On July 13, 2022, The Topanga Canyon Town Council (TCTC) presented written and verbal testimony to California Insurance Commissioner Ricardo Lara (ricardolara.com) regarding an “investigatory hearing into the operations, policies and procedures of the California FAIR Plan Association.”
In her testimony, Town Council president Carrie Carrier argued that Topanga is “one of the most wildfire-prepared communities in the State with an unprecedented number of organizations dedicated to keeping the community safe. It successfully applied for a Topanga ‘Firewise’ designation in 2021 and is on track to exceed its annual requirements by 400% in 2022.
Annual Increases Exponentially Spike Rates
Original % Increase
Premium Annual Increase in 4 Years
2019 2020 2021 2022
3000 30% $3,900 $5,070 $6,591 $8,568 186%
3000 40% $4,200 $5,880 $8,232 $11,525 284%
3000 50% $4,500 $6,750 $10,125 $15,188 406%
“And yet, we are one among a growing number of communities where private insurers are canceling policies and forcing residents onto the impossibly expensive, and woefully inadequate, FAIR Plan.”
Carrier names seven basic categories of FAIR Plan challenges that residents face:
Skyrocketing Rates and Unaffordable Plans—Residents’ insurance rates have been rising 30-50%+ per year, ever since the Woolsey Fire (November 2018) impacted the neighboring community of Malibu (but not Topanga). Recurring rate increases have a compounding effect, spiking rates exponentially over a short period of time. After four relentless years of rate increases, residents now pay premiums that are double, triple, and even quadruple what they paid in 2018. This is neither reasonable nor sustainable. All age groups are being severely impacted. Seniors on fixed incomes effectively have to pay a monthly insurance bill that rivals a mortgage payment. Young families already struggling to pay for expensive mortgages and child care must absorb annual rate increases that far eclipse meager annual wage gains. When adjusted for inflation, hourly earnings actually dropped 3.6% in June from a year earlier, according to the Bureau of Labor Statistics. With housing affordability already at crisis levels in the State, these insurance prices are pushing homeowners over the edge. And it’s not just homeowners who are suffering. Landlords who have to pay these rates pass on the costs to their tenants. (“US Inflation Quickens to 9.1%, Amping Up Fed Pressure to Go Big,” by Olivia Rockeman, Bloomberg News, 2022 July 13.)
Coverage Exclusions—In contrast to a traditional insurance plan, the FAIR Plan omits from its coverage several key loss types, including: water damage, liability, falling objects, and theft. This coverage gap forces residents to purchase a “Difference in Conditions” (DIC) or Wrap-around Policy, which often adds considerably to the bill. Commissioner Lara should compel the FAIR Plan to provide coverage that is as comprehensive as a traditional plan so that people in higher risk areas are not discriminated against in the options that they can obtain from a single policy.
Dwelling Unit Limitation—Most parcels in Topanga contain multiple structures, including one or more guest houses (ADUs), garages, sheds, barns, and so forth. But the FAIR Plan does not cover multiple dwelling units per parcel. Even if it did, the current $3.1 million cap on FAIR Plan coverage would essentially render those structures uncovered losses if a fire were to destroy them. The FAIR Plan should be required to cover all structures on a parcel, not just one.
Coverage Cap Too Low—The current cap on coverage should be raised from $3.1 million to at least $5 million to ensure that the majority of residential parcels in the State’s largest County (by population) are properly covered. Many residents will not benefit if the Commissioner requires the FAIR Plan to be more comprehensive without also raising the cap. The Plan cap should reflect actual real estate prices in the area. Too many “average” residents are already at, or over, the $3.1 million coverage limit.
Lack of Credit for Home Hardening and Other Mitigations
—Topanga has a robust culture of emergency preparedness, both at the community and individual level. We have four groups dedicated almost entirely to wildfire preparedness: the Topanga Coalition for Emergency Preparedness (TCEP), the Topanga Canyon Firesafe Council, Arson Watch, and the Community Emergency Response Team (CERT). The Firesafe Council shares data-driven “best practices” on home hardening while our local Resource Conservation District conducts FREE “Home Ignition Zone” inspections for residents.
The community has written a 100-page Guide on how to prepare for wildfires, called the “Topanga Disaster Survival Guide.” We also have a state-of-the-art helistop in Topanga, called 69 Bravo, which makes more than 32,000 gallons of water available to firefighting helicopters at a moment’s notice.
Individually, homeowners spend thousands of dollars to harden their homes by installing new windows, replacing siding, and overhauling their landscaping. However, they are not seeing any real reduction in their rates.
Commissioner Lara should specify how much of the rating can be adjusted with mitigations. We believe that these mitigations should factor significantly (at least 50%) into a homeowner’s overall rating.
Opacity in Rating Determination —Residents have long wondered why they receive the ratings they do, and until now, they had no way to know. Insurers were notoriously tight-lipped about how they determine risk levels, and residents felt completely powerless to improve their position. Now that Commissioner Lara is finalizing REG-2020-00015, we hope that the FAIR Plan will become fully transparent in how it determines rates and the extent to which it factors mitigations into premium reductions.
Inclusion on Advisory Committees —Los Angeles County has by far the largest population and Value-at-Risk (VAR) of any other county in the State. How mountain communities like Topanga prepare for wildfires has an outsized effect on the entire region. We carry that responsibility on our back, and we want to share the expert level of knowledge we have accrued over the years with others. We are not looking for a pat on the head; we are looking to save lives and make a difference.
We also want to ensure residents’ insurance rates reflect the amount of risk reduction that they have achieved with their efforts. To that end, we would like our community to be formally included on Advisory panels that inform the Insurance Commissioner and FAIR Plan on wildfire mitigation strategies.
In Conclusion—Residents in Topanga and other high-risk areas are being forced onto the FAIR Plan in droves and are being pummeled by its practices. We have detailed here not only the challenges that residents face but how the Insurance Commissioner could address them. Our goal is to ensure that our communities remain safe and that wildfire insurance remains affordable and accessible to all.”
Respectfully,
Carrie L. Carrier, President
The Topanga Town Council
