Slo County Homeowners Struggle To Find Affordable Fire Insurance In 'ruthless' Market

Feb. 26—Michele Flom's home borders open space in San Luis Obispo, which offers a beautiful view but exposes her to wildfire risk and makes it difficult for her to keep her homeowners insurance.

Within the last year, she's gone through the process of finding — and then being dropped from — her homeowners insurance twice as risk escalates.

Though Flom's home had been covered by Farmers Insurance since 2001, in June 2024 her policy was dropped, leaving her scrambling to replace it and maintain her mortgage.

Relief came when Flom found coverage through SageSure Insurance, a non-admitted carrier supposedly capable of tolerating higher risk — only to give way to more uncertainty just three months later, when Flom was dropped again, leading her to seek coverage through another non-admitted carrier in North Light Specialty Insurance, she said.

Unlike admitted insurance carriers, which are backed by the California Department of Insurance against financial failure, non-admitted insurers are on the hook for the full cost of their policies even in the face of a catastrophe like the recent Southern California wildfires.

After losing coverage twice in a year and seeing her annual payment more than double from $1,700 to around $4,000, Flom said she's less certain of the future stability of homeowners insurance than ever.

Flom isn't alone. Homeowners across California are being dropped from their insurance plans as companies flee from wildfire risk — forcing them to enroll in more expensive plans.

"We have to have insurance — this is our nest egg," Flom told The Tribune. "This is the only investment that we have, so it was a scramble."

SLO County homeowners dropped from fire insurance

George Hanna and his wife moved into what he called a "fireproof home" in the Trilogy Development in Nipomo about four yeas ago.

The home has a cement tile roof, stucco, a fire hydrant 50 feet away and a fire station about three miles away — all measures that either should prevent his house from catching fire or aid firefighting efforts.

"We don't live in the woods," he said. "There's trees, but it's not a forest."

Still, he lost his fire insurance.

Progressive provided home and auto insurance to the Hannas for eight years in Colorado and three years in Nipomo. In November, however, Progressive sent them a letter that said they would be dropped from their fire insurance plan in 60 days because they lived in a wildfire zone.

"I was just shocked," he said.

Hanna would lose his mortgage if he didn't have insurance, so he went shopping for a new plan. He settled on Mercury Insurance, which offered home insurance with a 25% rate increase.

"That's still a significant increase overnight, but again, it's better than doubling it," he said.

Hanna was relieved to find the insurance he needed, but called Progressive's approach "ruthless."

"I was really upset with Progressive," Hanna said. "I know if you're not making money, you can't stay in business, but at the same time, it's a different animal when you're insuring people that are required to have insurance. You have to work with the community."

Hanna is one of many California homeowners struggling to find affordable homeowners insurance.

Some insurance companies have dropped Californians from their policies, while others have increased their rates exponentially, according to Joel Laucher, a program specialist with United Policyholders, a nonprofit that helps people navigate gaps in their insurance coverage.

"I think that almost every homeowner's insurer in California is rethinking some of its exposure to wildfire," he said.

A few factors are at play here: Some insurance providers are leaving California due to wildfire risk. This means there are fewer insurance options available, allowing those companies to increase the price of their premiums.

If insurance costs get too high, people could eventually be priced out of their homes, he said.

"Insurance costs and availability are going to impact the cost of homeownership," Laucher said.

What does wildfire mean for the future of CA insurance?

The Los Angeles wildfires hit Southern California at a particularly difficult period for the insurance industry as the growing threat of climate change and inflation pushes carriers out and prices up.

Despite backing from the state, many major admitted insurance carriers have either stopped or put a pause on writing new policies in California in recent years, making it harder to get coverage for many Californians. Those companies include Allstate, State Farm and Farmers Insurance.

That's left remaining non-admitted carriers to deal with more requests for coverage from homes exposed to more risk, which are often in rural areas or along the outskirts of towns and cities.

Janet Ruiz, director of strategic communication at the Insurance Information Institute, said California's insurance market has "been on the brink of a risk crisis for decades," largely citing the state's regulatory policies.

However, there may be some change in the market coming this year as a response to California's growing level of risk, Ruiz said.

First and foremost, the California Department of Insurance's Sustainable Insurance Strategy is set to roll out this year, allowing insurers to use forward-looking catastrophe modeling, reinsurance costs and current building costs in the rate-making process, Ruiz said.

"Catastrophes such as wildfires are contemplated in the rate-making process," Ruiz said in an email. "Mitigation is a key component of the strategy. We expect the market to stabilize as the Sustainable Insurance Plan is implemented and licensed insurance companies in California are able to write more policies, thus removing policies from the FAIR Plan."

