Why your insurance costs may go up even if your home wasn’t burned in L.A. wildfires
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Good morning. Here’s what you need to know to start your day.
- How L.A. County’s fires will affect insurance.
- Rural areas got millions in state fire prevention funds over parts of L.A. that burned.
- The Southern California fires have us on the edge of our seat. When can we finally relax?
- And here’s today’s e-newspaper.
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Burning closer to an ‘uninsurable future’
Thousands of L.A. County residents are returning to the burned remnants of their homes — if they’re allowed back yet — and trying to figure out what happens next.
The historic devastation arrived after many insurance companies announced they were retreating from the Golden State, citing in part the increasing risk of devastating wildfires. Many homeowners in Pacific Palisades were dropped by providers in recent months and left with no option but to pay much higher premiums with minimal coverage under the state’s insurer of last resort.
For Dave Jones, director of UC Berkeley’s Climate Risk Initiative and the state’s former insurance commissioner, L.A. County fires tragically provide “more evidence that we are continuing to march towards an uninsurable future, because we’re not doing enough, fast enough to transition from fossil fuels and other greenhouse gas emitting industries.”
I interviewed him to get a sense of what affected homeowners should expect as they begin the recovery process — and the potential effects of the overall insurance market.
“I still believe insurance is the canary in the coal mine for the climate crisis,” he said. “And the canary is just about dead.”
Here are some takeaways from our conversation.
The road to recovery will be painful, confusing and riddled with fraudsters.
Although California’s Department of Insurance has announced steps to speed things up, “it is going to be a painful, long and frustrating process,” Jones said, sharing this advice:
Review your policy to understand the full extent of your coverage. Many policies include an additional living expense provision designed to help with out-of-pocket expenses fire victims face, like the cost of a motel stay, food and replacement clothing and other personal items.
Beware of fraudsters looking to take advantage of the crisis. As the ash settles in the coming weeks, bad actors will make their way to scorched neighborhoods, offering deals that may sound like a godsend during a traumatic time.
Public insurance adjusters may start reaching out to affected homeowners offering help through the cumbersome claims process and promising to get them the most money possible. “They charge a fee and you may not need their help,” Jones said, advising affected homeowners to file their claims directly with their insurance company as soon as possible.
Adjusters have to be licensed by the state, so homeowners can check whether they’re legitimate and in good standing. More tips and resources to avoid getting scammed are available on the state insurance department’s website.
Debris cleanup can be hazardous and open homeowners up to liability. Jones said counties typically launch their own debris removal programs in an effort to safely dispose of hazardous debris “as opposed to having every homeowner hiring some waste haulage company, which also could be fly-by-night.”
If those contractors don’t dispose of that material properly and it ends up polluting the environment, the homeowner who hired them could face consequences.
On Tuesday, Gov. Gavin Newsom’s office announced that federal and state debris removal teams were in affected areas and would start the first round of clearing “as soon as it’s safe to do.”
Everyone’s premiums — not just those affected by fires — are likely to increase.
That was already expected to happen, due to sweeping new regulations that went into effect just days before the fires started.
Insurance companies can now use so-called catastrophe modeling to determine how much risk a property faces from wildfires and other climate-related disasters. The regulatory change was one of several incentives designed to get insurance companies to write more policies in the state by allowing them to charge higher rates than they could before.
People with homes in fire-prone areas face the steepest hikes, but policyholders in lower-risk urban areas were also seeing their rates tick up.
Now that those risks of catastrophe have become reality — with claims projected to hit $20 billion — insurance companies will raise rates even higher for everyone, Jones explained, “because of this direct loss experience for the insurers.”
There’s a separate scenario that could hit the wallets of Californians with home insurance policies.
“The FAIR Plan has seen its policies grow from a little over 200,000 in September 2020 to more than 450,000 as of last September,” The Times’ Laurence Darmiento reported recently. “That has roughly tripled its loss exposure to $458 billion over the same period. Pacific Palisades has one of the state’s highest concentrations of FAIR Plan policyholders, with the insurer estimating its exposure in the neighborhood at $5.89 billion.”
If the FAIR Plan blows through its reserves and reinsurance paying out the substantial claims many homeowners are now filing, Jones explained, everyone else may be on the hook.
“In addition to substantial rate increases for insurance in California, people with private insurance could end up seeing an assessment to cover the FAIR Plan losses,” he said.
There are steps the government could take to alleviate this insurance crisis.
Jones outlined a few paths for state and federal leaders:
Shore up the FAIR Plan with federal support. Jones suggests “a federal program of nonprofit reinsurance for FAIR plans,” that could substantially reduce costs. Those cost reductions could then be passed on to FAIR Plan policies.
Create a state or federal subsidy for low-income households on the FAIR Plan. Jones said this should be done without suppressing the plan’s current rates. “We still want that rate to reflect the risk and send the signal that we ought to reconsider sprawling into these high wildfire risk areas,” he said. “But for low-income households, a federal premium subsidy program or state premium subsidy program to help people afford the FAIR Plan would be important.”
Make insurers factor fire mitigation efforts into rates. Right now, companies are not obligated to do that, Jones noted, despite any personal measures or government programs that increase the likelihood homes will survive a blaze.
