State Farm and Allstate recently made headlines when they announced they would no longer sell new homeowners insurance policies in California, due to wildfire risk and inflationary costs.
Steve Davis is a senior vice president at Zion’s Insurance, which handles home insurance policies in Utah.
“California is kind of the catalyst for what’s to come,” Davis said. “But about a little over a year ago we saw most of the major insurance companies here in Utah implement new underwriting guidelines or restrictions, in terms of insuring new homes in Summit and Wasatch counties. And that had a very big impact on consumers wanting to buy home insurance in those two counties.
He said insurance companies now use wildfire mapping software that allows them to rate the risk of homes, usually on a scale of 1 to 50 – with 50 being the highest risk. Davis said homes that score above 35 are generally not approved for insurance coverage.
“You can’t just assume it’s going to be the houses that are in, say, the Deer Valley or The Colony areas, where the houses are way up in the trees,” he said. “We are seeing variations of homes in areas like Promontory, Hideout, Victory Ranch. And so they don’t necessarily have a lot of trees, but they can have high concentrations of brush.
Promontory chief executive Kelli Smith said she is not aware of any home that has been denied coverage.
Another variable companies use to look at household risk is the distance to a fire station. Davis said that in most cases carriers balk if a home is more than five miles away.
He said insurance companies were under inflationary pressure as the cost of rebuilding homes rose. For this reason, they withdraw from risk areas.
“Chubb Insurance has announced that they basically have a moratorium, if you will, on writing any new business in Summit County,” Davis said. “Additionally, AIG’s private client has very strict restrictions in Summit County. So all of these things that you see happening in California are happening on a smaller scale in the state of Utah, but particularly in Summit County.
Davis said there are cases of insurance companies choosing not to renew coverage for homes in Summit County.
“What I see is that a lot of homeowners are doing well, their insurers are sticking with them on their home insurance,” he said. “But if, for example, they are going to sell their house and they are in a high-risk area, the buyer may not be able to get insurance on the house or it will be very difficult.”
The Wall Street Journal reported that AIG plans to halt homeowners insurance sales in approximately 200 ZIP codes across the United States, including Colorado, Wyoming, Idaho and Montana.
The price of a homeowner’s insurance policy in the Wasatch Back increases about 10 to 20 percent in the overall market, Davis said.
“The other thing we’re starting to see is the establishment of wildfire deductibles,” he added. “For example, if it’s a million dollar home and the carrier has a 5% wildfire deductible, then the owner would be responsible for the first $50,000 of loss. in the event of a forest fire.
As for solutions, homeowners can create a buffer zone between their property and the grass, trees, and wild land that surrounds 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 hydrants would help.
If a homeowner is having trouble finding coverage, Smith of Promontory also recommends people try bundling their property’s policy with that of their car or primary residence.