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The risk of wildfires is making insurance companies turn away from California

SCOTT SIMON, HOST:

Some residents and businesses are scrambling to find insurance coverage in California. Many of the country's largest insurers have quietly stopped offering coverage for new homes and businesses. We're joined now by Danielle Venton with member station KQED. Danielle, thanks so much for being with us.

DANIELLE VENTON, BYLINE: Good morning, Scott.

SIMON: Why have State Farm and Allstate insurance companies essentially pulled out of new coverage for California?

VENTON: Yeah. They say that it's too risky, that they need to pull back for their own financial health. Specifically, they're citing increasing catastrophes in California that's led by wildfire, high rebuilding costs so high that that outpaces inflation, and that their own insurance, the reinsurance market, is becoming more expensive.

SIMON: Can it be said this proves that climate change is driving up the cost of living for many Americans and beginning with those in California?

VENTON: Yeah, it is. I mean, climate change is fueling more disasters, making extreme weather routine around the country, but especially in California. I spoke with state Senator Bill Dodd from Napa. He's been active in sponsoring legislation aimed at reducing catastrophic fires. And here's what he said about this news.

BILL DODD: This insurance calamity - I would call it that - that we have today is a product of climate change. I got evacuated from my home in 2017, and I have never experienced anything like that in my life.

VENTON: And something that we talked about is that if this trend continues, it could really harm the property and the business market. You know, you can't get a mortgage unless you have full insurance coverage. So if insurance skyrockets, no one wants to buy your house. Higher insurance rates also make it harder to make monthly mortgage payments, and that can lead to foreclosures. And Dodd says he already knows people in his district who are going without insurance because they've been dropped from their companies. And that's a different, but related, issue. And they just can't afford 40- or $50,000 a year for a new policy.

SIMON: And businesses feel this crunch, too, don't they?

VENTON: Yeah, absolutely. Many businesses like wineries or restaurants, they own their own buildings and property. So if insurance becomes too hard to get, businesses could close their doors. People would lose their jobs. And potentially, more companies would move out of the state.

SIMON: Florida and Texas, of course, are among those states that also face challenges with insurance due to climate change. Is there something different about California?

VENTON: There is. Rates rise slower here in California owing to a law that dates from the '80s that effectively puts a speed limit on increases for renewed policies. And that's why overall rates in California have not gone up as fast as in Florida or in Texas.

SIMON: What can be done, Danielle?

VENTON: Well, some lawmakers, including Bill Dodd, would like to see insurance companies allowed to increase rates on renewed policies a little faster than they currently can. And he hopes that that, paired with efforts to increase fire safety - doing things like intentional burns or clearing brush - may ultimately sort of rebalance the insurance market. There's also proposals to restrict where new homes are built and to encourage the state to do even more to stem fire damage. I mean, but it's really tough because those are long-term solutions to a problem that people are feeling right now.

SIMON: Reporter Danielle Venton, who's with member station KQED out of San Francisco, thanks so much for being with us, Danielle.

VENTON: Thank you.

(SOUNDBITE OF DJ MITSU THE BEATS' "ALWAYS SOMETHING") Transcript provided by NPR, Copyright NPR.

Scott Simon is one of America's most admired writers and broadcasters. He is the host of Weekend Edition Saturday and is one of the hosts of NPR's morning news podcast Up First. He has reported from all fifty states, five continents, and ten wars, from El Salvador to Sarajevo to Afghanistan and Iraq. His books have chronicled character and characters, in war and peace, sports and art, tragedy and comedy.
Danielle Venton (KQED)