Why is it so difficult to get Homeowners Insurance in the Oakland/Berkeley Hills?

Why is it so difficult to get Homeowners Insurance in the Oakland/Berkeley Hills?

By Ruth Stroup

Contributing Factors:

  • More extreme weather events

  • Increased claims due to deferred maintenance

  • Building costs skyrocketing

Have you or your neighbors found yourself scrambling to find new insurance? For the past year, we’ve heard from many folks in the hills that they were having problems with their insurance. What in the past was a rare occurrence has become a weekly conversation. In this issue, my goal is to share some insight about the changes going on in the insurance industry, and to provide some solutions for you if you need to obtain a new policy.

A bit of background.

In CA, the insurance industry is governed based on rules established by Prop 103 in 1988.  These rules we developed to protect consumers by establishing guidelines and oversight for insurance rates.  The unintended consequences of these regulations is that there are times when insurance companies find the CA insurance market a difficult place to do business.  And over the years, we’ve seen companies leave California or restrict their underwriting guidelines.  These restrictions can include limitations on issuing new policies as well as policy renewals.

Insurance losses are infrequent so most people I talk to are surprised when we tell them that we’ve seen an increase in both the frequency and cost of insurance claims.  It’s not just the recent wildfires, it’s a combination of factors.  We’ve had a cycle of extreme weather events starting with Hurricane Katrina in 2005. In the aftermath of the 2008 real estate crash, many homeowners did not have the resources to maintain their homes so we have a cycle of deferred maintenance that ultimately lead to increased claims.  Finally, the current building boom that lead to increased labor and materials cost for even small claims.

I opened my Farmers Insurance agency in 2006, at the tail end of the last real estate boom. Insurance underwriting guidelines were easy compared to today.   We could write policies for homes in the Oakland and Berkeley hills.  We could insure people with prior losses.  Properties need to show “pride of ownership”, but there were few questions about the age of the home’s systems – electrical, plumbing, and roof.

Wildfires.

In 2012, at the beginning of the drought, we saw a few companies tighten their guidelines for wildfire risk.  Since that time, there’s been an industry wide trend for higher home insurance rates and stricter underwriting rules.  These changes have impacted in all areas, with special emphasis on wildfire risk which can lead to catastrophic loss.

Potential Non-Renewals

Today, very few companies offer new insurance policies in areas associated with wildfire risk.   Most homeowners are not aware of this because they have insurance, and their insurance company continues to renew their policy, albeit with stricter requirements. If for some reason you no longer fit the guidelines, then you may find yourself with a notice of non-renewal.     If this happens, you’ll want to seek a new policy as soon as possible so you’re ready before your current policy ends.

Review Your Policy Now

Insurance advertising might lead you to believe it’s all about saving money, but that’s really a small portion of the story.  What I have learned in helping clients for over a decade is that people want their claims covered.    Regardless of whether your home is easy or difficult to insure, I encourage you to review your policy regularly to make sure your coverage matches your needs. My agency offers a free policy review with no obligation.

This article is the beginning of a series about changes in the insurance industry.  If you have questions about your specific situation, please email rstroup@farmersagent.com