Due to the extremity of the destructive wildfires recently, well known insurance companies such as “All State”, “Farmers Insurance,” “Nationwide,” “Falls Lake Insurance”, “Chubb”, and “USAA” have withdrawn their policies related to fire coverage along with closing the option of renewing your insurance because of past natural disaster incidents.
Tornadoes, hurricanes, floods, earthquakes, mudflows, and tsunamis have all contributed to this. Though this is not new, events such as California’s 2018 Camp Fire that took place in Northern California (when a powerline and steel tower caused liquified metal to damage vegetation and resulted in eighty deaths and destroyed over 18,000 structures) solidified the process of multiple insurers revoking the privilege of renewing contracts to homeowners because they live in high risk zones.
This trend seems to continue as State Farm rewrote 1,600 policies in July of 2024 in areas like the Pacific Palisades, yet it did not stop there.
Due to the recent California Wildfires including but not limited to the Eaton Fire, Olivas Fire, Hurst Fire, Kenneth Fire and the Palisades Fire additional insurance companies have dropped a significant amount of policies due to laws where companies are not allowed to raise prices of insurance thus losing money in the process, financial strain (because billions of dollars are spent annually for coverage), and large claim payouts that overall make the companies increasingly financially unstable.
Other factors such as aggressive competition, climate change increasing, legal practices, and regulation practices affect the companies decisions of merging, dropping contracts or abandoning the policy altogether.
In addition to that, the continuous pressure insurance companies are enduring toward addressing the most recent natural disaster cases further complicates the insurers ability to fix the problem at hand.
Although these conditions make it unsustainable for a majority of the insurance companies, these horrifying events have left homeowners fearful, worried, and with limited solutions to deal with the costs of repairing what they lost during these disasters.
Effects of the multiple insurance companies dropping clients and policies include people having a difficult time insuring newer properties (if they live in California), limited housing market growth, financial strain increasing as policies raise their prices to double digits, business owners losing their properties when they are ruined in the disasters, and higher poverty rates.
Thousands of families have had to seek alternative forms of protection but options continue to look bleak and scarce leaving them susceptible to further wreckage.