In recent years, insurance companies have begun using sophisticated computer modeling and artificial intelligence to calculate risk in fire-prone areas. That led several companies to stop writing new policies for homeowners and renters in places like Altadena and Pacific Palisades. Janet Ruiz, with the Insurance Information Institute, says, "They did have to restrict coverage so that when we have catastrophes such as the one in Los Angeles, they can pay claims."
Along with the destruction of lives and homes, the Los Angeles wildfires will also have a big impact on California's insurance market. Some estimates put insured losses from the fires at more than $20 billion.
California law requires insurance companies to hold reserves adequate to pay out claims even in a catastrophe such as these fires. For that reason, Dave Jones, a former California Insurance Commissioner, doesn't expect this event will push any companies into insolvency. Jones, who's now at UC Berkeley's Center for Law, Energy and the Environment, says, "It will be an earnings event for them as they say in the industry which means they won't make profits this year for sure.
But homeowners will also have to help pay for the fires.
Because insurance companies stopped writing new policies in these areas, many homeowners were forced to purchase coverage from California's FAIR plan. Often called the insurer of last resort, it's a plan created by the state and funded by the industry. Jones says so many homes in Pacific Palisades had coverage from FAIR, that it may run out of money. If that happens, the plan will impose a special assessment on home insurance policyholders across the state.
So even if you are one of the people who elect officials who understand that firefighting is an essential service, unlike DEI, you are going to get stuck with the bill for Los Angeles' incompetence.
No comments:
Post a Comment