By Julie Johnson, Megan Fan Munce, SAN FRANCISCO CHRONICLE
In October 2017, a dry windstorm swept across Northern California, exposing weaknesses in the state’s electric grid on a staggering scale. Trees toppled onto power lines and utility poles broke in half. Sparks landed on tinder-dry landscapes and exploded into deadly blazes that leveled thousands of homes. Most of the destruction occurred in just one night.
California immediately opened its coffers, spending record amounts on firefighting and fire prevention. Insurance companies paid out nearly $12 billion in 2017 — the state’s most expensive year for wildfires on record. Pushed by California officials, Pacific Gas & Electric Co. dramatically ramped up spending to prevent more power line-sparked fires.
Seven years later, as another fire season arrives, Californians across the state are paying the price for wildfires — in rising bills that have stirred deep anger.
On a per-person basis, the costs are eye-popping.
Some residents report jumps of $10,000 or more in annual insurance premiums. An analysis by S&P Global found that private home insurance rates in California soared 43.7% from 2018 to 2023. And further jumps appear imminent: Just this week, State Farm — the state’s largest home insurer, which has cited wildfire risk as a key reason for dropping tens of thousands of California policies — asked regulators for permission to raise rates by 30% on average for its remaining homeowner customers.
When it comes to electricity, PG&E customers are collectively paying billions of dollars to prevent wildfires. Between 2020 and 2026, customers will have spent the equivalent of about $1,500 per person in the company’s jurisdiction, according to a Chronicle analysis of data from the California Public Utilities Commission’s Public Advocates Office. PG&E rates have soared 128% in the last decade. Electricity now costs more in California than any other state, except for Hawaii.
“The costs are everywhere,” said Alice Hill, senior fellow for climate change policy at the Council on Foreign Relations and chair of the California Department of Insurance’s climate working group. The cost of wildfires, Hill said, is now embedded in nearly everything Caifornians pay for, from health care to food products to home construction.
California taxpayers are also shouldering massive increases in state spending. Cal Fire, the state’s firefighting agency, has spent over $30 billion on battling and preventing wildfires since 2017. That’s about $750 per California resident and reflects a budget that has grown 72% in that time.
These services — insurance, electricity, firefighting — are crucial. But the costs are making an already expensive state even less affordable, including for those who live far from wildfire zones.
“It’s squeezing Californians, especially low-income Californians,” said Senate President Pro Tem Mike McGuire, whose North Coast district has been burned and menaced by major wildfires year after year.
Right now, the state is careening into another wildfire season, in which a series of early-season blazes has charred nearly 118,149 acres — more than five times higher than the recent average for this time of year. Continuing to contend with this challenge means that the costs Californians face — compounded by inflation for construction materials and other basic items — may only increase.
PG&E anticipates it will take much more money to meet its fire-prevention goals. The Public Advocates Office estimates it could cost PG&E $30 billion to bury 10,000 miles of power lines in the riskiest areas for wildfires, which the utility intends to do. That represents about $1,875 per person in PG&E’s jurisdiction — and to date, the utility has billed customers for only a fragment of that work. Insurance companies, meanwhile, are expected to seek significant rate increases — as State Farm just did — to keep up with projected risks and costs. And that’s if they remain in the state; some have stopped writing policies in risky areas or altogether.
In a future guided by climate change and severe weather events, “We’re going to make trade-offs between affordability and reliability and safety,” said Michael Wara, a Stanford professor and member of the state’s Catastrophic Wildfire Cost and Recovery commission. “And the trade-offs are big.”
An escalating insurance crisis
Dorothy Murphey has lived in Lafayette for four decades and never seen a wildfire.
And yet last year, she found herself sharing the panic of tens of thousands of Californians after her insurance company left the state. Now Murphey, like so many others, has found herself paying hundreds of dollars more per year for insurance than she expected.
As a retired claims adjuster, Murphey never anticipated having problems finding insurance for her single-family home sandwiched between a four-lane thoroughfare and a residential neighborhood, even though it is near tree-studded hills. But as she began the process of searching for a new policy, all she heard was no, no, no.
“It’s kind of a crazy situation they put on us,” Murphey said. “We have a fire hydrant outside our house — you can’t get much better than that.”
Insurers are rapidly cutting back in California, and wildfire risk has been a galvanizing factor. Some, like Murphey’s former insurer, AmGUARD Insurance Co., have abandoned California entirely. Others, like State Farm and Allstate, have stopped writing new policies. Still others are dropping older homes that are costly to replace in the event of catastrophe, or are pulling back from big cities where they feel they have too much risk in one area.
At the same time, insurers are charging more. In the first half of 2024 alone, the state’s five largest home insurers, representing over half the total market, all increased their prices. State Farm and Travelers, which together insure a quarter of California homeowners, have raised their average rates by double digits.
Wildfires are not the only issue for insurers. Inflation in building costs and the rising cost of reinsurance, which means insurance for insurance companies, have also put financial pressure on carriers. Some companies have also had poor stock market returns, according to Carmen Balber, executive director of the consumer advocacy group Consumer Watchdog.
But the wildfires of recent years were a turning point. In 2017 and 2018, state records show that insurance companies collectively paid out more than $24 billion in claims related to wildfires — burned businesses and homes, buildings tainted by heavy smoke and destroyed cars.
Some of those costs have been reimbursed — for example, PG&E paid insurance carriers about $11 billion to partially cover claims for wildfires during those two years. Since then, insurance companies have continued to pay billions for wildfires, but have not suffered such a devastating year since.
Still, annual insurance premiums, which had been stagnant for more than a decade, immediately began to rise following the 2017 wildfires, and by 2021 had jumped by an estimated $395 to just over $1,400, according to data from the National Association of Insurance Commissioners. No official data is available for the last two years. But a Chronicle analysis of data submitted to the state found the average homeowner in 2024 pays a little over $2,000 annually for home insurance with the state’s top 10 largest companies.
Many Californians are being forced to the FAIR Plan — a state-created wildfire insurer for those who cannot find insurance elsewhere — at exorbitant cost. The FAIR Plan does not disclose its average premium, but many homeowners report paying thousands of dollars a year more for a policy that only covers fire.
Victoria Roach, the FAIR Plan’s president, said during a state hearing in April that the plan, despite being designed as the insurer of last resort, is in reality “quickly moving to be the first resort for a lot of people” and has become “one of the largest writers in the state right now in terms of new business coming in.”
As of March, about 35% of FAIR Plan policyholders don’t live in fire-prone areas, a FAIR Plan spokesperson said — a reflection of how difficult it is for Californians to find insurance regardless of their location.