Homeowner's insurance rates in wildfire-prone areas on rise
"Insurance is risk-based priced, and so rates have to reflect the risk of loss," Ganley explained.
Ganley said because of the wildfires over the last two years, insurers have paid out about $26 billion in insurance claims for California homeowners.
"Some insurance paid out $2.50 for every dollar they took in," Ganley said. "If you were a business, you wouldn't stay in business for very long if you paid out more than what you took in -- sell insurance or balancing their book of business. There are some areas where insurers (are) not renewing, but 98.1% of the market is still covered by admitted insurers. Insurers are still committed to California."
Chris and Hannah Robbins quickly found out how much more expensive homeowners insurance rates are in wildfire-prone areas.
"Our insurance rates went from about $600 in Woodland to about $3,000 in the Foothills," Chris Robbins said.
The couple gets the keys to their new home in Meadow Vista on Friday. Although their insurance rate is much higher in the Placer County town than what they're used to paying, it's still much cheaper than their first choice.
"The costs did actually influence our home shopping," Chris Robbins said. "We were considering moving as high up as Colfax, but insurance was probably about $5,000 a year up there."
According to an April report released by the Gov. Gavin Newsom's wildfire strike team, homeowners in wildfire-prone areas saw a double-digit rate increase.
Consumers complaints about policies not being renewed doubled in the last two years, the report found.
"After two consecutive years of massive homeowners insurance loss ratios of insurers – 201% in 2017 and 170% in 2018 -- there is a sense of urgency about the decreasing availability and affordability in 2019, especially for regions with high wildfire risk," the report said.
Ganley said insurance rates can only be changed with state approval.
"Insurance rates in California are regulated by the California Department of Insurance, and insurers cannot just charge what they want," she said. "Rates have to be approved before they're charged. So, these rates have been approved and thoroughly vetted, but they reflect the risk of loss."
The report, citing the California Department of Insurance, said many regions of the state face insurance availability and affordability constraints.
"This is evidenced by increasing non-renewals and significant insurance premium increases in the areas of the state affected by wildfires," the report said.
Real estate broker Fred Eichenhofer said a client's policy was canceled, but it ended up being a positive thing.
"He was paying $2,200 a year with AAA, and he got a quote for $1,500 a year with a new company," Eichenhofer said. "So he got canceled, but he was able to replace it at a reduced rate."
Ganley said homeowners should periodically update their policy and shop around for better deals because like Eichenhofer's client, they may be pleasantly surprised.
"Talk to a local agent, talk to multiple carriers, because while one company had really bad losses, another might not have," Ganley said.
To get lower insurance rates, Ganley also recommends that homeowners increase their deductibles or bundle their homeowner's insurance with their auto insurance.