{"id":502082,"date":"2022-02-07T10:26:33","date_gmt":"2022-02-07T10:26:33","guid":{"rendered":"https:\/\/jacobinmag.com\/2022\/02\/california-wildfires-home-insurance-coverage-fossil-fuel-industry\/"},"modified":"2022-02-07T11:57:10","modified_gmt":"2022-02-07T11:57:10","slug":"insurance-companies-are-abandoning-homeowners-facing-climate-disasters","status":"publish","type":"post","link":"https:\/\/radiofree.asia\/2022\/02\/07\/insurance-companies-are-abandoning-homeowners-facing-climate-disasters\/","title":{"rendered":"Insurance Companies Are Abandoning Homeowners Facing Climate Disasters"},"content":{"rendered":"\n \n\n\n\n

Insurance companies are leaving homeowners at the mercy of climate catastrophes they helped create.<\/h3>\n\n\n
\n \n
\n A firefighter battles a house fire caused by wildfires in the Oak Park neighborhood of Ventura, California, in 2018. (Wally Skalij \/ Los Angeles Times via Getty Images)\n <\/figcaption> \n<\/figure>\n\n\n\n\n \n

Major insurance companies are choosing to protect the fossil fuel industry while abandoning homeowners whose safety and livelihoods are being threatened by the industry\u2019s carbon emissions.<\/p>\n

Insurance giants Chubb, Liberty Mutual, and AIG are three of the\u00a0biggest insurers<\/span><\/a>\u00a0of fossil fuel infrastructure around the world. But\u00a0the<\/span><\/a>\u00a0companies<\/span><\/a>\u00a0have<\/span><\/a>\u00a0just announced plans to scale back their homeowner coverage in California, where they insist future climate-related losses will likely prevent them from turning a profit.<\/p>\n

The coverage withdrawals may soon ignite a big money battle in the state\u2019s legislature, pitting insurance giants against lawmakers trying to preserve coverage for their constituents. Meanwhile, climate campaigners are decrying what they say is a fundamental hypocrisy.<\/p>\n

\u201cInsurance companies have known about climate risk for decades,\u201d said Elana Sulakshana, senior campaigner at the Rainforest Action Network. \u201cYet instead of actually tackling the root of these disasters, they\u2019re making short-term adjustments and refusing to fundamentally change their relationship to the fossil fuel industry.\u201d<\/p>\n\n \n\n \n \n \n

\u201cPeople Are Scrambling to Find Coverage\u201d<\/h2>\n \n

Though they\u2019re not as high profile as fossil fuel companies or airlines, insurance companies are some of the\u00a0biggest drivers<\/a>\u00a0of climate change. That\u2019s not only because they invest\u00a0hundreds of billions of dollars<\/a>\u00a0of consumers\u2019 premiums in fossil fuel companies, but also because their coverage provides the financial safeguard that enables tremendously costly oil, gas, and coal exploitation projects to go forward.<\/p>\n

\u201cYou\u2019re not going to get financing for a fossil fuel project that doesn\u2019t have insurance,\u201d noted Jamie Kalliongis, senior communications campaigner at the climate advocacy group Sunrise Project.<\/p>\n

\u201cThere\u2019s a small number of players playing a really critical role\u201d in the oil and gas insurance market, she added, since few insurance companies are big enough to do the due diligence required to insure massive mines or pipelines. Top insurers in the space include Chubb, Liberty Mutual, and AIG, all of which are now withdrawing coverage from high-fire-risk areas in California.<\/p>\n

Last year, Chubb\u2019s chairman and CEO Evan Greenberg\u00a0said<\/a>\u00a0the company was reducing its coverage in parts of the state that were \u201cboth highly exposed, and even moderately exposed, to wildfire\u201d because it was unable to obtain an \u201cadequate price for the risk, and not by a small amount,\u201d due to both the costs of wildfires and California\u2019s regulatory climate.<\/p>\n

