Rising insurance rates and canceled policies

Insurance in fire-prone areas is getting more expensive.

The RAND Corp. found the average premium for high-risk areas was up 15 percent between 2007 and 2014 in reviewing prices in a portion of San Bernardino County. It was up 12 percent in the same period in the Sierra Foothills east of Sacramento.

The Santa Monica-based nonprofit research firm conducted the study as part of California’s Fourth Climate Change Assessment and was funded by the California Natural Resources Agency.

RAND researcher Lloyd Dixon found the higher prices were influencing purchasing patterns: Policyholders are buying less coverage, lowballing the cost to fully replace their belongings and tending to elect higher deductibles.

But are insurers cancelling policies? This is harder to say.

A December 2017 survey by the California Department of Insurance found an uptick in renewal complaints in areas designated by Cal Fire as having the greatest risk of wildfire. The department received 41 complaints in 2010 but 143 in 2016. And the insurance department found that insurer-initiated cancellations went up from 8,796 in 2015 in high fire areas to 10,151 in 2016.

However, those figures are a fraction of the more than 36,000 cancellations initiated by policyholders. In fact, RAND’s study found more insurers are actually offering in high-risk areas.

At the same time, insurance policies of last resort written for brush and wildfire areas have increased from 22,397 policies to 33,898 policies, a 51 percent increase over five years.

This suggests people are more likely to be priced out and taking on more risk. Property owners in fire-threat areas can expect insurance prices to keep rising. In areas with the highest risk, people can expect their premiums by 2055 to go up 18 percent.