How the Los Angeles wildfires can increase insurance rates for all Californians
The program guaranteeing fire insurance coverage for homeowners turned down by traditional companies, known as the California FAIR Plan, could run out of money following the devastating destruction caused by the Palisades and Eaton fires.
The program is managed by the state and provides basic fire insurance coverage in high-risk areas where traditional companies won't. According to the office the California Senator Alex Padilla, the FAIR Plan had about $377 million available to pay claims as of last Friday.
"Our immediate focus is helping wildfire victims get their claims paid fairly, quickly, and completely by all insurance companies -- including the FAIR Plan," Insurance Commissioner Ricardo Lara said in a statement.
The Insurance Information Institute said the FAIR plan is not funded by taxpayers but by private insurers.
"The FAIR plan is funded by private insurers that are required to fund it," attorney Shant Karnikian said. "Once the funds that are in there run out, the only place to replenish it is from private insurers."
This could result in insurance companies raising rates for all customers to pay for it — meaning the disaster could raise coverage prices for renters and homeowners whose places didn't burn down.
"What they end up effectively doing is low-balling people's claims," Karnikian said. "People have to go in and it's a real challenge to fight and get fair compensation on the claims."
This is a concern for residents like Tiffany Carter, whose father came to California from St. Louis after enduring the Great Depression.
"To amass assets and wealth, through hard work, to be able to build something and leave a legacy for his family — it meant everything to him and my mom who was also a business owner in the community," Carter said.
The California insurance commissioner issued a mandatory one-year moratorium on non-renewals and cancellations to protect Southern California residents affected by the recent fires.
At a news conference on Friday, Lara said his primary concern is to make sure residents who are affected by the fires get the full insurance benefits they are entitled to.
His office will be hosting two free insurance support workshops. One will be in Santa Monica on Jan. 18 and 19 the second will be hosted in Pasadena on Jan. 25 and 26.