The Los Angeles fires will put California’s new insurance rules to the test

Lloyd and his wife later bought another home in Hidden Valley Lake, a town that has taken ambitious steps to reduce flammable vegetation, but their insurance premium is still more than $4,500 a year, more than triple what was for their last home in Kansas. Lloyd is worried that his insurance company will raise his price even more under the new rules.

Other Western states like Colorado and Oregon are also seeing gaps in insurance coverage after major wildfires, though their problems are less acute than the Golden State’s. In Colorado, for example, officials recently found a state fire insurance like California’s FAIR plan, since only in the last few years have customers there been churning. California’s grand deal with the insurance industry provides a blueprint for these other states: If you want to address coverage gaps, you need to give insurers more power to set prices.

Firefighters battle the Eaton Fire near the Altadena area in Los Angeles County, California. The fire broke out in force earlier this week amid a fierce Santa Ana storm.

Photo: JOSH EDELSON/Getty Images

Even that may not be enough. The past few years have seen a reprieve from large wildfires like those that hit in 2017 and 2018, but this week’s fires in the Los Angeles area could cause billions of dollars in damage, on par with an event like the Camp Fire.

Joel Laucher, a former adjuster and fire insurance expert at the consumer advocacy group United Policyholders, said damage from the Los Angeles fires could lead to further price spikes and more gaps in availability.

“These will certainly be big losses,” he told Grist. “Some areas will definitely have new challenges, to the extent that insurers will be able to charge what they think those areas deserve to pay.” Laucher said insurance companies may not refuse to renew as many policies as they could have under the previous state rules, but they could still avoid selling policies in some of the affected areas.

Insurance trade group Fraser expressed similar concerns. He said a new round of monstrous blazes on the scale of 2017 and 2018. could again drive the insurance industry away from the state, despite the commissioners’ reforms.

“If we have to have a few more unprecedented years, all bets are off,” he told Grist.