Dealing with home insurance

After buying home insurance from Liberty Mutual more than 35 years ago, Bob St. Clair received a letter stating that because his house in the Whispering Pines neighborhood of Scotts Valley was facing increased risk of wildfire and difficulty of access by emergency vehicles, Liberty Mutual was “choosing not to renew” his home insurance policy.

While causing concern, this “notice of non-renewal” ended up having a happy ending for St. Clair- he shopped around and found a policy with virtually the same coverage from the State Farm Insurance Company, at a price approximately 30 percent less than his policy with Liberty Mutual. 

“I don’t really blame Liberty Mutual, it was a business decision, they gave me more than 60 days notice and handled it fairly,” St. Clair said. “If I have any advice for other homeowners facing the same situation, it would be to shop around,” St. Clair added.

Many homeowners in high fire risk areas across California have not been as lucky as St. Clair. In the wake of devastating wildfires throughout California the last several years, the State Department of Insurance, charged with overseeing the insurance industry for compliance with state law, published a report in December 2017 on the availability and affordability of fire insurance in the “wildland-urban interface”.  

A key conclusion of the report, based on a survey of all residential property insurers over a two-year period was, “there has been a significant increase in insurer initiated non-renewals in the California counties with the highest proportion of homes located in high-risk-for-wildfire areas.”

According to the report, Santa Cruz County ranked 19th out of 58 counties with 31.3 percent of dwellings in “High” or “Very High” risk areas of wildfires. Almost all of the 18 counties with a greater percentage of homes in high risk fire areas are in the northern, Sierra Mountain counties between Yosemite and the Oregon border. Tuolumne County ranked first, with 81.1 percent of dwellings in high or very high risk areas.   

The report was published two months after the October 2017 wildfires, including the “Wine Country Fires” in Sonoma County, that resulted in the most destructive fires in the history of the state in terms of the number of structures destroyed; damaging or destroying more than 14,700 homes and 728 businesses, and “causing more than $9 billion in insured damages so far,” according to the report.

“Now, with the recent 2017 wildfires that have caused many fatalities and destruction of thousands more structures, we can expect that the insurance issues will only worsen,” the report predicts.

Glenn Greenberg, director of media relations for Liberty Mutual Insurance, wrote in an email to the Press Banner that, “Unfortunately, due to California’s significant wildfire exposure, we have taken the difficult but necessary step to responsibly manage our overall exposure to wildfires through underwriting decisions on new and renewal policies. This long-term management strategy is not in response to any specific recent fires, and is necessary to safeguard our ability to pay policyholders’ homeowner claims.”

One of the factors of risk used by insurers is a numerical rating of local fire departments and emergency services assigned by the Insurance Service Organization, an analytics, actuarial and advisory organization for the insurance industry. The ISO rating is an important and competitive measure of a community’s fire suppression systems that covers a wide range factors, including the adequacy of equipment, staffing, the geographic distribution of fire companies as well as water supply and pressure at the hydrants.  

The ISO assigns an advisory number from 1 to 10 to local fire departments, with a rating of “1” considered exemplary fire protection, and a rating of “10” indicating a community’s fire suppression program does not meet ISO’s minimum criteria.

While the Scotts Valley Fire District was rated with a “near exemplary” ISO rating of “2”, Fire Chief Steve Kovacs emphasized that insurance companies have many different criteria, including different inspection and underwriting standards, differing definitions of good access to a property and differing metrics of risk, some of which are known to their policy holders and some of which are proprietary and not shared. While the local ISO rating gets “quite a bit of attention”, Chief Kovacs emphasized it is only one of many factors considered by property insurers. 

In January, the California Public Utilities Commission (CPUC) adopted a statewide Fire Threat Map aimed at expediting the implementation of new fire prevention rules for utility companies. Beginning October 31, utility companies must file an annual fire-prevention plan with specific information about fire protection measures for overhead electric lines in the “High Fire-Threat Districts”.  Most of Santa Cruz County was designated as a Tier 3, “Extreme” High Fire Threat Area on this map.

George St. Clair, Bob St. Clair’s brother, suspected this revised CPUC “Fire Threat Map” was related to the increased scrutiny of fire risk in Santa Cruz County by insurers, including Liberty Mutual’s decision to not renew his brother’s home insurance policy.

Nancy Kincaid, Press Secretary for the State Department of Insurance, said she was not familiar with any CPUC “Fire Threat Map” used as factor for increased fire insurance premiums or non-renewals.  In an email to the Press Banner, Kincaid wrote, “Regarding a PUC map, our chief of rate regulation has never heard of a map produced by the PUC that is used by insurers. Insurers use many tools, e.g. maps, models and combinations of several factors in determining the rates they will submit to the Department of Insurance for approval.”

Kincaid also encouraged homeowners facing fire insurance difficulties to contact the Department of Insurance.  “We’d like to hear from homeowners and assist them with the cancellations. Please let them know to call 800-927-4357, our Consumer Hotline. We also have an online homeowner insurance shopping toll to help homeowners find coverage. They should also contact a broker to help them find the best coverage at the best price,” Kincaid wrote. 

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