2021 Tennant Fire burns in the Klamath National Forest near Siskiyou County farmland. The California Farm Bureau works to ensure low-risk farm properties receive a nonflammable classification in state fire-hazard mapping used by insurers.
Credit: U.S. Forest Service
August 14, 2024 - By Peter Ansel - Far too many Californians have been impacted by a worsening insurance market crisis, 
which creates confusion and anxiety as it imposes ever higher costs in America’s most expensive state to live.
The insurance crisis delays housing production and impedes real estate transactions. It curbs discretionary spending, making it harder to raise local sales taxes. It stresses retirees on fixed incomes, forcing many to consider resettling out of state.
In 1988, California voters passed Proposition 103, which promised transparency and fairness in the rating plans process that determines the cost of insurance. The measure admirably kept insurance costs low, providing Californians with largely affordable property insurance rates.
But in 2017, amid a then-record year for wildfire destruction in California, insurers faced massive property loss claims exceeding their ability to meet reasonable profit expectations and conduct business. The challenge deepened with new record fire years in 2018 and 2020.
Meanwhile, the California Department of Insurance struggled to timely approve new rate plan filings due to issues including staffing levels and legal challenges. By the early 2020s, it was no surprise that insurers were taking actions to create a new market dynamic to restore profitability to their California portfolios.
It may be hard to describe nonrenewals or cancellations of residential and commercial property insurance policies as a strategy. But those are the levers insurers have used to make their case to California that the state market is broken.
The California Fair Access to Insurance Requirements, or FAIR Plan, the state’s insurer of last resort, has faced surging demands to provide insurance alternatives, which often come at high costs. This is because residential and commercial property policyholders—including farmers and ranchers—have faced market cancellations or nonrenewals, even for properties outside high fire-risk areas.
Insurers rely on satellite imagery and drone flyovers to identity reasons for nonrenewing property insurance policies without providing consumers with photographs, video or even a report on how to mitigate those issues. Nonrenewal determinations could be based on insurers’ internal guidelines, such as a 1-mile proximity to high-risk fire areas that fails to exempt structures surrounded by row crops or consider defensible space, proactive home hardening or other nonflammable aspects of those parcels.
The Department of Insurance says it has an agreement with insurers on new regulations to restore their ability to conduct business in our broken market. But nonrenewals are expected to increase during the next two years, with still more FAIR Plan policies being issued to address the fallout. The situation is unsustainable.
Insurers will be allowed to submit rating plans based on new catastrophe modeling, which may bring higher rates to all policyholders in the state. State Farm asked for a 30% rate increase in early July just to stay in the market, arguing that the increase would fend off insolvency issues. Obviously, insurers need to be able to pay incurred claims, which include high costs of rebuilding in California.
Last year, the California Farm Bureau sponsored state Senate Bill 505 to help commercial insurance policies in the FAIR Plan participate in a clearinghouse program to move back to the competitive insurance marketplace. In July, Farm Bureau worked with Cal Fire and offices of Gov. Gavin Newsom and state Sen. Scott Weiner, D-San Francisco, to amend Senate Bill 610. The measure directs the Office of the State Fire Marshal to create new wildfire mitigation area maps that change a current tiered fire-risk map delineation to better reflect overall “fire-hazard severity” in state and local responsibility areas.
Farm Bureau’s amendments would require the fire marshal to consider excluding areas such as working rangelands and cultivated, plowed and irrigated agricultural properties with a low risk of wildfire propagation when developing the new maps.
The Department of Insurance plans to use the maps to identify distressed areas to track where insurers are competing for business and to move policies out of the FAIR Plan during the next two years. By recognizing the low risks of agricultural properties, many of those properties should move out of the FAIR Plan and back into the competitive insurance marketplace.
The 2025-26 legislative session kicks off in just five months. While the past year largely saw the Legislature defer to Department of Insurance efforts to address the crisis, constituents are making daily calls to elected officials complaining about being nonrenewed by insurers. When those nonrenewals fail to account for actual property risks, consumers may rightly conclude the market is undertaking an exercise in expectancy confirmation, in which insurers will land the market exactly where they want it.
Farmers and ranchers deserve fair treatment when the characteristics of working agricultural lands—with cleared properties, low fuel loads and minimal wildfire risk—warrant a nonflammable classification in the state’s wildfire mitigation area mapping, as those same maps determine a consumer’s access to affordable insurance.
(Peter Ansel is a senior policy advocate for the California Farm Bureau. He may be contacted at pansel@cfbf.com.)
The California Farm Bureau Federation works to protect family farms and ranches on behalf of nearly 32,000 members statewide and as part of a nationwide network of more than 5.5 million Farm Bureau members.
Source: Reprinted with permission CFBF
