By Hillary Ojeda, LOOKOUT SANTA CRUZ
Local insurance agents say they’re hopeful that planned new state regulations will allow them to write more home insurance policies, but say the future is still uncertain when it comes to access and affordability for residents who need to protect their homes from natural disasters.
Hundreds of thousands of homeowners have seen their insurance policies not renewed in recent years in California, including about 15,000 in Santa Cruz County, after the largest carriers in the state balked at what they said were rising costs due to increasing environmental disasters such as wildfires and floods. That has left many homeowners with fewer and more expensive insurance options.
Under pressure from consumer groups and the industry, Insurance Commissioner Ricardo Lara announced new regulations late last month that his office says will restore stability to the insurance market and expand home insurance coverage, starting later this year.
The Sustainable Insurance Strategy being implemented this month allows insurers to use sophisticated computer models to predict wildfire risk. Rather than relying solely on historical data about losses, insurers will be able to set rates based on models that incorporate the likelihood of future wildfire disasters.
Multiple devastating wildfires that have so far destroyed at least 15,000 structures and claimed 24 lives in the Los Angeles area this month, elevating concerns about a worsening crisis for the insurance industry as the state launches its latest regulations. On Friday, Lara issued a moratorium that prevents insurance companies from canceling or not renewing home insurance policies in areas surrounding the fires for a year.
The new rules introduced in December allow carriers to include costs of reinsurance – insurance bought by carriers – in policyholders’ rates. Just as homeowners buy policies to protect against disasters, insurance companies buy their own coverage to help pay claims after major catastrophes like wildfires. Until now, California was the only state that prevented insurers from including these costs in customer premiums.
The planned changes have already enticed some insurance companies to expand in California. Farmers Insurance announced last month that the carrier would slightly grow the number of new homeowners policies per month, from 7,000 to 9,500.
Dion Vokos, an agent with Farmers for 31 years in Santa Cruz, said he understands the frustrations of policyholders. Farmers canceled his roughly $1,400 annual policy a year ago Tuesday and now he pays about $4,000 a year with Sage Sure.
“The sleepless nights over it were interesting for me, because I finally had to put myself in my clients’ position,” he said. “What do I do? I found coverage. Decent coverage. I’m just paying for it.”
One option local homeowners have turned to is the California FAIR Plan, a pool of insurers required by the state to provide fire-insurance policies for people who can’t get insured by other carriers.
Since 2019, Vokos said about half of his clients’ policies have been canceled – mostly homeowners, and they’ve had to find other options. He said maybe five or six of his clients were on the FAIR Plan back in 2019 — a number that has risen to about 800 today.
Vokos said for some clients, he’s noticed the FAIR Plan has become the cheaper option. A client looking for a policy for his nearly $6 million home went with a $15,000 annual policy through the FAIR Plan after the second-best option was $55,000 a year.
Edna Vilozny, an agent with Farmers Insurance since 2010, said after several challenging years, she hopes that carriers will be able to rate policies appropriately with the new state regulations.
“To be able to charge, maybe twice as much as we used to charge for a renter’s policy, I think is appropriate if we can avoid the FAIR Plan,” she said. “But it is a little scary, I think as a consumer, because [the state] is giving a lot of freedom to the insurance company to hopefully do the right thing and rate appropriately.”
Vilozny was excited to hear about a slight expansion in policies, but emphasized it’s just a start and not a full reopening of coverage.
“I was so hopeful because I wasn’t really expecting any big update like that,” she said. “It’s been kind of bleak for a couple years.”
The proposed changes to the state rules have critics, including taxpayer advocacy group Consumer Watchdog. The group says the new regulations could significantly increase the cost of premiums and they don’t expand access enough.
“This plan could drive the price of home insurance up by 40%” Jamie Court, president of Consumer Watchdog, said in a statement. “Tellingly the commissioner did not do a cost impact analysis of his plan on consumers. That’s because this plan is of the insurance industry, by the insurance industry, and for the industry.”
Since the news of Farmers Insurance’s slight growth in new polices has spread, Vilozny said she’s been getting many calls from customers asking if they can get a policy. But unfortunately, it’s still not that easy.
“It’s not that we can just write any full homeowner policy in any area of Santa Cruz. That would be wonderful,” she said. “It’s not a full opening yet. I hope it’s moving in that direction. I still have a lot of new customers coming in that I’m putting with the California FAIR Plan.”
Vilozny recommends that people schedule annual reviews with their agents to be aware of their options, as those can often change.
“My short advice to people would be to schedule an insurance review with their agent at least once a year to revisit what’s available to them,” she said. “It’s absolutely worth reviewing everything together once a year.”
Vokos doesn’t know if the new state regulations will help stabilize the market.
“All the companies, Farmers included, want to get back in the market,” he said. “They just want to get back in the market at a premium that makes sense.”