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Why Wildfires Are Becoming an Insurance Nightmare | WSJ - YouTube
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[1]
- I'd like to stay
here, I love this place.
[4]
To be forced out because
I can't be insured
[9]
is not a happy prospect at all.
[13]
- [Narrator] Wildfires
are changing California.
[16]
Last year alone, almost
two million acres burned.
[19]
California wildfires
cost insurance companies
[22]
more than $24 billion
over the past two years
[25]
with the worst of the damage
[27]
linked to PG&E's electrical network,
[29]
and now, homeowners are paying the price.
[32]
Insurers are hiking up their premiums
[33]
or, in many cases, not
renewing customers altogether.
[37]
That's leaving homeowners
with little choice
[39]
but to pay triple or
more their expected costs
[41]
for replacement policies,
[43]
and in some areas with no options at all,
[45]
many homeowners are making the choice
[47]
to simply not have
insurance, and, instead,
[49]
are grappling with whether
they can stay in their homes
[51]
and live with the risk of wildfires.
[54]
Christy Hubbard and her husband
[56]
moved to Grass Valley in 2017.
[58]
They bought a home,
[59]
expecting to live in a
comfortable community.
[62]
Then, they got bad news.
[64]
- About six weeks ago, we got the notice
[66]
that said our insurance
was gonna be dropped,
[69]
and that was quite the eye-opener for us.
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There was no choice, it
was simply, you know,
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we're dropping your insurance,
[75]
and so, just literally, just
about a week and a half ago,
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we finally got new quotes or got quotes,
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one of which was at 10,000,
the other was at $13,000,
[86]
which was, holy cow!
[90]
- [Narrator] Hubbard is not alone.
[92]
Since 2015, insurers refused to renew
[94]
almost 350,000 homeowners
[96]
living in high-risk fire
areas in California.
[100]
Kimberly Martinez is an
insurance broker in Grass Valley
[103]
who's had first-hand experience
[104]
with the drastic industry changes.
[106]
She says the Camp Fire that
destroyed Paradise last year,
[109]
just an hour from Grass Valley,
[111]
changed the way insurers
view wildfire risk.
[114]
- Now, there's a lot of just judging it
[116]
based on the ZIP Code, and it's a blanket,
[119]
we're just not doing that ZIP Code anymore
[121]
because we can't make up
for the level of risk.
[124]
We're getting close to 80, 90% of people
[128]
looking for a new policy.
[130]
- [Narrator] Of course, this
isn't a totally new phenomenon.
[133]
Insuring areas prone to natural disasters
[135]
has always been complicated.
[137]
Florida's insurance market
nearly collapsed in 2006
[140]
after some of the costliest
storms in U.S. history.
[143]
Today, many of the big
national home insurers
[146]
have fled the state.
[147]
It's not hard to see why insurers
are nervous in California.
[150]
Last year, small carrier
Merced Property & Casualty
[154]
went out of business
under the weight of claims
[156]
from the Paradise Fire.
[157]
While a number of factors
[158]
contribute to California's fire risk,
[161]
one constant is PG&E.
[162]
The utility's equipment has
started at least 1500 fires,
[166]
averaging more than one
a day in recent years.
[169]
PG&E, which filed for bankruptcy
protection in January,
[172]
recently took the unprecedented step
[174]
of shutting off power to more than 750,000
[177]
homes and businesses because
of the wildfire risk.
[180]
- PG&E started shutting
off the power last night
[183]
in more than half of
California's 58 counties
[185]
because of what the company calls
[187]
an unprecedented wildfire danger.
[191]
- Well, this is day two
of our power outage.
[194]
This is our generator, and, basically,
[197]
we come in, we have to
turn the fuel valve on.
[200]
We start it up.
(generator humming)
[204]
At this point now, our
kitchen, our family room,
[207]
and our well will have power.
[210]
- [Narrator] The power stayed off
[211]
for more than two full days,
[213]
but PG&E defended its decision.
[216]
When inspecting their
lines that were turned off,
[218]
they said they found more
than 100 confirmed cases
[220]
of wind-related damage, and
that this type of damage
[223]
could have sparked a fire.
[225]
For homeowners who, through all this,
[227]
still need insurance,
they have a few options.
[229]
They can go with a surplus company,
[231]
like a Lloyd's of London insurer
[233]
or they can use the California FAIR Plan,
[234]
an option known as the
insurer of last resort,
[237]
but that plan covers less
[239]
and costs more than a traditional policy.
[241]
In either case, annual
premiums would likely go
[243]
from around $1000 to over 3000,
[246]
and for homeowners paying mortgages,
[248]
banks and lenders require insurance.
[250]
- It's got this ripple effect
[252]
down through real estate and new purchases
[254]
and people now leaving town,
[256]
and you can't get a rental
[258]
because nobody wants to insure the rental,
[261]
so yeah, I would definitely say
[263]
it's a crisis level in this community.
[266]
- [Narrator] Homeowners like Hubbard
[267]
are frustrated that insurers
aren't taking into account
[269]
all of the fire prevention improvement
[271]
she's done on her house.
[272]
- What we are trying to do, of course,
[274]
is manage the defensible space.
[276]
Near to the house, you
know, you're really keeping
[279]
your vegetation to an absolute minimum
[281]
and the other thing you're doing
[282]
is what they call limbing up,
[284]
which is, you can see here.
[286]
The very bottom of this tree,
[287]
we're cleared all the limbs.
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- [Narrator] This is similar to the work
[290]
that PG&E is attempting around the state.
[292]
A spokesperson said the
company has been meeting
[295]
and exceeding new state vegetation
[297]
and fire safety standards
among other measures.
[300]
- It has nothing to do with
the work that we've done.
[302]
It's not specific to my
property, it's my ZIP Code
[305]
or, you know, the fire zone that we're in.
[307]
Yeah, that's a little frustrating, right?
[309]
It's just sort of like your
best efforts aren't good enough.
[312]
It's tough beans, you know?
[315]
You're canceled because
we can't take the risk.
[318]
- [Narrator] Hubbard's
former insurance company,
[320]
Spinnaker, declined to comment.
[322]
- Now we have a new reality
that we have to deal with,
[326]
with higher fire risk, with higher costs.
[329]
If it becomes so extraordinarily
expensive to live up here,
[333]
how many people will move out?
[334]
And that very infrastructure and community
[337]
that I hoped to join and
make part of my life,
[342]
will it have to dissipate?
[344]
It's only really a question of time.
[346]
(dramatic orchestral music)
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