IMHO it’s nice when states work as “laboratories of democracy” and no, I don’t want to get into a generic discussion of federalism.
From the Orange County Register..
“For California and Colorado, 2020 has been a record breaking year for wildfires.
In California, an unprecedented 4.2 million acres have burned, and in Colorado, the Cameron Peak fire has become the largest fire in Colorado’s history. California and Colorado rank first and third in the United States for properties at high risk for wildfire damage.
To make matters worse, insurers have been fleeing the California fire insurance market, and in response, California announced Thursday that it would extend its moratorium on barring insurers from dropping coverage.
For homeowners and insurers in these states, the stakes have never been higher.
Although these two states are both experiencing record breaking fire seasons, California and Colorado’s responses to this real and growing danger are quite different. California’s approach of creating price restrictions on insurance premiums has forced hundreds of thousands onto a last resort, bare-bones state plan.
Meanwhile, Colorado’s innovative approach incentivizes homeowner mitigation and allows premiums to fluctuate, keeping homeowners insured. To end this geographical disparity, California should look to Colorado as a model to give its citizens access to quality fire insurance protection at a time when they need it most.
The California Department of Insurance regulates insurance premiums to keep prices artificially low. The result is that in the face of unprecedented losses, claims have overwhelmed what insurers are able to charge in premiums. With wildfire loss predictions increasing, insurers began to pull out of the California market to avoid insolvency, leaving hundreds of thousands scrambling to find coverage.
In response, in December of 2019 the CDI placed a one-year moratorium on fire insurance non-renewals for homes that suffered a total loss during the 2019 California wildfires. Last week, this was extended to include roughly 2.1 million policyholders living within or adjacent to a 2020 wildfire, regardless of loss.
Colorado took a different approach and would be wise to stay the course. Colorado’s Division of Insurance allows for premium adjustments that better reflect differing levels of wildfire risk. Like California homeowners, Colorado homeowners in extreme wildfire risk zones can be denied or lose fire insurance coverage. When this occurs, unlike in California, Colorado homeowners can then opt into local mitigation programs like Boulder’s Wildfire Partners that assist and certify them through a process of modifying their home and their surrounding property to reduce the risk from wildfire. In exchange, many insurers in Colorado have agreed to cover certified homes.
With a robust insurance market and variable premiums, Colorado homeowners may have to invest in home-hardening efforts and may face a higher cost to insure homes in high risk areas, but Colorado has not needed to create a last-resort, state-enforced plan. Instead, it has protected conditions for a healthy and competitive insurance market.
California would be wise to learn from Colorado’s approach. Like Colorado, California should reduce its binding price controls, allowing private insurance companies to use risk-based pricing to insure people willing to pay for the risk they face. Not only will this allow more insurers to reenter the California markets, creating true safety nets when homes burn, but it will also send a price signal to homebuyers about which areas are most dangerous. To avoid premium spikes, the CDI should also look to Colorado’s mitigation certification programs and develop premium discounts for homeowners who adapt to the increased risk.
With homeowners, regulators, and insurers facing a new and catastrophic norm for wildfire seasons, policies that keep homeowners insured and increase private suppression efforts are key to protecting people and their properties. California can start by following Colorado’s model. These changes would keep more Californians on better insurance plans and, like their western neighbors, align incentives for individuals to adapt to better protect themselves for the future.”
Monique Dutkowsky is vice president of operations at PERC, the Property and Environment Research Center. Her work with Wildfire Defense Systems mapping fire risk is used by insurance companies throughout the West to help mitigate the impact of wildfires and quicken response times to vulnerable areas during fires. Holly Fretwell is vice president of outreach and a research fellow at PERC.
6 thoughts on “California can learn from Colorado on protecting homes from wildfire risks: Orange County Register op-ed”
I’d like to see Colorado’s system here in Oregon. I lost my homeowner’s insurance policy in 2019 after the company realized that we live in the woods. Not in a high fire risk zone, but after all the Paradise Fire and other California fires, they were spooked. I’d have gladly worked with the local fire dept. to get a Firewise certification in exchange for keeping the policy at reasonable rates.
There’s less than 6 million people that live in Colorado. California is an entirely different political economy. What they do in a small state for insurance doesn’t scale up to what California is dealing with where real state values are off the charts in comparison.
We’re talking about total loss claims at the scale of a hundred thousand structures destroyed by wildfire in past 15 years in California: https://headwaterseconomics.org/natural-hazards/structures-destroyed-by-wildfire
The insurance exodus from the golden state is gonna be in the headlines big time in coming months and years. For example a recent article:
As California wineries lose insurance, some fear this fire season will be their last
My hope is hard to get homeowner’s insurance will encourage innovations like rapidly deployable burnover tents on the roof of your house if you want to get fire insurance in the future.
It’s insane to me that so many people lose everything and file a total loss insurance claim simply because they’re evacuated and and no one is around to put out a single ember that lands on the wrong spot of their house and ignites it… Insurance companies and local firefighters need way more support and coordination than they currently have with wildland firefighters so home saving and perimeter containment aren’t the conflicting priorities that they always are. Of course the firefighting industrial complex will waste much needed billions in funds just so giant airplanes can drop pretty colored clouds over the flame and smoke.