“That’s hugely frustrating,” he said. “You can be a homeowner and spend thousands or tens of thousands of dollars [to create] defensible space, you’re paying all these taxes, you can be proximate to a big land management program … and you get no credit for it — and they non-renew you.”
Recent state bills aimed at changing that have died in the Legislature.
Jones acknowledged the outrage is likely to boil over in California as policyholders see their premiums hiked — and potentially get a separate bill to cover an insurance plan they don’t have.
“But the industry they should be angry at most of all is the oil and gas industry, who lied and misled and deceived the public for decades about climate change and their contribution to it,” he said. “I hope that will result in more tools for private individuals to bring lawsuits against the oil majors for the damage they suffer.”
The Times has more guides to help fire victims understand the recovery process:
- If you lost your home or business in the wildfires, here’s what to do next
- What to know about temporary housing, rents, price gouging during firestorm
- I was forced to evacuate my home. Do I still need to pay my mortgage, rent, utility bills?
- Fire victims can get aid from the feds. How to apply for FEMA and avoid potential scams
- Here’s what to do if you have to evacuate without your medications.
- Plus, here’s a list of free and discounted resources for wildfire victims.
Today’s top stories
Aryan Brotherhood on trial
- Prosecutors say they have traced seven homicides — two behind bars, five on the streets of Los Angeles County — to three alleged leaders of the Aryan Brotherhood prison gang.
- The case has been cloaked in secrecy, but at a trial beginning Wednesday, prosecutors are expected to reveal how murders were plotted from behind prison walls.
The Senate is considering the Laken Riley Act. Here’s what it would do
- The Republican-led bill mandates federal detention for immigrants who are charged with minor crimes and grants broad enforcement powers to states.
- The bill is named for Laken Riley, a 22-year-old nursing student who was murdered last year in Athens, Ga., by a Venezuelan immigrant who had entered the U.S. illegally in 2022.
What else is going on
- The family members of a man found dead in a pillar sue the ex-deputy they allege left him there.
- Kim Kardashian wants higher pay rate for inmate firefighters: ‘I see them as heroes.’
- A $2-billion Powerball jackpot winner loses his home in L.A. County wildfire.
- Nine people have been charged with looting during L.A. fires; an Emmy award is among the items stolen.
- Rural areas got millions in state fire prevention funds over parts of L.A. that burned.
- ‘TikTok refugees’ unexpectedly turn to Chinese alternative as ban looms.
- Can fire-torn L.A. handle the World Cup, Super Bowl and Summer Olympics?
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Commentary and opinions
- Fire is part of L.A.’s ethos. But columnist Mary McNamara is asking, ‘Is it time to go?’
- Los Angeles is the latest of a long list of victims of worsening wildfires. But history suggests we will forget the risks and rebuild the devastated areas, columnist Robin Abcarian writes.
- Global warming changed the behavior of the jet stream, and a new pattern is now clear: sapping moisture from the West Coast and freezing the East, writes guest columnist Shih-Yu Simon Wang.
- City Councilman Jeff Okrepkie lost everything in the 2017 Tubbs wildfire. In conversation with columnist Mark Z. Barabak, he offers practical advice.
This morning’s must-reads
It’s a tense wait for fire refugees kept from their neighborhoods. The breakfast club helps. At an El Segundo Residence Inn, evacuees from L.A.’s fires share news, knock down rumors and commiserate in a way only those experiencing the same trauma can. “Even though you don’t know them, you don’t look at them as strangers,” said Far Farshad, who calls the group the Palisades diaspora.
Other must reads
- These gardeners, housekeepers, nannies kept Pacific Palisades going. Fire took their jobs.
- The Southern California fires have us on the edge of our seat. When can we finally relax?
- An Eaton fire victim must start over. He begins by volunteering with the people who helped him.
How can we make this newsletter more useful? Send comments to [email protected].
For your downtime
Going out
- 🚨Where you can volunteer to help those affected by the L.A. County fires.
Staying in
- 📺 What to know about the allegations in the new documentary ‘Diddy: The Making of a Bad Boy’— now streaming on Peacock.
- 🍛Here’s a recipe for Ghanaian jollof rice.
- ✏️ Get our free daily crossword puzzle, sudoku, word search and arcade games.
A question for you: How do you show up for your community during a time of tragedy?
In the wake of the Los Angeles County firestorm, volunteers have donated money, offered shelter for pets and served food to those in need.
What are some ways you’ve assisted your community during a tragedy?
Email us at [email protected], and your response might appear in the newsletter this week.
And finally ... your photo of the day
Today’s powerful photo is from Times photographer Christina House in Altadena, where the Eaton fire destroyed more than 1,000 structures and killed at least five people.
Have a great day, from the Essential California team
Ryan Fonseca, reporter
Defne Karabatur, fellow
Andrew Campa, Sunday reporter
Kevinisha Walker, multiplatform editor
Hunter Clauss, multiplatform editor
Christian Orozco, assistant editor
Stephanie Chavez, deputy metro editor
Karim Doumar, head of newsletters
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