California FAIR Plan launches residential discounts

Since the California FAIR Plan started offering residential discounts earlier this week, Chalk Hill Ranch owner Charlie Martin may be in line to see a savings of about $2,000 a year. But it’s a savings he doesn’t think is even remotely enough when it comes to insuring his Healdsburg-area properties.

FAIR Plan costs are already much higher than most policies for the state-sponsored plan “of last resort.”

The discounts amount to up to a 14.5% reduction on policy premiums for home hardening and landscaping measures to avert wildfire damage. Those discounts, which went into effect Aug. 23, would be applied to residential properties. Discounts on commercial properties are under review, according to the California Insurance Commissioner’s office.

“Anything would help,” Martin said. “I guess I’ll call my agent.”

During a time in which more insurance companies are pulling out of writing new policies for Californians and particularly the Wine Country, Martin uses the state’s insurance program for a residence on his farm and the ranch itself. He signed up for the Fair Plan after the 2019 Kincade Fire scorched his land and claimed a few “nonessential” structures. His primary residence is insured through State Farm.

“I’m just biting the bullet,” he said, of having to pay higher rates because fewer companies offer coverage.

California wildfire losses have topped $1 billion among wineries and agricultural operations since 2017, sparking an up to $15 million increase in coverage limits for the state’s insurance program.

Martin has two FAIR Plan policies which cost him about $50,000 a year. If there is a fire though, the policies limit him to $3.5 million in replacement cost for a ranch assessed at $8 million. That financial difference prompted Martin to hire a logging team a cost of $250,000 to reduce the wildfire danger.

In March, limits were raised on the FAIR (Fair Access to Insurance Requirements Plan for commercial property (Division I) and other business owners (Division II) from $7.2 million and $8.4 million, respectively, to $20 million per location. The first plan may go up to $23 million with liability, an increase California Insurance Commissioner spokesman Michael Soller calls “long overdue.”

Now the discounts are the result “of listening,” he added.

The state has not extended the new discounts to commercial policies, only to residential properties at this time. FAIR Plan officials indicated they have a separate filing pending with the state insurance department on that.

The residential property discount on insurance premiums for home hardening is 10%. Protecting the immediate surroundings is another 5%.

“Home hardening in communities vulnerable to wildfire improves safety and helps to address insurance availability for consumers,” FAIR Plan President Victoria Roach said in a statement.

Sonoma, Lake and Napa counties represent 8% of the state’s commercial agriculture and farm owners’ insurance market. But the combined total of claim losses from 2017 to 2020 added up to roughly 45% of the statewide total, according to the state insurance commissioner’s office. In a barrage of fire years, these losses for wineries and farm operators have totaled $629 million.

The Tubbs, Kincade, Nuns and Glass Fires were some of the worst wildfires in the state within the last six years. Across the entire state, more than 4 million acres burned in California in 2020 alone, Cal Fire reported.

According to PropertyCasualty360.com — an insurance data research firm for brokers — between 1960 and 1980, the aggregated average of California’s fire insurance claims cost $100 million per year. From 2000 to 2010 claims were six times that amount. In 2019, that figure rose to more than $4 billion, and in 2020, the industry reported claims topped $9 billion.

Susan Wood covers law, cannabis, production, tech, energy, transportation, agriculture, banking and finance. She can be reached at 530-545-8662 or susan.wood@busjrnl.com