Volatility in Homeowners Insurance Market Continues Amid Another Unprecedented Fire Season

Rate hikes, non-renewals, and cancellations of homeowners insurance have been hot topics for the past three years, and Montecito’s issues on this front trend with problems statewide. 

Here’s a quick recap:

2019

March: Montecito homeowners get notices of non-renewal. They struggle to find replacement policies, with price shocks — up to 10 times what they had been paying. At first, the community worries this is related to the Debris Flow.

April: The Montecito Association creates an Insurance Task Force. We map our members’ notices of non-renewal, and see they are occurring most heavily in the area above 192 – in Cal Fire’s Very High Risk of Severe Wildfire zone. 

We contact then-Assemblymember Monique Limón and learn this is a massive statewide issue.

August: California Insurance Commissioner Ricardo Lara meets with Montecito, brought here by Limón. He then:

1. Orders the California FAIR Plan limits to $3 million from $1.5 million;

2. Requires the FAIR Plan offer more comprehensive coverage;

3. Proposes legislation to force insurers to offer coverage in communities that are significantly “hardened” against wildfire risk. The bill dies in the legislature.

December: The Insurance Commissioner is sued by the FAIR Plan insurers to halt the coverage increase and more comprehensive coverage order. 

2020

California has the worst wildfire season on record. Insurance company notices of non-renewal increase across the state.

2021

February: Lara proposes new rules that would require insurance companies to provide a consumer with their property’s wildfire risk score, which must recognize a consumer’s mitigation actions that could improve their rating, such as creating defensible space and fire-hardening, and must allow time for the consumer to reduce their score.

June: Lara states he doesn’t want California to continue building in high wildfire zones. The state can’t sustain resources and support for people to live in the High Wildfire zones. The story runs on the front page of The New York Times.

July: The Dixie Fire breaks out, potentially caused by PG&E. They committed last Friday to burying up to 10,000 miles of utility lines. We’d love to see SCE make the same commitment. Putting Montecito’s power lines underground has become an urgent matter. Neighborhoods, such as Periwinkle, who step up to do it, have to self-fund, and it’s prohibitively expensive. A potential undergrounding project on the table at 192 and Hot Springs, to be funded by the County, has not happened.

Last week: A California court ruled for the Insurance Commissioner in the Fair Plan lawsuit, so insurers will have to offer more than just fire coverage. Lara continues to negotiate with traditional insurance companies on a plan that would require them to sell coverage in fire-prone areas as long as those communities meet certain standards for safeguarding against wildfire risk. That includes “hardening” homes by retrofitting them with fire-resilient materials.

Worldwide, fires along the West Coast of the U.S., floods in China, Germany, and the Midwestern U.S. have caused insurers to update their risk models.  

Some Montecitans have just received non-renewal notices. Smoke from massive western fires caused haze and hazardous breathing conditions in New York and Boston last week. We could potentially expect more cancellations of policies. Some members of the Montecito Association have had success procuring replacement policies at fairly competitive rates through Brown and Brown Insurance in Carpinteria. Let us know if you’ve found success in securing replacement insurance, particularly if your home is above Highway 192.

Stay up to date on all things Montecito by joining the Montecito Association at montecitoassociation.org.