Rebuilding challenges in Paradise with skyrocketing home insurance costs

November 10, 2023

Paradise residents face insurance affordability crisis

The small town of Paradise, still healing from the scars of California’s deadliest wildfire, is now grappling with a new crisis: affordable home insurance.

The town, preparing to mark five years since the devastating Camp Fire, is caught in a bind with insurance premiums soaring to unattainable levels for many.

Heidi Lange, a resident who rebuilt after the tragedy, is facing a steep increase in her home insurance premium, which is set to rise from $1,200 to an astonishing $9,750 annually.

Home insurance hike leaves homeowners staggering

Residents like Lange, who made careful plans to reconstruct their lives and homes with fire-resistant materials, are finding the rug pulled out from under them with prohibitive insurance costs.

“To see we’ve come so far, only to have the legs kicked out from under us,” Lange stated. “This is so crazy to me. How is this the biggest thing we’re dealing with?”

This sentiment is echoed across Paradise as homeowners receive premium notices that edge or exceed $10,000, questioning the feasibility of residing in what was once an affordable area.

Insurance exodus by major providers

The ripple effect of the Camp Fire and the broader issue of climate change-induced wildfires have led to a retreat by home insurers.

Major companies like Farmers Insurance, State Farm, and Allstate have curtailed or ceased new policies in the state.

Despite efforts by California’s Insurance Commissioner Ricardo Lara to reform the market, substantial changes will not be in place for some time, leaving residents in a lurch.

Initiatives not translating to lower premiums

Despite community measures such as burying power lines and clearing flammable vegetation, insurance rates remain high.

Michael Soller, a spokesperson for the state Insurance Department, explains that a multitude of factors influences insurance premiums, which include community efforts to reduce fire risk, expected to be recognized with discounts by early next year.

Farmers Insurance, a brand name mentioned by residents for raising premiums, declined to comment beyond a statement on rate determination, which considers various risk factors and inflation adjustments.

The high cost of living in wildfire-prone areas

Rex Frazier of the Personal Insurance Federation of California highlighted that insurers’ losses from the 2017 and 2018 wildfires wiped out over two decades of profits, hinting at higher premiums for riskier locations.

This leaves homeowners like Carl Johnsen, a long-time resident of Paradise, and Gene Robinson, a retiree, facing difficult choices regarding their insurance and their future in the town.

California’s FAIR Plan as a last resort

The California Fair Access to Insurance Requirements Plan is witnessing a surge in applications from those unable to secure affordable private insurance, with policies written increasing significantly since the Camp Fire.

Insurance Commissioner Lara’s ongoing initiatives aim to balance rate-setting with climate change considerations and incentivize companies to insure more homes in wildfire-threatened areas.

California compared to other states

While California’s home insurance premiums have risen by approximately 35% from 2017 to 2022, they remain lower than other states with significant climate risks.

Kathy Ehrhart, a Chicago-based litigator with a focus on insurance, commends California’s strategies to retain insurers, which is a slow yet hopeful push towards market competition and stability.

FSJA Comment

The surge in insurance premiums in Paradise, California, is a reflection of a broader issue facing many regions affected by climate change.

With premiums increasing and major insurers retreating from high-risk areas, the situation underscores the need for comprehensive reform in the insurance industry.

These changes have profound implications for community resilience and the ability of towns like Paradise to recover from disaster.

The shift also highlights the struggle between the immediate needs of homeowners and the long-term strategies required to address the escalating risks of climate-related catastrophes.

As the market adjusts to these new realities, the experiences in Paradise may offer valuable lessons for other communities nationwide.

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