State Farm and Allstate recently made headlines when they announced they will no longer sell new home insurance policies in California, due to wildfire risk and inflationary costs.
Steve Davis is a senior vice president with Zion’s Insurance, which manages home policies in Utah.
“California is kind of the catalyst for what’s coming down the road,” Davis said. “But about just over a year ago, we saw most major insurance companies here in Utah implement new underwriting guidelines or restrictions, in terms of insuring new homes in Summit and Wasatch counties. And this has had a very significant impact on consumers wanting to get home insurance in those two counties.”
He said insurance companies are now using a wildfire mapping software program that allows them to score the risk of homes, typically on a scale of 1 to 50 – with 50 being the highest risk. Davis said homes that score over 35 are usually not approved for insurance coverage.
“You can’t just assume that it’s going to be the homes that are in, say the Deer Valley areas or The Colony, where the homes are way up in the trees,” he said. “We’re seeing home declinations in areas like Promontory, Hideout, Victory Ranch. And so they don’t necessarily have a lot of trees, but they may have high brush concentrations.”
Promontory General Manager Kelli Brown said she wasn’t aware of any homes that were refused coverage.
Another variable companies are using to examine home risk is the distance to a fire station. Davis said in most instances, carriers balk if a home is farther than five miles away.
He said insurance companies are experiencing inflationary pressures with rising costs of rebuilding homes. Because of that, they’re pulling back from risky areas.
“Chubb Insurance has announced that they have essentially a moratorium, if you will, in writing any new business in Summit County,” Davis said. “Also AIG private client has very strict restrictions in Summit County. So all of those things that you’re seeing happening in California are happening on a smaller scale in the state of Utah, but in particular in Summit County.”
Davis said there are cases of insurance companies choosing not to renew coverage of homes in Summit County.
“What I’m seeing is a lot of homeowners are OK, their insurance providers are staying with them on their home insurance,” he said. “But if, for example, they go to sell their home, and they’re in an area that’s a high risk area, the buyer may not be able to secure insurance on the home or it will be very difficult.”
The Wall Street Journal reported that AIG is planning to halt home insurance sales in roughly 200 zip codes across the U.S., including in Colorado, Wyoming, Idaho, and Montana.
The price for a home insurance policy in the Wasatch Back is increasing around 10% to 20% across the market, Davis said.
“The other thing that we’re starting to see is the implementation of wildfire deductibles,” he added. “For example, if it’s a $1 million home and the carrier applies a 5% wildfire deductible, then the homeowner would be responsible for the first $50,000 of loss in the event of a wildfire.”
Regarding solutions, homeowners can create a buffer between their property and the grass, trees, and wildland around it.
Davis also recommended a process called home hardening, which involves installing new roofs and vents that prevent a fire from starting.
He also said more fire stations and fire hydrants help.
If a homeowner is struggling to find coverage, Brown from Promontory also recommends people try to bundle the policy for their property with that of their car or primary residence.