As the "insurer of last resort," the California FAIR Plan offers homeowners coverage against fires for higher-risk properties — meaning other forms of damage must be covered by other insurers — and is financially held up by the state's private home insurers, meaning it doesn't come from taxpayer dollars.

According to the most recent data available from the National Association of Insurance Commissioners, the average home insurance premium in California in 2021 — the most recent data available — was $1,403, which ranks around 20th in the nation.

That placement has more to do with the California homeowners insurance industry of the past, which has historically featured premiums slightly below the national average, Ruiz said.

In the intervening three years, the Insurance Information Institute projected that the average cost of a premium in California rose from $1,475 to around $1,750, increasing by a projected 5.1% in 2022, 10.2% in 2023 and 7.7% in 2024.

Can the FAIR Plan keep up with growing wildfire risk?

As California's last option for coverage, the FAIR Plan is facing more pressure than ever to write new policies — and take on more risk as a result.

Between September 2020 and September 2024, the number of FAIR Plan policies currently in effect exploded by 123%, from about 202,897 to 451,799, according to the most recent FAIR Plan data.

In San Luis Obispo County, just under 2,700 residential FAIR Plan policies are currently in effect — a small share of the state's total, but growing with increasing speed in recent years.

Compared to 2020, when 550 FAIR Plan policies were recorded in San Luis Obispo County zip codes, 2024's total of 2,699 represents a roughly 490% increase in the number of active policies, according to data from the FAIR Plan.

The annual premium cost for FAIR Plan coverage ranges dramatically based on property location, risk levels and size.

With that growth, the total risk the FAIR Plan is exposed to has grown from $153 billion to more than $458 billion over those four years, and that figure is likely to grow in the wake of the Los Angeles wildfires.

Ruiz said the FAIR Plan should be able to pay out the Los Angeles wildfire claims, which total more than $40 billion in insured losses, according to early estimates from modelers cited in the Insurance Journal.

But as wildfire risk increases in California, some wonder if the FAIR Plan can continue to operate sustainably.

The FAIR Plan is funded by homeowners enrolled in the program. The California Department of Insurance saves some of that funding in a reserve to pay out claims during a "catastrophic loss" like the L.A. wildfires, Laucher said.

If an event drains the reserve, insurance companies operating in California must pay a certain percentage of the remaining claim costs based on their size.

"You're free to do business in this very financially lucrative marketplace," Laucher said of insurance companies working in California. "But to do that, you also have to, you know, serve as a backstop for the business that you reject."

Those insurance companies can then pass off half of that cost to their clients. For example, if State Farm owed $10 million to the FAIR Plan, it could charge its policyholders $5 million, he said.

Policyholders would see this as a one-time "assessment," or fee, on their insurance bill. It would not impact the cost of their premium.

As wildfires become more frequent and destructive, the likelihood of this fee being levied has increased.

"We don't really want to end up with everybody in the FAIR Plan," he said. If this happens, the FAIR Plan would require something like a government-level backstop, he said.

Though the program isn't perfect, it has allowed people to keep their mortgages and protect their homes.

"It is kind of integral to prosperity that we have insurance available for deal with catastrophes," he said. "We're very fortunate to have the FAIR Plan. Not every state has that kind of backup plan."

How to protect your coverage and what to do if you lose it

Homeowners can take steps to ensure their fire insurance coverage isn't in jeopardy.

Laucher recommended adopting fire mitigation around the home. Not only will they protect the home from fire, but it may encourage insurance companies to continue providing the homeowner insurance or offer a discount.

The Insurance Institute for Business and Home Safety offers certificates to "wildfire prepared homes." Recommendations include installing a Class A roof and removing all overhanging branches, grass, turf, wood mulch and fencing made of wood or vinyl from a 5-foot buffer area around the home.

Insurance companies are also more likely to offer policies to homeowners living in communities where local governments implement fuel management projects like vegetation removal and hosting prescribed burns.

"You really want to get a kind of a buffer around the community to give the firefighting operation a chance to suppress the fire before it has entered into the community," he said.

When people lose their insurance, they should ask their insurer if they can make improvements to their home to help them qualify for a renewal.

If not, shop around for a new policy before settling for the FAIR Plan because it is often the most expensive option.

United Policyholders offers a guide to homeowners who have lost their insurance at bit.ly/41iyR05.

© 2025 The Tribune (San Luis Obispo, Calif.). Visit www.sanluisobispo.com. Distributed by Tribune Content Agency, LLC.

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