State commissioner aims to expand fire insurance options in high-risk areas

OAKLAND — California state regulators released a new plan to make it less difficult for homeowners to buy home insurance but some consumer advocates worry it would mean sharp premium increases for everyone.

The proposed plan comes after many homeowners in older houses and those who live in fire-prone areas either lost coverage or saw rates soar in the past couple years.

In fact, many major insurers have either left the state or stopped writing new policies.

“Seven redwoods and we have oak trees and cedars as well. We’re surrounded by trees,” said Buck Reesor, who lives in the Oakland Hills.

Like many of his neighbors, Reesor received the dreaded cancellation letter.

“We had Mercury and they dropped us last year,” Reesor said.

Many companies insist that state regulations make it tough to increase premiums and too risky to insure homes in fire-prone areas.

“We phoned around and it was difficult to find somebody (to insure our house),” Reesor recalled.

California Insurance Commissioner Ricardo Lara announced a new plan that would allow companies to use “catastrophe modeling” and climate change to set higher rates. In exchange, companies would sell policies in areas with the greatest fire risks, areas like Wine Country, the Santa Cruz Mountains and the Oakland Hills.

The new plan would require insurers to increase coverage in designated fire-prone zip codes identified by the state.

“All they really want to do is have a regulatory system and prices reflect the real-world risks,” said Seren Taylor, vice president of the Personal Insurance Federation of California (PIFC), an insurance industry group.

Taylor supports the plan and believes it would stabilize the market.

“Once all these pieces are in place, we’re confident that insurers are going to come back to California. They’re going to continue to serve,” Taylor said.

Opponents say that, under the proposed plan, home insurance will remain unaffordable and unobtainable for many people.

“There are too many loopholes to be workable. There are too many off-ramps for insurance campanies to not meet those commitments,” said Carmen Balber, executive director of Consumer Watchdog. “The baseline problem with this regulation is that insurance companies will be able to raise rates immediately on day one but not have to prove they moved back into distressed areas of the market for two full years.”

While Reesor doesn’t know if the state’s latest plan would help homeowners like him, he’s glad he did not have to buy the state’s FAIR plan, an expensive policy of last resort. He says he is paying 30 percent more with his new policy.

“It was quite a relief when AAA just signed us up,” Reesor said.

Commissioner Lara said he wants to finalize the proposal and new regulations by the end of the year.