Francisco and Silvia spent their whole lives serving their community in a small mountain town in California. Silvia worked for 30 years in the elementary school cafeteria. She was known to everyone who passed through the school by her smile and love for everyone around her, especially the children. Francisco was a handyman who had fixed up about every house in town during his nearly 40 years in the business. Several years ago, Francisco and Silvia used their life savings for a down payment on a small home in the Sierra Nevada mountains, the joyful culmination of a life of hard work.
Earlier this summer, their long-time insurance company cancelled their home insurance, stating that the risk of wildfires had grown too high. This forced them onto the state-sponsored fire insurance option, the California FAIR (Fair Access to Insurance Requirements) Plan, which was set up by the state for people who can’t get fire insurance anywhere else, a growing pool as insurance companies are dropping coverage for tens of thousands as wildfire risks increase. The plan was almost twice as expensive for worse coverage. They wondered whether they could afford to insure their home at all.
On the night of August 15, as they sat at the dining room table, they got word that the Caldor Fire had just exploded in size in the last hour and they had five minutes to evacuate their home. With barely 50 feet of visibility in the acrid haze, they packed a few pictures and their dog into the car and quickly made for safety.
Unprecedented Climate Disaster
Today, our ‘new normal’ consists of massive, uncontrollable Mega Fires, intensifying hurricanes, catastrophic flooding, tornadoes, pandemic diseases, and temperatures in the desert that are closer to settings on an oven than anything ever seen in the natural world.
In the last few months, we have witnessed two California Super Fires that are totally unprecedented in size and behavior. Despite the entire, unprecedented weight and muscle of the state and federal firefighting resources, the Dixie and Caldor fires burned clear over the peaks of the Sierra Nevada Mountains to the eastern side of the state for the first time in recorded history.
Ski resorts turned their snow making machines on their own buildings to try and save their structures. Winding mountain roads were so packed with evacuees that people sat locked in traffic, unable to see much or safely breathe the air. Fires have raged so intensely that any dream of containing fires to the forests are distant. Homes deeper in the woods are abandoned to their fate, and that of suburban homes comes down to a battle between firefighters and fire.
The State of Wildfire Insurance in California
For homeowners, the issue of insurance is huge. In a for-profit housing market where buying a house is an enormous financial stretch for many, having financial back up in a worst-case scenario is the difference between financial ruin and a shot at recovery. Insurance companies themselves only exist for this reason, for the very fact that under capitalism, no one is guaranteed housing or financial support if their home burns down.
The climate crisis, however, is creating a profitability crisis for the insurance companies. While in decades past companies would make solid profit margins from the high volume of insurance plans compared to the relatively low number of insurance claims, wildfires, hurricanes, and other extreme weather is upsetting their balance. Extreme weather is escalating and with it damaged homes, meaning it is no longer profitable in high-risk places like swaths of CA to provide home insurance.
Non-renewals, where insurance companies cancel insurance due to risk at the end of an annual policy term, increased by 31% statewide and 203% in the 10 highest risk zip codes in 2019. Statewide, FAIR Plan policies have increased in number by 36%, and in the highest risk zip codes FAIR Plan policies have increased by a staggering 559%. Nationally, non-renewals are also exploding in wind/hail and flood insurance.
Where they are still covering, big insurance companies are bringing out their disaster playbook: obfuscation, cheating, and deflection to avoid paying what they owe at all costs, using their well-funded battalions of lawyers.
State Farm, the most profitable insurance company in the U.S., is notorious for scamming their customers and refusing to honor their obligations. After Hurricane Katrina, State Farm allegedly altered engineering reports about damage from the storm, and they have a history of forging signatures on forms to get out of covering earthquake damage. Given this criminal behavior, it makes perfect sense that State Farm is one of the only standard carriers still writing insurance in riskier wildfire areas: they don’t intend to pay.
After a wildfire, insurance companies frequently offer homeowners only a fraction of the cost to rebuild their home. The poorest homeowners are forced to accept the small amount or to hold out and wait for what they are owed. Going toe-to-toe with an insurance company on their own terrain in the legal system shaped to serve the rich is an unappealing and often inaccessible option. The mortgages of working families then go unpaid, their homes reduced to a literal pile of ashes, with the vulture lenders and creditors never far behind them.
Wildfire Insurance Crisis on the Horizon
The CA Department of Insurance, which is tasked with regulating insurance, acts more like the industry’s best friend. Ricardo Lara, the CA insurance commissioner, had his election campaign almost entirely bankrolled by the insurance lobby.
Almost all standard, private insurance companies now refuse to offer insurance in wildfire risk areas. This has left the state insurer of last resort, the FAIR Plan, holding the bag for the most at risk homes and commercial property.
Given the fact that there is no state funding for FAIR (it is instead self-funded through homeowner payments for coverage), its solvency is entirely dependent on its ability to raise rates indefinitely as more and more destruction is caused by a longer and longer wildfire season. This confluence of factors will inevitably lead to a crisis in wildfire insurance in California, which will severely impact countless working people and their homes.
FAIR incurred wildfire claims totaling $350 million between September and December 2020 when the worst of last year’s fire season began. During the same period, FAIR received $400 million. They of course need to pay claims besides those caused by wildfires, and as damages from fires increase every year, it’s easy to see how the program may soon be in the red.
This has led FAIR to implement massive rate increases, up to three to four times more than the previous year in some of the riskiest areas.. The state has now started to accept credit card payments for the FAIR Plan for the first time this year as homeowners struggle to keep up with payments.
End Private Insurance Greed!
We need an immediate end to for-profit fire insurance and a fully funded, public, affordable option that would guarantee any homeowner full compensation for the loss of their home. This type of a program could be easily and fully funded by a tax on fossil fuel companies and other major companies that bear responsibility for the climate crisis that has triggered our escalating extreme climate.
Beyond this, we need a massive expansion of affordable housing in areas not increasingly ravaged by fires. People should not be forced to move to high-risk areas because they are the only affordable place to live, and should be guaranteed affordable replacements in worst-case scenarios.
We need to drastically increase the funding for wildfire prevention, Cal Fire, and the U.S. forestry service, including an end to the barbaric use of prison labor for line crews and reintroduction of controlled burning tactics. And, most importantly, we need to take immediate action to dismantle the fossil fuel industry, completely rebuild an 100% renewable, publicly owned energy grid, reforest the state, expand public transportation, and so much more.
A World Ablaze
This time, Francisco and Silvia’s home survived the fire, but in a world ablaze, it’s really only a matter of time. Until then, they clear brush on the weekends and scrape together funds to pay the predatory insurance company that could well abandon them in their hour of need.
What is profitable for insurance companies has never been what is best for ordinary people. With the climate catastrophe a reality, we can no longer afford a system that is driving our planet to the brink of climate disaster, all in the name of profit. Instead, we need a socialist society that runs on 100% renewable energy and puts human need and wellbeing first. The future of humanity is at stake. It’s our future to win, but only if we fight.