When Steve Kress moved into an old ambulance that he had converted to a travel van a few weeks ago, he had started wearing a pin that said “Since I lost hope I feel a lot better.”
“It’s true though,” he told me. “I have given up hope that my property will survive. As far as I’m concerned, it’s already gone.
Kress nervously awaited the Monument Fire, a blaze in far northern California that reached over 216,000 acres and is threatening several communities. His 10-acre lot was in an evacuation zone; his Airstream trailer, his workshop, his goats and chickens, the house he is building, all were 300 meters from the perimeter of the fire.
With torrential rains forecast for the area this weekend, Kress may have dodged a bullet. But he lives in a community whose insurance premiums have skyrocketed in recent years due to the risk of wildfires. When his sister, an insurance agent, assessed his home and property and told him he wouldn’t be able to find affordable fire coverage, Kress walked away, a decision known as “get naked”. If his property burns, it burns. He will only have to leave. His ability to get coverage, he said, could be the difference between his stay and his departure: “If I lost everything and had the money to redo everything, I would probably rebuild right away. “
Kress is not a outlier. “Two-thirds of people who lose their homes to forest fires are severely underinsured,” says Amy Bach, executive director of United Policyholders, a consumer advocacy organization. This means they are missing money to rebuild properly Where cover other expenses related to the fire. Already this year, forest fires have burned or damaged more than 3,200 structures in California alone, including countless homes and businesses.
Each year more and more Westerners find themselves in Kress’s predicament as insurers, facing record claims, are wary of covering large swathes of land. About 11 million Californians live in the state’s “interface between wilderness and urban”, including vulnerable areas where regulators counted nearly one million insurance non-renewals in 2019.
Premiums have soared in these risk areas. Cancellations are increasing. And some insurers have pulled out altogether, leaving low-income homeowners to choose between basics like food, prescriptions, and expensive coverage. If a fire sets their communities ablaze, “what are they going to do to recover? Asks Douglas Quinn, executive director of the American Policyholder Association, an insurance industry watchdog group. “They’re going to spend their savings, they’re going to spend their children’s college fund, they’re going to spend their retirement money. If these assets are not available, they will go into more debt and many people will lose their homes.
A non-renewal can result from an insurer’s refusal to renew a policy or from the owner allowing coverage to expire, often because the rates have become too high. Many families have seen their insurance bills more than triple in recent years; some report that premiums that once cost $ 1,000 have been increased to $ 7,000.
Families may turn to unregulated “excess” insurers, but this can result in even more expensive and less reliable coverage. Another option is the Californian FAIR plan, a state insurance program that officials describe as a “last resort.” It doesn’t provide as much coverage as the typical private plan, and it’s still too expensive for some families. Last fall, the California Department of Insurance (CDI) approved a premium hike of nearly 16%.
Lenders usually require fire insurance, but families without a mortgage have the option of going naked. Precise figures on this subject are “hard to come by,” Bach told me, but some families lay bare in pswitchbacks like Janesville, an unincorporated town of about 580 households vulnerable to the still-spread Dixie fire. In 2019, according to CDI data, about a quarter of households in Janesville had non-renewals. Greenville, a town of 1,072 households wiped out by the Dixie fire, recorded 84 non-renewals that year.
The Dixie fire, although 86 percent contained, has burned nearly a million acres and destroyed 1,329 structures to date, with more still at risk. Dixie burned down five counties, all of which saw steep increases in insurance rates and cancellations. In 2019, there were 12,339 non-renewals in Butte County, 1,462 in Lassen and 8,871 in Shasta.
Rural woodland counties in California were the first to feel the effects of this looming insurance crisis. Many of these tight-knit communities are mired in intergenerational poverty. “These people who pay $ 1,000 a year for their home insurance are seniors living in rural areas and on fixed incomes. If the premium goes up to $ 5,000, they literally can’t pay, ”Bach told me.
“It’s having a dramatic impact in virtually all of our poorest counties,” notes Paul Smith, former vice president of government affairs for California Rural County Representatives, an advocacy group of county officials. But insurance problems have since spread even to some wealthy urban areas.
The huge losses caused by the fires have left insurance companies cautious. For just two months of 2017, California wildfire claims topped $ 12 billion. Amid rising temperatures and worsening drought, residents have lost homes and businesses to the fires in record numbers – more than 35,000 structures in total from 2018 to 2020.
In 2018, the CDI was already sounding the alarm on the surge in premiums and the fall in coverage in high-risk areas. Insurers, agency officials said, did not factor fire mitigation efforts into their calculations and were too general in risk assessments, classifying entire regions as high risk regardless of the situation. individual families. CDI officials recommended legislation to further regulate and stabilize the fire insurance market, a move that catalyzed lingering tensions between companies and state regulators.
To curb a wave of cancellations, Insurance Commissioner Ricardo Lara issued a series of one-year moratoria banning revocation of coverage near recently burned areas and took steps to expand FAIR plan coverage. Last October, it convened a very first state inquiry hearing into wildfire insurance, in which officials reported a 31% increase in non-renewals from 2018 to 2019, mostly in forest fire areas. “In the blink of an eye, my insurance went from $ 1,500 a year to over $ 4,800, more than triple,” said Colleen Cross, a retired Nevada County public school educator, describing his experiences following the devastating 2018 camp fire.
The problem extends far beyond California. Rates are already rising in other fire-prone states, including Colorado, Oregon and Washington. Nationally, forest fires burned more than 89,000 homes and businesses between 2005 and 2020. Coexistence with fire is an increasingly brutal reality, but adaptation – in the way we mitigate them. risks, prepare our communities and help them recover – has fallen behind. “Climate change and the for-profit property insurance system are incompatible,” Bach said. “A lot of insurance companies are now saying, ‘You know, we just can’t handle this, and the government has to take care of it. ”
It is not uncommon for large corporations to capitalize on their profits and socialize their losses. The large US property and casualty insurers remain profitable overall. In 2020, State Farm, Nationwide and Farmers generated $ 79 billion, $ 42 billion and $ 12 billion respectively for their shareholders.
The western states are in the midst of another epic season, with dozens of fires ravaging the wilderness of Idaho, Oregon and Washington. In addition to the Dixie and Monument fires, California is still grappling with the Caldor Fire, which most recently threatened to destroy the community of South Lake Tahoe, a key tourist destination and California’s jewel of beauty. burned nearly 220,000 acres. Another fire threatens the area around Sequoia and King’s Canyon National Parks, which are home to some of the tallest and oldest trees on the planet. Families across the state are stuck in evacuation limbo waiting to see if their homes and towns survive.
So what happens, I asked Bach, to those who can’t afford adequate insurance and don’t have a wealth cushion to fall back on? Are they our next wave of climate migrants? “Absolutely,” she said. “A lot of the people we help, at some level, are victims of climate change. ”
That’s what’s at stake: Thousands of Americans, perhaps millions, risk losing their homes, businesses, and livelihoods to fires, floods, droughts, and hurricanes every year. Risk of traumatic loss followed by years of scratching at disrupted lives and battles against adjusters.
“Insurance companies have special obligations because they have this kind of captive clientele,” Bach told me. “People have to buy their product if they have a mortgage, right, so you don’t even have a choice. Same thing with driving a car and buying insurance, right? Insurance companies have this great deal.