Why should all Californians pay for the fire insurance risk only a few face?

After State Farm said it would stop selling new home insurance policies in California, Insurance Commissioner Ricardo Lara responded that the state will explore new rules allowing insurance companies to consider climate change when setting their rates.

But companies will only get to do this if they agree to write more policies for homeowners who live in areas with the most risk, including communities threatened by wildfires. This move is aimed at preventing insurers from fleeing the state over fears of massive losses from natural disasters.

While a multi-year surge of non-renewals affected roughly 235,000 households by 2021, there are more than 13.3 million households in California. Lara’s rule change could mean higher rates for all homeowners, who are already seeing dramatic cost increases, and could result in more expensive homeowner and renter insurance bills.

Eight insurance companies have asked California for rate increases of at least 20% or higher, according to the state Department of Insurance. State Farm’s request was approved in December.

Why should the remaining 13 million households be required to pay higher rates when we do not live in communities threatened by wildfires? Why not instead ban home construction and the rebuilding of homes that have burned in fire-prone areas? At a time when climate change is making wildfires more common and more dangerous, isn’t it time to consider banning such construction?

Starting this month, PG&E will increase customer rates by 13% to cover the cost of undergrounding 1,230 miles of powerlines and place covered conductors on another 778 miles. The utility said that undergrounding lines essentially eliminates the risk caused by their transmission and distribution lines.

Again, why should millions of households have to pay higher rates when we do not live in these areas?

In 2018, the group 1000 Friends of Oregon released a report that recommended avoiding development in high-risk areas, “unless they are related to farming or forestry.” Many have backed the idea. Five days before his 2018 retirement as director of Cal Fire, Ken Pimlott told the Associated Press that officials should consider banning home construction in vulnerable areas, saying “we owe it” to homeowners, firefighters and communities “so that they don’t have to keep going through what we’re going through.”

It is also extremely expensive to live in California especially with inflation increasing. The consumer price index, which measures the prices paid by typical consumers for retail goods and other items, increased by 7.3% for fiscal year 2023-24. It rose 5.6% the previous year.

No wonder people are leaving California – who can afford to live here? Perhaps, California should be as equally concerned with people fleeing the state as they are with insurance agencies fleeing.

I don’t blame State Farm, American International Group, Chubb and others for not renewing insurance for customers in fire-prone areas. In fact, I think they should have the ability to choose not to pay if customers decide to rebuild in those areas after a wildfire.

If California officials represent the entire constituency of the state, why then should the vast majority of households have to shoulder the costs for a small percentage who live in fire-prone areas?

When assessing rates and financial burden, California officials should consider the price tag for the majority of households instead of the few. Considering the financial costs and far-reaching harm wildfires produce, it is time to ban house development and building in fire-prone areas.