Since I have dreams of someday moving to a rural location in the WUI near a national forest, I hate to say this, but I think there need to be restrictions on continued building in identified “climate change” hazard zones. And, since this is supposedly a capitalist country, market forces should be the primary mechanism that drives these economic adjustments. In other words, if you can’t afford the insurance, don’t build/live there.
Besides, as some say, “A whole lot of positive things can happen by pulling back from having developments in the WUI: environmental, financial, fiscal, human — you name it.”
“It is understandable that insurance companies want to adjust their risk/reward metrics. Insurance companies lost a total of $20 billion in 2017 and 2018, twice the industry’s profits since 1991. In California, insurers are betting that climate change isn’t going away and that’s why they’re now pushing the state to allow them to factor in future flooding, mudslides, and forest fires into customer premiums.
If they don’t get their way, they say they’re just going to continue to drop more homeowners from coverage in a state where one out of three homes has been built in or near dense vegetation. Insurers say it’s simply too risky to write policies in these regions — payouts from the 2017 and 2018 fire seasons alone totaled $24 billion, almost completely wiping out the industry’s profits for the previous 16 years.”
In 2019, policy cancellations statewide rose by 61%, and the state’s 10 most fire-prone counties saw a 203% increase. Enrollments in the FAIR Plan jumped 225% last year. The state FAIR plan, which costs 21% more than most previous comprehensive plans, covers only smoke and fire damage.
Most homeowners (and taxpayers) want to avoid the California FAIR Plan, which is the state’s insurer of last resort that comes with a hefty premium and only covers fire damage. Critics add that the plan was never created to be a permanent solution for California homeowners seeking fire insurance.
The fundamental questions that need to be answered are:
Who will certify that homeowners meet mitigation standards?
How will those standards be determined?
Will insurers be allowed more flexibility to adjust rates in conjunction with such a program?
Despite the fact that some responsible homeowners have implemented defensive fire-safe measures, “Your house can be perfect, every dimension dealt with, and your neighbor who is six or seven doors down is not, at that point you’re still vulnerable to wildfire.”
“What we cannot yet do is say, okay, if you address just the roof vent, do you reduce the risk by 4%, by 7%, by 12%?” he said. “If you had to say, addressing the deck versus the fence — we know they’re both important, but if you wanted me to put a specific number behind differentiating which one is more likely of ignition, that’s the gap we’re still working on.”
“When the local fire department or the Forest Service comes by to inspect our property, we pass with flying colors — they don’t have a single recommendation,” Ladich said. “In my conversations with insurance companies, I’ve raised these items to try to plead our case — it doesn’t make a difference, it’s like they don’t even care to hear these details. They just have a set map and they say, ‘Nope, we’re not insuring in that area.’”
Even those who have had insurance company inspectors come to their property and followed their recommendations have faced cancellations.
Nevertheless, new housing developments in the WUI are proceeding at breakneck speed.
Local officials’ motives for allowing rebuilding has less to do with fairness than it does with the money. “The economics of the West has changed,” he says. Twenty years ago, local budgets came largely from resource extraction, including lumber, oil and gas, and mining. “The new cash cow is homebuilding,” Rasker says. “When they look at a new subdivision, they’re thinking tax revenues. And that clouds their judgment.”
Rasker says part of the problem is perverse incentives: Local officials know that most of the cost of fire suppression and disaster recovery will be paid by state and federal taxpayers.
It is a wicked problem, for sure.
Hmm. I remember 20 years ago and “Twenty years ago, local budgets came largely from resource extraction, including lumber, oil and gas, and mining. ” I don’t believe that’s true for large areas of the West. For one thing, much of the interior west doesn’t have trees, or oil and gas or mining potential. I think it’s hard to generalize about the West.
I also lived in California 40ish years ago and I can safely say that local budgets in Eldorado County did not come from any of those things.
Many of the most destructive and deadly wildfires in California over the past decade or so have been the direct result of downed power lines. These power lines went down during 40 mph to 80 mph extreme wind events and in many cases the power companies failed to take responsibility and were later found negligent.
This includes Pacific Gas & Electric pleading guilty to 84 counts of involuntary manslaughter stemming from a 2018 Camp Fire that was started by the utility company’s power lines. That one power-company-sparked-fire destroyed 18,000 buildings.
Has Colorado had many similar examples of power-line caused wildfires killing scores of people and burning down thousands of structures? If not, maybe this helps account for some of the differences between insurance in the two states.
Once again I’ll point out the PERC, the Property and Environment Research Center, is a right-wing libertarian think tank that gets funding from Exxon-Mobile and the far-right Koch Foundation. For decades PERC has fought to weaken America’s basic environmental, conservation, and wildlife protection laws. As “free market” cheerleaders, PERC opposes strong zoning laws and doesn’t seem to like many of the local, state or national regulations that may help save homes from wildfires.
Finally, I’ll also point out that nearly 20 years ago, some of us did work with the insurance industry on various community wildfire protection plans.
And Headwaters accepts money from the Western Conservation Foundation to which Wyss contributes and as to Wyss.. https://www.influencewatch.org/non-profit/wyss-foundation/
And I disagree with their researchers on some things, but also greatly appreciate some things they do. Actually, same as PERC.