Woodbridge firefighter Joe Zurilgen passes a burning home as the Kincade Fire rages in Healdsburg, Calif., on Oct. 27, 2019. California Insurance Commissioner Ricardo Lara announced plans on Thursday, Sept. 21, 2023, aimed at keeping home insurers in California amid increasing risks from climate change. (AP Photo/Noah Berger, File)
One of California’s largest home insurers is raising rates for hundreds of thousands of state policyholders by an average of 15.3%, the latest move by a major insurer to boost homeowners’ premiums in the face of growing wildfire risk.
Travelers Insurance, the state’s sixth-largest home insurer as of 2022, plans to raise rates for roughly 320,320 homeowners, with some seeing hikes of more than 25% annually, according to filings with the California Insurance Department.
It was not immediately clear where in the state homeowners will see the largest increases, which could take effect as soon as June 24. On average, California homeowners pay $1,452 a year for coverage, according to Bankrate.com, a personal finance website. The rate hikes could raise annual premiums by a few hundred dollars.
California’s insurance rates are tightly regulated and, as a result, far lower than in many other states. The insurance industry, citing a series of destructive wildfire seasons and rising building costs, has for years argued the rate regulations are untenable.
Many of California’s biggest insurers, including State Farm and Allstate, have ended coverage for tens of thousands of homeowners in fire-risk areas, including the Santa Cruz Mountains and Wine Country, and last year paused writing new policies anywhere in the state, even as companies have won approval from regulators for double-digit rate hikes.
“Nobody wants prices to go up, but anybody who’s not a climate change denier knows that the risks are going up,” said Edan Cassidy, an insurance broker in Scotts Valley in Santa Cruz County.
In a filing with the state insurance department explaining the need for a rate increase, the New York-based company cited “inflationary pressures” on construction costs and argued current pricing models don’t account for the damage expected from “changing climate conditions.”
“The approved adjustments to our California homeowners insurance rates are necessary to align pricing to the risks that our customers are facing,” the company said in a statement.
In a similar move, PG&E has repeatedly raised electric and gas rates in recent years as part of a bid to modernize equipment and reduce wildfire risk. Last November, the state Public Utilities Commission that oversees the utility authorized a 13% increase in customer’s monthly bills.
To calm California’s imploding home insurance market, state regulators have embarked on a yearlong overhaul of home insurance rules and pricing. The goal is to give insurers additional latitude to raise premiums to account for more frequent catastrophic fires while extracting commitments to extend coverage in fire-risk areas.
“Under outdated rules, the growth of climate-driven mega fires has supercharged insurance costs for many Californians while making insurance harder to find,” Insurance Commissioner Ricardo Lara said in a statement announcing some of the planned reforms in March.
Initially, Travelers had asked the state to raise homeowners’ rates by an average of 21.7%. But earlier this month, the nonprofit Consumer Watchdog reached an agreement with the company to slash the hikes by almost 6%. According to the consumer advocacy group, that should save policyholders an average of $118 on their premiums, or $37.8 million in total.
Despite the settlement, Cassidy expects the company to continue asking for rate adjustments to offset the increased risk across the state. However, he said the company insures relatively few properties in the wildfire-prone Santa Cruz Mountains, where his agency is based.
Kami Cady, who works with Edan Cassidy at Cassidy Insurance Agency, added that while Travelers hasn’t stopped writing new policies in California, she’s noticed the company, like many other insurers, has become more picky about the homes it covers.
She said homeowners shouldn’t be surprised to see more rate hikes in the months ahead. “This is going to be a recurring trend in California across the board with all insurance companies,” she said.
In 2022, state regulators announced a requirement that insurers provide discounts to consumers for wildfire mitigation and clarify the basis for their homes’ wildfire risk rating.
But amid an accelerating California insurance market meltdown, some homeowners are frustrated that they aren’t getting much if any credit for undertaking often costly measures to make their properties more resistant to wildfires as state officials have urged.
Originally published at Ethan Varian