Could the LA Insurance Debacle Happen in NC?

Could the LA insurance debacle happen in NC?

In a devastated LA County, thousands are without homes—and without any home insurance to cover their losses. Before fires burned over 10,000 structures, insurers decided against renewing thousands of home policies in areas they deemed to be at high risk for wildfires.

Case in point: Last March, Cali’s largest home insurer State Farm General announced they wouldn’t be renewing 72,000 home and condo policies upon expiration. Meanwhile, premiums in some neighborhoods more than quadrupled, and many who couldn’t get onto the California FAIR Plan (the state’s public insurance op) had to opt for no insurance at all. 

Chubb Insurance halted new policies for homes at high wildfire risk in 2021 and Allstate stopped writing new policies altogether in 2022. Now, State Farm General is seeking an avg. 22% emergency rate increase. So, while some residents have been able to maintain coverage, they, too, will still face an incredibly steep price increase on insurance.

Here in NC, as we’ve especially seen in the past year, we are no stranger to natural disasters. 

Houses are falling into the ocean due to flooding in the Outer Banks. WNC still looks like a war zone after Helene demolished entire towns that may never fully recover. And every year, the coast must brace for hurricanes that are slowly but surely becoming more ferocious and catastrophic.

In the face of imminent calamity, we tapped NC Insurance Commissioner Mike Causey with pressing questions about the state of insurance amid natural disasters—and what’s stopping insurers from pulling the rug out from under NCers like they did in LA.

How did this happen in California? Could a massive insurance withdrawal like this happen in NC? No. Poor decisions in California’s leadership have allowed extreme environmentalists to override common sense fire safety in wooded areas. Additionally, repeated denial of insurance rate increases forced insurers to stop writing new business.

What should you do if you can’t find affordable coverage?Our No. 1 tip is to
shop around. Second, consumers should check with any independent agent with access to [public] state plans available through the NC Joint Underwriting Association or the NC Insurance Underwriting Association.  

How do natural disasters affect premiums?They have long-term consequences in making insurance in those areas more risky and causing increases in rates. The solution to keeping costs down is to rebuild to more resilient standards that are stronger than code.

What actions should you take if insurance is dropped or prices spike after a disaster? Call the ‘Big I’ (Independent Insurance Agents of NC) to shop around, or call the NC Department of Insurance.

What risk-reducing measures can consumers take to keep their premiums low? Higher deductibles, fortified roofs and minimizing fire hazards

Where can residents find risk maps for their area? NC provides the Flood Risk Information System, containing digitally accessible flood hazard data, models, maps, risk assessments and reports that are database driven. This site also provides geospatial data, along with hydraulic and hydrologic models available for download and use. fris.nc.gov