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There is a quiet but very real crisis hitting unsuspecting Santa Cruz County and other California homeowners. The problem is easy to describe: home insurance companies, including very large and familiar ones like State Farm and Allstate, are refusing to provide fire insurance for millions of California homes.

You won’t be surprised to hear that the reason they give for this retreat is related to the rapidly growing risk of catastrophic fire loss due to the impacts of climate change. But what you probably don’t know – unless you are one of the households whose fire insurance is being canceled –  is that these cancellations by the insurance industry are not taking place in just remote forested areas of the state.

It is very difficult to get exact numbers, but it appears that significant numbers of homeowners, not just in forested areas of the San Lorenzo Valley and the rest of the Santa Cruz Mountains, but in urbanized areas of cities like Santa Cruz, are receiving notices that their home insurance companies are canceling their policies. Once this happens, it becomes an instant and serious crisis, because most home loan mortgages will be called in if a home is not fully insured against fire loss.

At this point, I only know for certain that a handful of homeowners in Santa Cruz have received cancellation notices from their insurance companies. 

And they don’t live at the edge of the city in the urban-wildland interface, where you might expect this could be an issue. People living in downtown Santa Cruz and on the Westside and Eastside have recently been shocked to discover that they need to find a new home insurance company – and that they need to do so in a hurry.

There is some help from recent new regulations in California. On the last Monday in December, California Insurance Commissioner Ricardo Lara announced a new state regulation requiring insurance companies to begin offering an increased number of fire insurance policies to California homeowners. But it is not at all clear how quickly the new rules  – currently under review by California’s office of administrative law before they take effect in 30 days – will be implemented.

What is clear is that the new policies being offered might cost a minimum of 40% up to 500% more than they did a year ago – in rules that Consumer Watchdog describes as being of, by and for the insurance industry – even in situations where the issue is not proximity to forested areas facing significantly higher fire risk.

In one example in the city of Santa Cruz, a downtown homeowner got a cancellation notice because they have a wood-shingled roof (even though it had been treated with fireproofing). Another homeowner near downtown got a written letter informing them that their home insurance was canceled and didn’t even include a reason other than the general increased fire risk in California.

California does have a temporary measure in place to help homeowners whose insurance gets canceled because of environmental risks. The California Fair Access to Insurance Requirements (FAIR) Plan, which often serves as the last resort when insurance companies stop providing coverage for those living in areas threatened by wildfires, is mainly designed as a temporary safety net with basic coverage until policyholders find a more permanent option. The number of people on California’s FAIR plan more than doubled between 2020 and 2024, reaching nearly 452,000 policies.

We are all aware of the fire risks that climate change is bringing to California. Nonetheless, the home insurance companies might be overreacting at this point. I would be a bit more sympathetic about their concern for financial losses if I didn’t know that the industry is still making record profits.

The industry had $88 billion in profits in 2023, and $39 billion in the first quarter of 2024. 

Maybe it’s time to consider doing something radical like following Florida, where the legislature created a nonprofit home insurance company to cover homes that the private insurance industry is not willing to insure. Surely Gov. Gavin Newsom would welcome the opportunity to find a way to do at least as well as Florida does in serving its residents in the face of exploitation by the private sector.

Another avenue to explore that some California cities have tried is to pass legislation that mandates basic fire protection for residences like fuel setbacks from homes and access to sufficient water to fight fires when they do occur. Such policies might make private insurance companies more willing to provide policies in California. 

If the problem I am describing here is as serious as it appears to me, perhaps the Santa Cruz City Council, with the advice of its fire department, might consider enacting legislation requiring distance between houses and dense combustible foliage, fireproofing of roofs and walls, and similar protections.

In the meantime, it would really be helpful to get some dependable statistics on how many homes in Santa Cruz County and cities are being impacted by the attempt of private home insurance companies to abandon our communities and their residents. This could be done at all levels of government, including cities, counties and the state as a whole. It would be a service to us all.