County, state hit by home insurance cancellations
Pamela Ochoa Fierro and her husband have lived comfortably in their Placerville home for over two decades. With the kids out of the house, the couple is working on paying off their 10-acre, four-bedroom home nestled in the El Dorado County foothills and eventually living off the equity.
This summer, after several straight years of devastating wildfires throughout California, their circumstances began to change. In June, Allstate canceled the couple’s home insurance. The couple had been paying $1,100 a year for extended home coverage. Scrambling to reinsure their home, they adopted the California FAIR Plan, under which they pay more than $5,200, nearly five times the amount they paid just a year earlier.
Now, the Ochoa Fierros face an uncertain financial future.
“We have to put other important needs on hold, like anything out of pocket for medical or home maintenance,” Ochoa Fierro said. “My husband needs a new car, but we can’t get one until we know if our insurance is going to go up again next year.”
The Ochoa Fierros are far from alone. New data from the California Insurance Commissioner’s Office reveals that more than 350,000 home insurance policies have been non-renewed in high-risk wildfire areas since 2015, with El Dorado County experiencing one of the most dramatic increases.
“We are seeing an increasing trend across California where people at risk of wildfires are being non-renewed by their insurer,” said California Insurance Commissioner Ricardo Lara in a press release. “I have heard from many local communities about how not being able to obtain insurance can create a domino effect for the local economy, affecting home sales and property taxes. This data should be a wake-up call for state and local policymakers that without action to reduce the risk from extreme wildfires and preserve the insurance market we could see communities unraveling.”
As one of 10 counties with the most homes in high or very high-risk fire areas, El Dorado County is getting hit hard by insurance non-renewals. A total of 1,594 EDC homeowners were dropped by their insurance carriers last year, a 12.5-percent increase from 2017. Since 2015, 6,398 EDC homeowners have been dropped by their insurance carriers, according to the data.
The 10 counties with the most homes in high or very high-risk areas include Tuolumne, Trinity, Nevada, Mariposa, Plumas, Alpine, Calaveras, Sierra, Amador and El Dorado, according to the insurance commissioner.
Statewide, yearly non-renewals have remained relatively steady hovering between 83,511 and 89,571 non-renewals per year since the state began collecting data in 2015. Non-renewals increased by 6 percent last year, the largest increase since 2015. Zip codes affected by the devastating fires from 2015 and 2017 experienced a 10 percent increase in insurer-initiated non-renewals last year, according to the data. The data doesn’t account for homeowners that re-upped with another insurance company.
After decades as a low-cost option to the Central Valley and San Francisco Bay Area, home insurance hikes are erasing the affordability gap between the foothills and more expensive areas of Northern California.
“I get phone calls from people in tears every day telling me they can’t afford their homes anymore because of how much they’re paying for insurance,” said Kathy Patsfiel, a Cameron Park loan officer. “There are a lot of seniors on fixed incomes. Young couples coming up here to own a home. A lot of these people moved to the county for the affordability aspect. Now they’re being run out.”
Housing unaffordability has some folks considering leaving the foothills altogether. After speaking with over three dozen insurance agents, Becca Foles of Foresthill received three home insurance offers of $11,500, $16,000 and $19,432 a year. Just two years earlier, she was paying $1,250. The Foles’ American Dream may be no more — soon.
“We literally feel like we’re going to lose our home and won’t be able to have children here unless we sell it and move back into a rental,” Foles said. “It’s our perfect, dream home. We’re just devastated by what’s going on.”
The housing market in fire-prone areas has been hit hard over the past year. Home sales over the past year are down 11 percent in El Dorado County, 3 percent in Nevada County, 23 percent in Amador County and 15 percent in Plumas County, according to the California Association of Realtors. Recent market decline is just the beginning unless seismic changes take place immediately, according to Patsfield.
“We don’t have five or 10 years for the state to save our foothill communities,” Patsfield said. “We’re running people out of California and we need something to change soon.”
Many homeowners that are unable to buy private insurance turn to the California FAIR Plan, which is supposed to be the last resort for coverage. This plan offers bare-bones coverage at a premium price. From 2015 to 2018, there was a 177 percent increase in high-risk area homeowners forced into the FAIR plan, according to the insurance commissioner’s data.
Debra Miller, president of the El Dorado County Association of Realtors, noted that the California Fair Plan is often homeowners’ only option but “can be costly and/or unaffordable for some residents.”
El Dorado County is almost entirely a high-risk fire zone, according to Cal Fire hazard maps. An estimated 75 percent of the 90,000 residential properties in the county are at risk of losing fire insurance coverage or receiving high premium increases.
Since the release of the data, Lara has toured through Gold Country holding town halls and meetings with public officials throughout August. On Aug. 15 El Dorado County Supervisors John Hidahl and Brian Veerkamp met with Lara to discuss the home insurance crisis. Speaking of the meeting, Veerkamp highlighted the county’s effort to mitigate home insurance woes through its vegetation management program.
“This meeting was a positive first step in helping Commissioner Lara understand the challenges in El Dorado County and establish a relationship with him and his staff to help meet our residents’ needs,” Veerkamp said in a statement.
“We also explained how our recently enacted vegetation management ordinance dovetails into his belief that pre-disaster prevention and mitigation is a key component to this issue and the impact unavailable coverage has not only on homeowners but also our economy and our government’s ability to provide needed services to our residents.”
In a letter sent to Lara on July 25, the El Dorado County Board of Supervisors characterized the issue as a downright emergency.
“Premiums are skyrocketing, policies are canceled outright and notices of non-renewal within weeks of a policy’s expiration are occurring at an alarming rate, and it is not an exaggeration to characterize the situation as dire,” wrote District 5 Supervisor Sue Novasel, the lead author of the letter. “An especially worrisome aspect to the matter is El Dorado County’s higher-than-average population of seniors, many of whose fixed incomes can ill bear the dramatic premium increases — that is if their carriers continue to cover their homes at all.”