Today’s Fire Insurance Crisis

Today’s fire insurance crisis in the United States isn’t due to anything new. It started 10 years ago and has been escalating the entire time. 

It’s an ideal example of Einstein’s theory of insanity: doing the same thing over and over and expecting a different result. Instead, it just becomes more so. 

That’s why insurance companies are now cutting back and pulling out of markets where they can no longer afford to sustain significant losses. The fire risk landscape is constantly evolving. And the insurance industry needs to change with it. 

Technology solutions aid in addressing this rapidly and constantly unfolding environment. Success with big data cutting-edge analytic solutions and location intelligence assist us in doing so. This allows for a creative approach to addressing the proximity or spacing of homes, one that is more sustainable and, over time, will reduce the cost for homeowners.  

As an example, consider State Farm. It’s made headlines for not renewing policies on 30,000 homes in California, starting with effective dates of July 3. Other insurance companies will continue to follow suit. They are now in the process of non-renewing. 

That’s why there are headlines like: 

• Put out the fire on home insurance:

  Fire and fire insurance are top of mind in Sisters. No wonder – because of devastating wildfires, Oregon homeowners face soaring premiums and few property insurance options. Some have had their policies canceled when they came up for renewal, and some insurers no longer write new policies. (The Nugget Newspaper) 

• Why thousands of Americans are losing homeowners insurance:

  Hundreds of thousands of people across the U.S. are losing their homeowners insurance, with four major companies ending coverage in California due to the growing risk of wildfires. Companies in Florida are canceling policies due to increased hurricane risks. Matthew Eby, the founder and CEO of First Street Foundation, a nonprofit that studies climate risks, joined CBS News to discuss. (CBS News) 

• South Bay homeowner sees insurance premium double from $9,000 a year to $18,000:

  A South Bay family recently saw the insurance premium on one of their homes double even though the property is not in a high-fire area. The significant jump comes as insurance companies cancel policies and hike rates across the country – largely citing fire concerns. (NBC Bay Area) 

• Over a million Californians insured with AAA will see rates rise, some substantially:

  Over a million California policyholders insured through AAA are seeing their home insurance rates rise – sometimes by substantial amounts. CSAA, the Northern California insurance affiliate for AAA, was approved last Friday to raise its average home insurance rate by 6.9%. Some homeowners may see their rates go up as much as 23.3%, though a small number of others may see their rates decline as much as 11.3%, according to filings with the California Department of Insurance. The approximately 448,000 customers affected by the rate change can expect to see their new price at their next renewal date on or after August 1, according to the company’s filings. (Hearst Communications) 

• Major California home insurer to raise rates 15% for 320,000 policyholders:

  One of California’s largest home insurers will raise rates an average of 15.3% while thousands of its customers are losing coverage due to wildfire risk. Travelers Insurance – the sixth largest property and casualty insurer in California as of 2022 – was approved this month to raise rates for its Quantum Home 2.0 program by an average of 15.3% starting June 24, filings with the California Department of Insurance show. Some of the approximately 320,000 policyholders affected will see their rates rise up to 26.7%, while others may see their rates decline as much as 8.6%, according to data in the filings. (San Francisco Chronicle) 

• State Farm won’t renew 72,000 insurance policies in California, worsening the state’s Fire insurance crisis:

  The California homeowners insurance crisis reached another critical stage this week when State Farm General Insurance announced that it would not renew policies for 72,000 property owners across the state. The insurance giant announced Wednesday that it would not renew homeowner insurance policies for 30,000 customers, including owners of condominiums. It also plans not to offer commercial apartment policies and won’t renew the 42,000 now in place. Although the number of people affected is large, the company said the cuts represent less than 3% of its policies in the state. (Los Angeles Times) 

• Beverly Hills 90210 mansions lose fire coverage as insurers flee:

  State Farm is discontinuing fire insurance policies in wealthy California areas. It’s part of a nationwide trend fueled by climate change. (Bloomberg) 

• Natural disasters are making it harder for wealthy homeowners to insure their properties:

  Premiums in California, Florida and across the Midwest have skyrocketed, driving away potential buyers. (Penske Media Corporation) 

Having been an insurance professional for 25 years, specializing in placing insurance in fire zones, I’ve seen this happen and been on the front lines as the situation got worse and worse. 

It’s time for things to change. Fire insurance needs to be re-engineered. Change is not only possible but also essential. That is the solution to this serious issue. 

That’s why I co-founded WOWS Insurance Services with Joel Silver and Drew Engler. We believe it’s the blueprint for reengineering the insurance industry.  

WOWS Insurance Services has launched an innovative new product that provides homeowners coverage for high-end properties in the state of California and is leading the way for the insurance industry to change. As a result, insureds can get protection and ease skyrocketing homeowners insurance costs, saving up to six figures. And when it’s time to sell, this coverage is transferable, adding a premium touch to their listing, enhancing their property, and standing out to potential buyers. This is the first-ever policy to do so. It will also add stability to the real estate market, possibly avoiding the feared decline in both, home sales and market value. Based upon the reaction of real estate professionals across California, this new program will not only maintain but also increase homeowner values…a true win/win for all concerned. Reinsurers are supporting the program, too.  

This also provides insurance brokers with an advantage in fire insurance coverage, standing out from competitors. 

It’s time to stop the insanity. It’s time to take action and resolve the insurance crisis by doing things differently. 

Farewell, Einstein. 

Learn more about WOWS Insurance Services at https://wowsinsurance.com/.