California suspends non-renewals, cancellations for wildfire-affected policyholders

November 5, 2020.
Insurance Commissioner Ricardo Lara is moving to keep insurance companies from canceling homeowners' policies(AP Photo/Rich Pedroncelli)

Insurance Commissioner Ricardo Lara is moving to keep insurance companies from canceling homeowners' policies(AP Photo/Rich Pedroncelli)

Insurers won’t be allowed to not renew or cancel certain residential property policies in California for one year, the state’s insurance commissioner declared Thursday, as the regulator of the largest U.S. insurance market continues to fret about the availability of homeowners insurance amid devastating wildfires.

The California Department of Insurance said that 2.1 million policyholders — comprising 18% of the Golden State’s residential insurance market — would benefit from Insurance Commissioner Ricardo Lara invoking the little-used 2018 Wildfire Safety and Recovery Act, which he authored. 

California Gov. Gavin Newsom, a Democrat, made emergency declarations related to wildfires on Aug. 18 and Sept. 6, 10 and 28. Lara’s move provides one year of protections from each date for residential insurance policies for properties within or adjacent to the perimeters of recent wildfire disasters. 

Lara invoked the same moratorium law for the first time in December 2019. The law extends non-renewal and cancellation protection to Californians who did not suffer a total loss from a declared wildfire emergency. Such protections already exist for those who do experience a total loss.

“Losing your insurance should be the last thing on someone’s mind after surviving a devastating fire,” Lara said. “My action gives millions of Californians breathing room and hits the pause button on insurance non-renewals while we take additional steps to expand our competitive market.”

Wildfires in the state have scorched more than 4 million acres and ruined over 8,800 buildings since the start of the year, according to an Oct. 6 report from the California Department of Forestry and Fire Protection. Five of the 20 largest wildfires in state history occurred in 2020.

Amid concerns that homeowners are increasingly being priced out of coverage, last month Lara hosted the department’s first-ever “investigatory hearing” on wildfire insurance, and promised to take several measures, including building on existing home-hardening standards “that are based in fire science, making them consistent and applicable to all insurance companies and the rates they seek for approval.” 

The commissioner expressed a desire to create insurance incentives that recognize property and community risk mitigation, including home-hardening, or the use of building materials and installation techniques that improve a home’s resistance to wildfires — for instance, using double-pane windows — as part of the effort to lower policy rates. 

The department scheduled a similar meeting for Dec. 10, saying it would address “potential administrative and regulatory changes” that would incentivize home-hardening “and discuss models that are based in fire science to protect lives and property.”

Lara has also asked insurers to cover extra living expenses for relocated policyholders.

“If we don’t want to be in this position every year, we have to reduce the risk to lives and homes, which means everyone plays a part — homeowners and state and local governments through home-hardening, the federal government though forest management, and the insurance industry working as a partner,” he said Thursday.

Insurance companies collect $310 billion in premiums each year in California.

Consumer advocates praised the moratorium.

“In the aftermath of 2020's devastating wildfires, and after struggling to feel safe again, residents in and near the impacted communities are now fearing they'll be dropped when their policies come up for renewal,” said Amy Bach, executive director of the nonprofit United Policyholders. 

“United Policyholders commends the Department of Insurance for taking decisive action to calm their fears and keep order in the home insurance marketplace as we work together to establish the statewide mitigation and reward program that will help reduce wildfire risk and restore available, affordable options for consumers,” she continued.