Los Angeles Fires: As wildfires continue to devastate large areas of Los Angeles, homeowners are grappling with a growing insurance crisis that complicates their recovery efforts. With nearly 2,000 structures destroyed and over 130,000 residents evacuated, the situation has become dire, prompting urgent discussions about the future of homeowners’ insurance in California.
The California insurance crisis refers to the increasing difficulty homeowners face in obtaining and maintaining property insurance in high-risk fire areas. NBC reports California had been the only state that didn’t allow the cost to be passed on.
Many insurers are either raising premiums significantly or refusing to cover properties altogether due to the heightened risk of wildfires exacerbated by climate change.
This has left numerous homeowners vulnerable, as they struggle to secure adequate coverage for their properties.
California does have an insurance program under the Fair Access to Insurance Requirements Plan, established in the 1960s, which provides fire insurance coverage for high-risk properties. The coverage is basic and funded by the insurance companies, reports NBC.
While it’s meant as a last resort for homeowners, its use has only soared in recent years, from nearly 154,500 residential policies in September 2019 to more than 408,400 in June — creating a high risk exposure that state officials say was never intended.
Moreover, according to the NBC report, State Farm had already said in 2023 that it would no longer offer home insurance to new customers in California, in part because of catastrophe exposure. Allstate, the sixth-largest home insurer in California, also said that year it was halting new policies in the state.
