On Real Estate & More – June 2024

THERE ARE FEW HOMEOWNERS that would be willing to purchase a home without homeowner’s insurance.  However, there is a growing number of homeowners in Oregon who are facing higher annual premiums or have had their policies canceled when they came up for renewal, with some insurers no longer writing new policies. That change came after the 2020 Labor Day fires that destroyed more than 4,000 homes, becoming the state’s most expensive natural disaster in history.

Since then, insurance markets in parts of Oregon have begun to look more like those in California, where some of the largest insurance companies are no longer renewing or writing new policies, and where the number of people turning to a state-backed insurer has doubled in the past few years.

The exit of companies offering coverage in parts of Oregon is not as serious as in California, which has been driven by high payouts for recent wildfire losses and state consumer protection laws that previously capped annual insurance premium hikes.

But recent laws passed by the Legislature to encourage insurance companies to reward customers for hardening their homes and communities against wildfires have not had a big impact on premiums.

Senator Jeff Golden of Ashland, who’s been behind several wildfire proposals, has said investing in fire-resistant roofs, siding, and clearing out vegetation to make communities resilient and accessible to firefighters are the only real options to bring insurers back to parts of the state and curb rising premiums.

In Oregon, premiums are up nearly 30% since 2020, according to the state’s Department of Consumer and Business Services. It reflects nationwide increases. Some areas of Southern Oregon have increased even more due to the wildfire risk, and policies under $1,000 per year have become extremely rare.

No major insurer has publicly announced a retreat from Oregon as they have in California, Florida and Louisiana, which have all been slammed with repeated natural disasters. But several companies that used to sell property insurance in Oregon no longer offer it at all. Oregon Mutual and Kemper have stopped selling property insurance, and Nationwide no longer sells one of its property policies for high-value homes. Some companies choose to no longer renew or write new policies in certain ZIP codes, especially properties in more high-risk rural areas.

In 2023, a law sponsored by Senator Golden and passed by the Legislature, mandates that insurers reflect in their underwriting guidelines how they take into account wildfire mitigation efforts like home hardening and explain on their websites how such efforts impact rates or any discounts a property owner could receive. But it seems to have had little to no impact on coverage so far, as few insurance companies have begun rewarding home hardening with lower or stable premiums.

Carly Kraft, a spokesperson for Farmers, has stated that Farmers will start offering discounts in July of 2024 for customers who have implemented various Firewise fire reduction measures. The measures include ignition-resistant siding and roofing and clearing out shrubbery and trees around the home.

Insurance companies are generally looking at a whole area when they determine risk, not individual homes, or even individual neighborhoods. Regardless, investing in home and community hardening is the best option for homeowners with increasing wildfire risks. It also has the added benefit of potentially saving homes and neighborhoods.

Oregon law requires insurers to include fire coverage in home insurance policies, but it does not prohibit insurers from not renewing policies or choosing not to insure properties due to a wildfire risk.

It is possible in the future that insurance companies will offer home policies in high-risk areas that exclude coverage for wildfires. Instead, property owners could buy an additional policy meant to cover wildfires from Lloyd’s of London, a marketplace of insurers that share risk, or from the state-backed plan of last resort.

FAIR plans, Fair Access to Insurance Requirements, cover some damage or loss, on properties that are considered too risky for companies to insure. They exist in more than half of states and are subsidized by taxpayers and insurance companies. They typically have higher-than-average premiums and less coverage. Oregon’s FAIR plan will only pay up to $600,000 for damage or loss.

With increasing natural disasters and little regulatory authority when it comes to rising premiums or who gets covered, this is a trend that is likely to continue.