Chubb and other insurers have not similarly withdrawn their coverage of fossil fuel projects creating the climate risk.<\/p>\n

For Californians in these areas, losing fire insurance is a highly stressful experience.<\/p>\n

\u201cThey think, \u2018What if I can\u2019t insure my home at all, and then it burns down, and I have nothing?\u2019\u201d said Amy Bach, executive director of the consumer advocacy group United Policyholders. \u201cThen they think, \u2018Well isn\u2019t there some law that prevents the insurer from just dumping me like this?\u2019 And the short answer is no.\u201d<\/p>\n

Even when insurers stop short of withdrawing coverage, homeowners still often find their premiums\u00a0dramatically increasing<\/a>. \u201cPeople are scrambling to find coverage, and they\u2019re getting a lot less coverage, and paying a lot more,\u201d said Robert Herrell, executive director of the Consumer Federation of California.<\/p>\n\n \n \n \n

\u201cA Blank Check to the Insurance Industry\u201d<\/h2>\n \n

In the short term, California\u2019s strategy to deal with the crisis has been\u00a0issuing temporary moratoriums<\/a>\u00a0preventing insurers from not renewing coverage in wildfire-stricken areas.<\/p>\n

In the long term, California can\u2019t stop insurers from withdrawing coverage from the state. More proactive solutions are needed \u2014 but industry and consumer advocates have dramatically different answers as to what those solutions should be.<\/p>\n

A main solution proposed by industry is that they be allowed to use \u201ccatastrophic modeling<\/a>,\u201d a method where rates are set based on predictions of future losses rather than recorded past losses, as is currently the case.\u00a0All other states<\/a>\u00a0allow the use of this technique in at least some cases.<\/p>\n

But consumer advocates balk at this suggestion, in part because under insurers\u2019 preferred formulation, the models used\u00a0would be secret<\/a>, unlike California\u2019s current public process for setting insurance rates.<\/p>\n

\u201cWhat they want is the ability to aggressively use models absent any sort of meaningful transparency about the factors that make up those models,\u201d Herrell said. \u201cIt winds up being a bit of a blank check to the insurance industry.\u201d<\/p>\n

Rather than catastrophic modeling, consumer advocates often favor allowing homeowners to fireproof their residences through measures like installing fire-resistant roofing or clearing flammable vegetation from a house\u2019s radius in exchange for discounted insurance, or a guarantee of coverage. As\u00a0we\u00a0reported<\/a>\u00a0last month, a recent\u00a0study<\/a>\u00a0found that homes constructed after California beefed up its anti-fire building codes are as much as 40 percent less likely to be destroyed from wildfire exposure.<\/p>\n

\u201cThere\u2019s a lot of things that you can do to make it less likely that homes will burn,\u201d Bach said. \u201cWhat insurance companies should be doing is investing in that research and working with their customers to help them do everything they can.\u201d<\/p>\n

Tools such as drone photography and construction data have made it possible for insurers to issue plans based on individual homes, unlike in the past, when insurers used low-resolution satellite images to assign uniform risk scores to entire areas, said Joel Laucher, a consultant who worked as an insurance regulator in California for over three decades.<\/p>\n

So far, 40 percent of the state\u2019s insurance market offers discounts to consumers who take wildfire mitigation measures, according to California Department of Insurance spokesperson Michael Soller.<\/p>\n

The department, under commissioner Ricardo Lara, declared\u00a0in early 2021<\/a>\u00a0that it plans to develop standards for fireproofing homes, in order to make it easier for homeowners to obtain insurance in high-risk areas.<\/p>\n

The department\u2019s\u00a0initial proposal<\/a>, issued in February 2021, would require insurers to take fireproofing into account when setting rates, but wouldn\u2019t require insurers to consider these factors when deciding whether to offer coverage at all. Such a rule could provide relief from premium increases, but might not do anything to help consumers whose insurers have dropped them altogether.<\/p>\n

