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Insurance Issue


Struggling with Homeowner’s Insurance? Revelations From The California Insurance Commissioner’ Marathon Virtual Hearing.

By Sharon Byrne, Executive Director, Montecito Association

Published in the Montecito Journal, October 22nd, 2020

The good news from the pandemic: the state has learned how to do Zoom. We no longer must trek to Sacramento to work with state officials, but can now do it from our living rooms. Direct democracy in action!

We met Insurance Commissioner Lara last year when Assembly Member Monique Limon brought him here to meet with us because we were starting to experience the newly emerging statewide problem of non-renewals tied to high wildfire risk.

Fast forward to today...after 4.1 million acres just burned in California.


Insurance Commissioner Lara scheduled a mega virtual hearing October 19, 2020 with homeowners, fire chiefs, consumer advocacy groups, and insurers on the problems of non-renewal, under-insurance, Fair Plan, and climate change mitigations. Here are the highlights:

1. Several fire chiefs spoke, including our own Chief Taylor, who did a great job! The message was pretty consistent: we're fire-proofing around here. We have a Fire Safe Council, a Community Wildfire Protection Plan (Montecito was the first to file one in Santa Barbara County). There are sheep eating brush off the mountain, wood-chipping and brush-clearing activities. Homeowners are hardening their homes and creating defensible spaces.

2. Prop 103 regulates insurance company rate increases. They can file rate increases of up to 7% with no public hearings. Above 7%, it triggers public review, called 'interventions'. Members of the public can push back against the rate increase, and elongate the time for approval. To avoid interventions, many insurers game the process, with one company raising rates 42% by submitting 6 requests to raise rates 6.9%.

Homeowners who live in a fire risk area will pay higher premiums. A rate filing for a request of 6.9% could result in 30% reduction for one home in a zero fire risk area, and an 80% increase for a homeowner in high fire risk area.

3. Several insurers presented their case. They wanted easier paths to rate increases. Denied those, and facing higher risks in wildfire areas, they largely decided to abandon writing policies in those areas. If the insurance companies can't increase premiums outside the Prop 103 process that triggers public review, according to State Farm, the largest carrier in the state, to the level needed to cover risk, they can't succeed. Every week's delay in a rate increase request of 6.9% = $1.6 million they aren't getting in premiums to cover claims filed.


California  is a very profitable market, especially with the $11 billion PG&E settlement. Our insurance companies make 5.9% profit in California, compared with 4.6% nationally.

4. Several advocacy groups weighed in on climate change, calling for different risk models that reflect the world we've known in the past 3 years, rather than the past 20. In 2016, some consumer groups said wildfire rates were going down, so premiums should drop. We know how that turned out. Insurance companies were pushed to use better replacement cost estimator tools, widely known to lowball the actual cost of replacement items, and leave you underinsured, while you believed you were fully insured. I asked, as did other communities, on what about climate change mitigation? What about communities that underground utilities, reduce their community-wide risk of fire, harden their infrastructure - is any of this going to matter in insurance companies' calculations when they don't send assessors in to evaluate those mitigations? The insurers maintain their costs are regulated by the California Department of Insurance and don't allow for assessments of mitigation strategies. Local land use codes need updating for building / rebuilding in the WUI to force mitigations on homeowners.

5. All of this has driven many desperate homeowners to the California Fair Plan, which has plenty of its own problems, including refusing to underwrite some homes, underinsuring others, and not having large enough limits to cover many properties. Here is the effect of non-renewals from voluntary insurers on the uptake of the Fair Plan:





Commissioner Lara's closing statements:
He appreciates that homeowners and communities have done so much work to harden against ember spread. But the sacrifice should not all be on the homeowner’s side. We need greater partnership with our insurers. Today we’ve seen evidence insurers game the system to fly under the radar of public scrutiny. If the insurance industry wants higher rates, they need to maintain the solvency of the industry. We need insurers to stop cherry-picking some homeowners while abandoning others. Home ownership serves as a primary source of wealth accumulation in California. Not being able to get affordable insurance, and not being able to access resources to harden your community can lead to a downward spiral in our state’s housing market. When people have taken steps to harden their homes and communities, it should be taken into account in premiums. It’s time to show our resolve and commitment to these protective measures, and for insurance carriers to work with us. We know there are updated models that can take recent events into account to better assess risk, and we want to pursue incorporating those that are proven. We also want local land use authorities to update their codes to push risk mitigation strategies.



The Montecito Association created a committee in April of 2019 focused on the problem of insurance carriers not renewing homeowner's policies. We had become already aware of several non-renewals, and learned that some firms have indeed stopped writing policies here. Chubb made it clear via internal memo that they wanted to reduce their risk in our market, as they cover 60% of Montecito homes. They are shedding risk by not renewing homeowners in our community.

California has been so much in national / global news in the past 2.5 years with wildfire and disaster coverage, we suspected this problem was wider than just Montecito. Indeed, it is a huge statewide problem at present.

We are working with our state representatives Senator Hannah-Beth Jackson and Assemblymember Monique Limón to find solutions. Monique pulled in Congressman Carbajal and Insurance Commissioner Ricardo Lara. They asked us to collect data on the depth of the problem here. We have put together a brief survey for our community, and collected over 300 responses. 


We shared our survey with Insurance Commissioner Lara and Assemblymember Monique Limón's office in a joint meeting held here at the Montecito Association on Friday August 9th, 2019. Commissioner Lara's presentation can be accessed here.


We have made some requests of the Insurance Commissioner and Assemblymember Monique Limón:

1. A higher number of non-renewals occurred in the area above Highway 192. This area has been declared at very high risk of wildfire. We believe this is contributing to a higher level of non-renewals. Since the area burned in 2017 as part of the Thomas Fire, it is unlikely to burn again within the next 10 years. If the area was downgraded to 'high risk of wildfire' from 'very high', we believe it may reduce the problem of non-renewals.


2. We saw internal memos from AIG and Chubb that indicated their profitability over the past 17 years was wiped out in 2018. Their strategy to reduce risk and recover their losses is to shed risk via non-renewal of homeowner policies and to dramatically increase premiums for clients they take on. It felt to us all the insurance companies were taking this approach, and that has the appearance of collusion. The state of California has standards for many industries operating here that are higher than national standards. The state could pass regulations requiring insurers to carry higher risk profiles to operate in California. 


3. Montecito is not waiting for the next disaster to strike. We're deeply engaged in resiliency initiatives here, including the ringnets in the canyons to prevent future debris flows from the Partnership for Resilient Communities, exploring a debris basin with our county on Randall Rd, working with the Clean Coalition on a possible micro-grid to ensure essential services are backed up by solar power, and other hardening initiatives. We provide an emergency 3 day backpack as a gift with our membership. We also educate our community on being safe. We feel insurance companies do not know about these initiatives, and they should. So we've asked Commissioner Lara to engage with the insurance industry, speak at their conventions, publish in their periodicals, and educate them about our wildfire cycles. 

We've also connected with Mission Canyon and Eucalyptus Hill neighborhoods in our community, and with the city of Malibu on this issue.


We'll continue publishing updates on this page as this issue moves forward in our state.


Noozhawk did an excellent write-up on the problem for the South Coast and Montecito here.

Kind regards,

Sharon Byrne, Executive Director

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