The Little Red Hen and the Insurance Cost of Living in a Slab and Fire: How Much Will You Have to Pay? An Attorney General’s Perspective
People may have decided not to continue with their insurance coverage, which is a concern for the consumer advocate. “For some people who live in a home they inherit, they might be priced out because they can’t afford to stay,” she says. Some of those people may have had no insurance.
He owns the building that was home to The Little Red Hen, a coffee shop that’s now just a slab and ashes. He says, ” getting insurance on the Little Red Hen was very difficult because of what happened.” Even if you build back, I think it will be difficult. It’s going to be difficult to get insurance because it will be very expensive.
According to Carolyn Kousky of the Environmental Defense Fund, the cumulative profits of the industry had been wiped out by the massive losses incurred from those fires. There was a shake-up in the way people think about climate impacts and the fact it’s continuing to go up.
State Laws and Policy Enforcement in the Pacific Palisades Region: After the Hurricane Ian, Insurance Market Instability Has Not Come to an End
Many homeowners were forced to purchase coverage from the FAIR plan because the insurance companies stopped writing new policies in these areas. Often called the insurer of last resort, it’s a plan created by the state and funded by the industry. Jones says there are so many homes in Pacific Palisades that it might run out of money. The plan will impose a special assessment on home insurance policyholders if that happens.
Perry and her family leased the home and always had renter’s insurance to cover the expense of relocation and replacing their possessions. That was until last year. “We were told nobody was insuring renters up this way. She said that they had no choice. Kwynn, her husband Brian and son Ellison are reliant on FEMA and a crowdfunded page because of no insurance.
And since home insurance is a prerequisite for getting and having a mortgage, Fowlie says, it’s a particularly pressing issue for those who live in those high-risk ZIP codes, many of whom are struggling to afford the higher insurance rates needed for homeownership.
California’s high premiums, less availability of insurers, and increasing numbers of people on insurance plans of last resort echo across the nation, according to the Environmental Defense Fund. Florida and Louisiana are both seeing the same levels of market instability due to worsened hurricanes because of rising temperatures and sea levels.
At the time that Hurricane Ian hit the state in September 2022, many worried that the expensive payouts after the hurricane could be the final straw for many insurance companies. And it was, Central Florida Public Media reports, as Ian proved to be the most expensive storm in Florida history: Over 30 insurance carriers left the state.
Household budgets have had to absorb higher home insurance costs. She says that since 2020, premiums have risen more than 10% adjusted for inflation, but that figure doesn’t demonstrate how much has changed in some places.
“What we’ve been telling people nationally and in our meetings with other insurance commissioners is do not wait until California comes to a theater near you and you’re getting insurance companies to either restrict their portfolios in the state or leaving the state,” he says.
Insurance rates in California will likely increase in the future, but not necessarily because of the fires. Regulations were passed by the California Department of Insurance in an attempt to increase access to insurance.
Insurance companies have been asking state regulators for many years to be able to base their rates on models of climate risk in the state without having to cite historical data, and that is one of the main parts of the new regulations. In exchange, the companies committed to writing more policies in high-wildfire-risk areas and factoring in any fire-mitigation efforts into lowering those rates.
The insurance industry made concessions to create an environment that people in insurance policies feel more comfortable in, according to the executive director of United Policyholders.
It is difficult to provide coverage at an affordable price due to the difficulty in accounting for known unknown risks of climate change, according to the Environmental Defense Fund.
“I think the big question now, after what we’re seeing in the LA region, is, you know, how far can regulatory changes go in helping maintain insurability in this environment of really catastrophic wildfire risk?” she says.
“It’s the one place where I feel lots of Americans are seeing the costs of climate hit their pocketbooks,” she says. It’s a kitchen table economics problem now, it’s like that. And yet it’s directly related to what we’ve been doing with the climate. And I think it’s maybe one of the first places that lots of people are grappling with that.”
“These newer risk-modeling tools are definitely helping insurers come to terms with what wildfire risk looks like in California and how they’d want to price it in order to ensure that they are ready to pay when claims come in,” she says.
How Los Angeles Wild Fires Could become Some of the Costliest Disasters in the U.S. — A Climate Scientist’s Look at Los Angeles
Simply put: The costs of doing business are going up, such as increased costs of the construction materials and skilled labor needed to repair and rebuild homes, as well as higher interest rates, she says. Across the country, that’s the case.
As the wildfires in Los Angeles tear through hillsides, raze neighborhoods and displace residents, it’s too early to know how vast the destruction will be when the last of the flames is put out. Initial estimates predict that the costs will be huge. One leading climate scientist, Daniel Swain of the University of California, Los Angeles, told KQED that the fires could become some of the costliest in U.S. history; as of Monday afternoon, AccuWeather experts said that total losses could cost somewhere from $250 billion to $275 billion.
Climate Change is disrupting the way that homes are insured in the US. Extreme weather catastrophes are more common across the country. And as insurance companies contend with the sum total of these disasters, those higher costs are passed on to policyholders.