The rule won\u2019t do anything if it\u2019s not implemented, and since issuing the February 2021 proposal, the department has yet to begin the rulemaking process. Even as the moratoriums on policy cancellations\u00a0lapse<\/a>, it\u2019s not clear when regulations might take effect.<\/p>\n

Asked whether the department has a timetable for implementing the regulations, Soller said that Lara \u201chas already introduced draft regulations and held regulation workshops to get input from stakeholders.\u201d<\/p>\n

He added, \u201cThe Department of Insurance has been working to implement them as part of a comprehensive solution.\u201d<\/p>\n

Some consumer advocates say that the process doesn\u2019t need to take this long. \u201cThe commissioner could have mitigation discount regulations in place by the summer with no problem,\u201d said Carmen Balber, executive director of Consumer Watchdog. \u201cThe department is dragging its feet.\u201d<\/p>\n

On the other hand, Bach at United Policyholders said that more research is needed before the most effective regulations can be put in place.<\/p>\n

\u201cI\u2019d like it to all be done faster, but given that we don\u2019t have this really robust data set on the effectiveness of risk reduction, it’s logical that it’s taking as long as it’s taking,\u201d she said.<\/p>\n\n \n \n \n

Big Money in California\u2019s Legislature<\/h2>\n \n

Marc Levine, a Democratic California assemblymember who is also running against Lara in the primary for insurance commissioner, hopes to pass a law to force the department to act.<\/p>\n

Levine\u2019s\u00a0legislation<\/a>\u00a0\u2014 which is still being finalized \u2014 would require the department of insurance to issue regulations outlining fireproofing measures by 2024, and would require insurance companies to offer policies covering fireproofed homes by 2025. It would also create a fund that would give grants of up to $10,000 to help homeowners fund fire mitigation projects.<\/p>\n

Asked whether the Department of Insurance favors requiring insurers to take account of fireproofing when deciding whether to offer coverage, Soller said: \u201cInsurance companies in California have discretion as to where to write policies, whereas Commissioner Lara has existing authority to establish clear and science-based requirements for insurance companies to reward consumers\u2019 risk reduction actions.\u201d<\/p>\n

Levine\u2019s legislation is likely to be heavily opposed by the insurance industry, which is a major donor to both Senator Susan Rubio and Assemblymember Tom Daly, Democrats who chair their chambers\u2019 respective insurance committees. Rubio, who was first elected in 2018, has received roughly\u00a0$69,000<\/a>\u00a0from the industry, and Daly, who has held his office since 2012, has received\u00a0$564,000<\/a>.<\/p>\n

Donations and intense lobbying often dim the prospects of bills like the one from Levine.<\/p>\n

\u201cThe insurance industry is very aggressive both in terms of their political contributions and lobbying efforts in the California legislature,\u201d Herrell said. \u201cIt makes it extremely difficult for meaningful pro-consumer legislation<\/p>\n\n \n \n \n\n \n \n

You can subscribe to David Sirota\u2019s investigative journalism project, the\u00a0Daily Poster<\/i>,\u00a0here<\/a>.<\/p>\n\n\n\n

This post was originally published on Jacobin<\/a>. <\/p>","protected":false},"excerpt":{"rendered":"

Major insurance companies are choosing to protect the fossil fuel industry while abandoning homeowners whose safety and livelihoods are being threatened by the industry\u2019s carbon emissions. Insurance giants Chubb, Liberty Mutual, and AIG are three of the\u00a0biggest insurers\u00a0of fossil fuel infrastructure around the world. But\u00a0the\u00a0companies\u00a0have\u00a0just announced plans to scale back their homeowner coverage in California, [\u2026]<\/p>\n","protected":false},"author":685,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"_links":{"self":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/502082"}],"collection":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/users\/685"}],"replies":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/comments?post=502082"}],"version-history":[{"count":1,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/502082\/revisions"}],"predecessor-version":[{"id":502083,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/502082\/revisions\/502083"}],"wp:attachment":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/media?parent=502082"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/categories?post=502082"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/tags?post=502082"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}