seen as a threat. That is the way insurance works.
20
@bart if insurers want to make money from aggressive home building by selling high-priced insurance to these home owners, then they have to be ready to pay the claims. What you've described is the way corporate greed works, not insurance.
14
@bart Most of California’s wildlife’s have not been in forests, with the exception of the Camp Fire. They are occurring in chaparral and grassland/scrub bush areas.
2
@Rakesh And the rates will have to go up to cover the statistically expected costs. That's the way insurance works.
This might be a hint that people should STOP rebuilding in the same spot. They should get insurance money to leave not rebuild.
152
I'm curious about what types of changes insurance companies across the US and the World have made to their coverage and premiums in places with the increased risk of climate change.
8
We live in an area considered to be high fire risk and have done everything we can to protect our homes from wild fire. This year the home owner’s policies on all my families homes were cancelled. Our agent said no insurance companies were issuing fire policies in our whole zip code as well as adjoining zip codes. Our only option is the state sponsored California fair plan which has tripled our insurance costs. The state has to do something to help homeowners be able to afford to insure their homes.
5
You need to take your insurance money and move to somewhere safer if possible, or make your community safer somehow. As others have pointed out, voters will eventually revolt if we are stuck with too many home insurance bills. I may be in the same boat!
4
Why is the Fair Plan charging so much? They are non profit and run by the government. I guess that they are able to fairly take into account the risk of loss.
The effect of climate change has been known for a long time. Fossil companies spent money to lie about it. Insurance companies should spend money countering the lies. They didn't so now they harvest .
59
And you perpetuated the problem by driving a car, turning on lights, order deliveries, catalog/internet purchases, heating your home, etc.
Everyone is to blame as no one forced anyone to use their products.
4
There is an uncomfortable, unasked question at the heart of this issue: Should homes in areas at increased risk of fire, flood, or other damage due to climate change even be rebuilt? Who is going to (repeatedly) pay for it?
Insurance companies? To recoup costs, they will need to raise their rates so high, nobody will be able to afford the policies. If government regulators tell them they can't, they're going to go out of business. Then the government has to take over. And as costs increase, either the government will have to cut other programs to pay for it (like Medicaid or Social Security) or raise taxes. At some point, voters will revolt.
Neither our government nor the insurance companies nor homeowners are prepared for the mounting costs of climate change. And we can't say we weren't warned.
211
@Scott I fully agree with Scott. I would like to add that this insurance enigma without an apparent solution is likely just a little hint of what is coming down the pike for all of us. Climate change will not merely bankrupt insurers of any kind, but we as a species will find ourselves directly in the line of fire, bereft of nature's resources and any means of adapting, which, logically, will lead to our extinction. The stark reality is that this unimaginably horrible process has begun and nature does not care about us whatsoever.
22
@Scott
This is just CA's lazy politicians (predominantly Democrats) passing the buck to the insurers rather than changing zoning laws.
8
@D M Extinct? No way to adapt? I don't know what species you're talking about, but it isn't homo sapiens.
Preventing insurance companies from dropping rates only prolongs development in unsustainable areas. Poor land use and land management is one of the major causes of climate change. This policy will worsen effects of climate change.
82
@Jon I think it's preventing houses from being uninsured when they have never been on fired. It's not about new development. It's about those already bought in.
6
@Tran Trong And natural disasters can, and do, happen in urban areas. So, do we just abandon NYC the next time a Hurricane like Sandy hits it?
1
Development in areas that are prone to natural disasters, be it flooding or wildfires or hurricanes, has been possible in part because those risks were not priced into the insurance system.
The lesson here may be that wanton human development is not desirable, and we should more carefully consider which areas people should inhabit, and which regions are better off staying wild.
233
@Aziz
Good thought, but I think the real problem is that since 1960 the world population has gone from 3 billion to almost 8 billion, the US population has gone from 180 million to 330 million, and the California population has gone from 16 million to 30 million. In the meantime, the amount of land has remained the same - where are people supposed to live?
26
The other lesson here is that insurance companies are allowed to take premiums for years and then leave the market when payouts get too high.
