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Insurers Face $12 Billion in Claims after California Wildfires

by Precise Leads

February 13, 2018

The California Insurance Commissioner says that last year’s wildfires were one of the worst natural catastrophes in the state’s history.

California Insurance Commissioner Dave Jones recently announced that insured losses from the blazes that swept through much of California last fall reached nearly $12 billion. According to Jones, the staggering total resulted from the destruction of 32,000 homes, 4,300 businesses, and more than 8,200 vehicles, boats, and equipment.

Of that amount, Jones attributed roughly $1.8 billion to December’s wildfires in Southern California, while the remaining claims stemmed from the infernos that ravaged Northern California’s wine region in the fall. The last time the state witnessed such extensive fire-borne damages was in 1991, when flames that engulfed the Oakland Hills caused $1.5 billion in damages.

“If you treat these October and December fires as a combined incident, these insured losses represent one of the most damaging natural catastrophes in California history,” Jones said.

Easier Claim Filing

To help residents recoup their losses more quickly, Jones called upon California’s insurers to pay claims for the loss of home belongings even if the policyholder fails to submit a detailed list. According to Jones, insurers that cover 98% of wildfire-related damages agreed to the request. He said that his department is working with the remaining insurers to do the same.

The North Bay Business Journal reported that many insurers have settled claims for 75% of the personal property coverage limits without an itemized inventory. Several insurers have agreed to reimburse such claims at 100%.

While many affected homeowners will have their claims settled sooner after the most recent disasters, others may see their coverage cancelled as insurers choose to curb their exposure in the state. Jones told CNBC that insurers have now broadened their risk models to include urban and rural regions, stressing that this new risk assessment could make it more difficult to find private homeowner’s insurance.

“Homeowner insurers still have the ability to decide where the risk is too high in parts of California, and decline to renew or write [policies],” Jones said. “And that's what we're beginning to see.”

It wouldn’t be the first time that the state’s insurers have decided to reduce their risks in the aftermath of wildfires. In 2016, CNBC reported that 10,000 homeowner policies in fire-prone areas were not renewed. In light of data from Verisk that categorizes more than two million homes in the Golden State at either high or extreme risk from wildfires, insurers might decide not to insure risky properties. In response, CNBC notes that California lawmakers have proposed several bills to prevent insurers from revoking insurance policies following natural disasters.

Damages from Mudslides

Soon after the wildfires in Southern California subsided, strong storms caused massive mudslides in Montecito. Jones told the Los Angeles Times that losses from that January disaster have yet to be calculated, but he added that because the “proximate” cause of the mudslides was the fires, insurers should pay for damages even if homeowners don’t own flood insurance. Their homeowner’s insurance policy, he emphasized, already covers damages from fires.

Insurance agents helping clients in California recover from the wildfires must be aware of the latest regulations regarding claim filing. For agents outside of California, however, natural disasters provide an excellent opportunity to review their clients’ homeowner’s insurance policy to ensure that it covers all potential hazards.

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