For California and Colorado, 2020 was a record year for wildfires.
In California, an unprecedented 4.2 million acres burned, and in Colorado, the Cameron Peak fire became the largest fire in Colorado’s history. California and Colorado are high-risk properties from wildfires and are ranked first and third in the United States.
To make matters worse, insurers are fleeing the California fire insurance market, and in response, California announced Thursday that it would extend the moratorium that bans insurers from dropping coverage.
For homeowners and insurance companies in these states, stakes are higher than ever.
Both of these two states have experienced record fire seasons, but California and Colorado’s response to this realistic and increasing danger is quite different. California’s approach to setting price limits on premiums has driven hundreds of thousands of people into a last resort, minimal state plan.
Colorado’s innovative approach, on the other hand, encourages homeowner easing, fluctuates premiums and continues to insure homeowners. To eliminate this geographical disparity, California needs to look at Colorado as a model to ensure that citizens have access to quality fire insurance protection when they need it most.
The California Department of Insurance regulates premiums to keep prices artificially low. As a result, in the face of unprecedented losses, claims have overwhelmed what insurers can claim at premium. As insurers began to withdraw from the California market to avoid bankruptcy as wildfire loss forecasts increased, hundreds of thousands of people fought to find coverage.
In response, in December 2019, CDI set up a one-year moratorium on non-renewal of fire insurance for homes that were totally lost in the 2019 California wildfire. Last week, this was expanded to include approximately 2.1 million policyholders living inside or adjacent to the 2020 wildfire, regardless of loss.
Colorado would be wise to take a different approach and continue the course. Colorado’s insurance sector can adjust premiums to better reflect different levels of wildfire risk. Like California homeowners, Colorado homeowners in extreme wildfire risk zones may refuse or lose fire insurance coverage. When this happens, unlike California, Colorado homeowners assist and certify through the process of changing home and surrounding assets to reduce the risk of wildfires in areas such as Boulder Wildfire Partners. You can choose a mitigation program. In exchange, many insurance companies in Colorado have agreed to cover certified homes.
A strong insurance market and fluctuating premiums will require Colorado homeowners to invest in home-building efforts and may face higher costs to insure homes in high-risk areas. But Colorado doesn’t have to make a last resort plan for the state to implement. .. Instead, it protects the conditions of a healthy and competitive insurance market.
California would be wise to learn from the Colorado approach. Like Colorado, California will reduce binding price controls and allow private insurers to use risk-based pricing to insure those who are willing to pay for the risks they face. is needed. This will allow more insurers to re-enter the California market, creating a true safety net when homes burn, as well as sending homebuyers price signals about the most dangerous areas. Will be done. To avoid a surge in premiums, CDI should also look to Colorado’s mitigation certification program and develop premium discounts for homeowners to adapt to increased risk.
Allowing interest rates to rise in response to real risk not only provides incentives for homeowners to invest in mitigation, but also provides the funds needed by insurance companies to link private fire extinguishing services to insurance contracts. Offers. When a forest fire rages.
As homeowners, regulators and insurers face new catastrophic norms during the wildfire season, policies to continue insuring homeowners and strengthening private oppression efforts are for people and their It is the key to protect your property. California can start by following the Colorado model. These changes will allow more Californians to have better insurance plans and, like their western neighbors, can adjust incentives for individuals to adapt to better protect themselves for the future. I will.
Monique Dutkowsky is Vice President of Operations at PERC, Real Estate and Environmental Research Center. Her work with Wildfire Defense Systems, which maps fire risks, is being used by western insurance companies to mitigate the effects of wildfires and reduce response times to vulnerable areas in the event of a fire. Holly Fretwell is PERC’s Vice President and Researcher for Outreach.
California can learn from Colorado about protecting homes from the risk of wildfires –
Source link California can learn from Colorado about protecting homes from the risk of wildfires –