Just as many companies abandoned the Long Term Care “market” when more customers than anticipated kept their LTC long enough to collect, insurers count on be able to bail when costs overcome profits in any one area.
I’m not sure what the solution is, but it’s becoming apparent that we as a country need to make some decisions about the insurance industry and how we can be most resilient given climate change realities moving forward.
30
Population is the root of climate change and the direct cause of its acceleration. There is no chance of slowing it until we go net zero population growth.
9
It's a terrible idea to build in areas prone to fire and flood in the first place. Why was insurance ever affordable there?
84
@Robert Lauriston A few answers here in CA - one is affordability (people leaving expensive urban areas), the other is changing climate - areas that were once safe are no longer.
Another is 100 years of fire surpression, and the buildup of a century's worth of fuel where wildfires used to occur with some regularity. Somewhere along the way it became politically unacceptable to let it burn.
51
@Robert Lauriston
Well, one reason is that some of these regions weren’t actually so susceptible to fire or floods when the homes were built many years ago. But, because of climate change, these regions have now become much more flood or fire prone.
24
You mean places such as Berkeley, which narrowly escaped massive destruction during the 1991 firestorm centered in the Oakland hills, including a neighborhood adjacent to a tony Berkeley one? Or do you mean areas such as Berkeley, which has the Hayward earthquake fault running through town and directly underneath the UC Berkeley football stadium?
11
It's a terrible idea to build in areas prone to fire and flood in the first place. Why was insurance ever affordable there?
6
@Robert Lauriston Santa Rosa, downtown, is suburban. Large sections burnt to the ground. Berkeley is just as prone to wildfires as SR. So should they drop your coverage?
1
@Robert Lauriston . . . The fires were smaller and burned lower because most of the forest was still green but now . . . the extended drought has left massive stands of trees dried beyond the roots and the fire walls are far higher than anyone has ever had experience with .
The last 2 years of high , super hot and fast moving mega fires have made all the fire fighting equipment look like kids toys .
1
All insurance companies, either mutual or investor owned, must at least break even on a long term basis or go bankrupt. Ditto hospitals, even non-profits must profit most of the time.
State regulators who do not understand the "market" nor pay attention to the realities of business will not only ruin those businesses but force them to do business elsewhere!
10
@Pete in SA . . . Actually it was the fire at Paradise that bankrupted their local insurance company & it seemed to be a wake=up call for the rest of the insurers .
California's inverse condemnation law allows insurance companies to sue PG&E to recover their losses. In effect, PG&E is subsidizing fire insurance.
As long as inverse condemnation is the law in California insurance companies have nothing to fear.
12
PG&E is not subsidizing fire insurers. Rather, as has been reported, PG&E's laziness, relative disregard for public safety, and either incompetence or greed (or both) caused or significantly contributed to some of the most destructive wildfires in the northern part of the state.
If the San Jose Sharks practiced outdoors and failed or refused to take adequate measures to keep pucks from flying toward and hitting neighborhood homes, and a puck smashed your sliding glass door, would you assert that the Sharks were subsidizing your home-owner's or renter's insurance because the company sought compensation from the Sharks for the damage they caused? If you didn't have insurance but went to the Sharks' business offices demanding that the Sharks reimburse you for the costs associated with replacing the glass door and other losses you & your family suffered as a result of the hockey puck slamming into your home and shattering the glass door, would it be accurate to say that you were trying to get the Sharks to subsidize your home maintenance expenses?
5
Maybe this industry will use their money to lobby Republicans to finally acknowledge and deal with climate change. They certainly don't want to listen to non - donor voters.
162
@Matt I think you're on to something. Business will only pay attention to climate change when profits are affected and Republicans will pay attention only when businesses (i.e. big donors) are affected.
21
Nah, they'll just buy the already-stolen Court to make sure it strikes down such states' rights, without irony.
This is why calling 2018 a "blue wave" was premature.
6
@Matt, Not sure the industry has the incentive if it can increase premiums and profit, citing climate change.
1