Burn, Baby, Burn

Burn, Baby, Burn

Like every other homeowner in the western United States, I am going through a crisis of homeowner’s insurance. I know I am not alone and, in fact, the rising tide of catastrophic losses from natural disasters combined with the escalation in the value of homes and the replacement cost of homes have all contributed to a steep rise in the cost of homeowner protection insurance. I often quote my friend Joe, who finally sold his Santa Barbara vacation home, set on three acres overlooking the ocean, because his insurance premiums went up to $84,000 per year. Mine have not gone that high, but they are on the verge of quadrupling this year, and so, they are a source of fiscal concern.

I bought this hilltop back in 2012 and for ten years I paid a fairly normal price for coverage (including fire, flood, theft and general casualty) of about $2,500 per year. That was bundled pricing and I used Chubb, which from my days running a private banking business, is always the provider of choice to the upscale market. I had my car, motorcycle, liability umbrella and all other homeowner coverage through them as well. For the years I had that extensive coverage from Chubb, they made considerably more from me on premia than I ever had in the few minor claims I made. It was good business for them to be sure.

Then, once we moved out here full time, things started to change. To be clear, we have had no major wildfire risks in this area in the past dozen years and there have been no close calls either. But during those years, other areas of California, have suffered greatly with drought and the incumbent rise in wildfires that have devastated many homes. Based on the past few years of increased rainfall from things like those Pacific atmospheric rivers that have doused us, we are all at much lower drought risk levels and therefore at presumably lower risk of fire casualty. One of the things Chubb required of us was to cut the brush on our property to reduce the amount of natural fuel directly around us. Since then, we have added mostly succulent (water bearing) plantings on the property to fill in for that absented brush.

In 2021 I got a notice from my broker at AON, someone I had used for insurance for thirty years, that Chubb would no longer insure my California property due to wildfire risk. According to the national risk registry, this property is a 2 out of 5 in terms of fire risk, but that didn’t seem to matter. I got shut down after a thirty year relationship without so much as a how-do-you-do. I scrambled and decided to go with a California carrier, so I went with Farmers for what seemed like a premium price of about $3,500. I moved all my business to Farmers accordingly. All was well for the next year. At renewal time in 2022 I was informed that my premium would rise to $6,000. Bummer! Then, at renewal time in 2023, I got a notice that Farmers was no longer willing to insure me due to wildfire risk…even though that risk had greatly declined due to the reduced drought risk from all the rains. Then the State of California Insurance Department stepped in and told Farmers they couldn’t do that and I was allowed to renew with the new premium going to $10,000. I did not like this trend, so I talked to the agent and by increasing the deductible to $20,000 from $5,000, effectively making this a catastrophic risk policy, I was able to decrease the premium to $7,000.

This year, well in advance of my November renewal, Farmers got even cagier. They told me that to renew I needed a Wildfire Certificate from a company they have designated to examine and underwrite risk. This assessment would cost $125, but I went through it. It looked a lot like the Cal Fire Home Assessment, which I had earlier this year and forced me to clear out around my propane tank and lay down gravel around it. The basic requirement was fora five food hard scape perimeter all around the house. I took all the pictures they asked for, which showed that I mostly had what was required. In those photos was a photo of my deck. They told me that I had to remove the palapa, which is made of wood and they declared my deck as a wooden deck. I explained that the deck was not really wood since it was a tile surface with stucco and fire-rated material covering any wood. Also, I noted that the palapa was made of IPE wood which carries a Class A fire rating comparable to steel or concrete. They have sort of bought into the deck issues and I am awaiting the inspection visit to get the certificate. I know I will have issues with them on the Yucca trees in the front, but I plan to lobby that as succulents they are not a fire hazard.

What Farmers have clearly done is to raise the bar so that they can deny coverage to most of the homeowners that they tried to toss out last year. I will fight it as well as I can and try to get my certificate. If I fail to do so, the only solution I will have is to go into the California Fair Plan, as it is called, which is a shared risk pool. I am led to believe that I can qualify for that but that it will cost about $6,000 just for the fire insurance. That means I will still have to get Farmers to give me a flood, and other property and casualty wrapper that will include liability. I’m sure that will add another $3,000 – $4,000 and I will be back up at $10,000 in total premiums once again.

This wildfire insurance coverage is proving to be a universal issue among American homeowners and it is said that between coverage costs and rising property taxes, many older homeowners like Kim and me may find it impossible to continue to support their homes. There are enough reasons driving older Americans out of their homes and into smaller condos or apartments…or, God forbid, nursing homes, but this is the latest one.

As we watch the heat index across the western half of the country rise as it has this summer, it is not hard to imagine that wildfire risk is once again going to be spiking, only making the issue all the more acute. It seems that nature really doesn’t want us to set up shop and pretend that any of us have any ability to permanently squat on her lands, no matter where they are. In the case of the eastern half of the country, the issue tends to be more one of flood risk, but out this way its all about fire risk. I have often said that I feel that none of us has the right to think that we are doing anything other than temporarily occupying space on this earth and that we don’t truly own any of it. The forces of nature seem to want to remind us yet again of that reality. There comes a point when I and others may well just sit back and have to say, burn, baby, burn.