The Los Angeles fires will test California’s new insurance rules

Lloyd and his wife later bought another house in Hidden Valley Lake, a city that has taken ambitious steps to reduce flammable vegetation, but its insurance premium is still more than $4,500 a year, more than triple what he was at his last home in Kansas. Lloyd is worried that his insurance company will increase his price even more under the new rules.

Other states in the West, such as Colorado and Oregon, are also seeing gaps in insurance coverage emerge after large fires, although their problems are less acute than those in the Golden State. In Colorado, for example, officials have recently established a state fire insurance backstop like California’s FAIR Plan, since it’s only in recent years that customers have been dropped en masse. California’s big deal with the insurance industry provides a blueprint for those other states: If you want to address coverage gaps, you need to give insurers more authority to set prices.

Firefighters battle the Eaton Fire near the Altadena area of ​​Los Angeles County, California. The fire exploded in force earlier this week in the middle of a fierce Santa Ana storm.

Photograph: JOSH EDELSON/Getty Images

Even this might not be enough. Recent years have seen a rebound from large fires like those that struck in 2017 and 2018, but this week’s fires in the Los Angeles area could cause billions of dollars in damage, equivalent to a event like the Camp Fire.

Joel Laucher, a former regulator and fire insurance expert at the consumer advocacy organization United Policyholders, said the damage caused by the Los Angeles fires could lead to more price increases and more coverage gaps. availability

“These will be major losses, certainly,” he told Grist. “Certain areas will definitely have new challenges, to the extent that insurers will be able to charge at the rate that they believe these areas deserve to pay.” Laucher said insurance companies would not be able to refuse to renew as many policies as they could have under the previous state rules, but they could also avoid selling policies in some of the affected areas.

Frazier, of the insurance trade group, expressed similar concerns. He said another round of monster fires on the scale of 2017 and 2018 could push the insurance industry out of the state once again, despite commissioners’ reforms.

“If we’re going to have an unprecedented couple of years, all bets are off,” he told Grist.