Homeowners face soaring premiums

Nancy Matela co-owns a vacation home in a wildfire zone northwest of Bend that has a new, annual property insurance premium of $9,000. It’s more than nine times what the company Safeco charged her a year ago.

That policy remains her only option as well: Her broker couldn’t find her another one.

Matela is among a growing number of homeowners in central, southern, and eastern Oregon who have faced higher annual premiums or 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 destroyed more than 4,000 homes, becoming the state’s most expensive natural disaster in history, according to state and federal emergency response agencies.

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

“If you want to know what the next five years look like in Oregon, look at southern California,” said Perry Rhodes, who has sold property insurance policies for Farmers in Bend for the last two decades. “If you want to know what this looks like if things get even worse, look back east to Florida,” he added. Farmers announced last year it would limit new property insurance policies in California and no longer sell any new property policies in Florida.

Rhodes said it used to be extremely rare to find a customer whose property was at such a high risk that he had to refer them to other companies. Now, he said, he sends about half of potential customers to other insurers because Farmers won’t cover them.

“The only homes that we know for sure are going to be eligible are the ones that are, so to speak, right in the middle of town, and right next to the fire department,” he said.

Oregon’s insurance commissioner, Andrew Stolfi, told the Capital Chronicle the exodus of companies offering coverage in parts of Oregon is not as severe 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.

Nevertheless, Oregon lawmakers are aware of the predicament. But recent laws passed by the Legislature to encourage insurance companies to reward customers for hardening their homes and communities against wildfires have had little impact so far, according to more than a dozen policyholders, agents, brokers, and industry leaders.

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

In the current session, Golden is behind Senate Bill 1511, which would create a one-time $5 million grant program to help Oregonians establish neighborhood protection groups focused on creating and managing defensible space around homes to help fight a wildfire and clearing yards of debris. It would also begin the process of creating a state-backed certification program for wildfire prevention for homes and neighborhoods, to encourage insurers to continue writing policies and to slow rising premiums.

“Absent that, I’m not seeing an obvious path to a viable insurance system for wildfire in the state. If somebody’s got alternatives, I’d like to hear it,” he said.

Golden helped secure over $30 million for home hardening in 2021. But in 2023, the Legislature allocated about 10% of that.

Rising premiums

In Oregon, premiums are up an average of nearly 30% since 2020, according to the state’s Department of Consumer and Business Services. It reflects nationwide increases, according to several insurance marketplace reports. But in Bend, Ashland, Medford and Hood River, agents said premiums for most people have doubled or quadrupled due to the wildfire risk, and policies under $1,000 per year have become extremely rare.

Agents said policies on some homes near Ashland have risen as much as 600% in the last four years.

Barbara Klein lives in Ashland within a mile of two fire stations. She said her home insurance premium with Allstate nearly tripled in the last five years, from $556 in 2019 to more than $1,400 in 2023. When she got a promotion in the mail from Amica, she contacted the company to see if they could offer a cheaper premium.

“They started my application, but then said that a pop-up window – or something to that effect – showed that they ‘are not taking any more customers from your area – due to fire risks,’” she said in an email. “They said that they never drop a customer, unlike the other companies, but didn’t want further risk from this area.”

Homeowners in Jackson, Hood River, Deschutes, Umatilla, and Malheur counties also say they’ve never seen premiums so high.

“Insurers are having to reckon with the fact that there has been a dramatic increase in natural disaster-related losses,” said Kenton Brine, president of the Seattle-based nonprofit industry group NW Insurance Council.

He said this has to do with climate change and where people have chosen to build.

“Companies either have to reduce their risk exposure to reduce the threat that a major wildfire will wipe them out, or they have to increase premiums, or they have to do both,” Brine said.

He added that companies are also adjusting premiums that have been artificially low in Oregon for years and have not kept up with rising inflation. He said they are also accounting for a reluctance by reinsurance companies, which insure insurance companies, to cover those that sell high-risk home policies.

Nevertheless, executive compensation and company valuations for some of the largest insurers have not declined significantly or at all since 2020. State Farm – the company with the largest share of Oregon’s property insurance market – is worth $131 billion today, an overall increase of $7 billion since 2020. The company’s CEO received more than $24 million in total compensation in 2022, including a $22 million bonus, compared with $10 million in 2019.

Progressive is also worth more: from nearly $58 billion in 2020 to more than $110 billion today. Allstate’s stock is up more than 60% over the last five years, worth nearly $42 billion today, though its CEO’s compensation dropped from $19 million in 2021 to $15 million in 2022, according to the business publication Crain’s Chicago Business.

oregoncapitalchronicle.com