Following a string of destructive and deadly fires in 2017 and 2018, insurance companies have ended coverage for tens of thousands of California homeowners as providers have pulled out of high fire-risk areas – forcing many homeowners to buy policies through the expensive California FAIR Plan, the state’s insurer of last resort.

Now, heading into what could be the worst of this year’s fire season, many more homeowners may soon be in jeopardy of losing their policies.

“It’s that time of year, and here we go again,” said Osborn, who eventually found new private coverage for the home she’s owned since 1985.

In response to growing uncertainty in the insurance market, the state has imposed new wildfire regulations in recent years aimed at bringing down costs and protecting homeowners. But the insurance industry has pushed back hard against the reforms, arguing the state should instead overhaul how it regulates policy rates to account for more frequent catastrophic fires.

“Risks are getting worse, and rates are going to have to go up to ensure insurers are solvent and operational in California,” said Seren Taylor, senior legislative advocate with the Personal Insurance Federation of California, an industry trade group.

In 2018, former Gov. Jerry Brown signed a law prohibiting insurance companies from canceling or refusing to renew homeowners’ policies in areas impacted by a wildfire until twelve months after the blaze. In 2019, California Insurance Commissioner Ricardo Lara ordered the FAIR Plan to expand its coverage beyond fire to include liability, theft and other parts of a traditional homeowner’s policy. Insurance companies, which manage and fund the state-created FAIR Plan, have challenged the regulation in court.

And later this year, the state insurance department is expected to begin requiring that providers offer lower rates to homeowners who fireproof their homes.

While consumer advocates have cheered the new rules, some in the insurance industry worry they could lead to providers scaling back their presence in the state even further.

“If (Commissioner Lara) reaches too far, and he already has several times, insurance companies will just say, ‘We’re leaving California – we’re not going to write that product anymore,’” said Edan Cassidy, a broker with Cassidy Insurance Agency in Scotts Valley near Santa Cruz.

Early this year, high-end home insurers American International Group Inc. and Chubb Ltd. drastically reduced coverage in California in the wake of recent fire seasons. And this summer, Geico closed all of its brick-and mortar sales offices in the state, though company officials said it will continue offering policies online.

Department of Insurance spokesperson Michael Soller said the agency is working with the industry to understand their concerns and refuted the notion the new rules could push many insurers out of the state.

“We have a strong insurance market statewide, even with massive wildfires we’ve seen over the past few years,” Soller said.

In 2020, insurers ended coverage for over 212,000 properties in California, according to the most recent state data. More than 77,000 homeowners couldn’t find private insurance that year and signed up for the FAIR Plan. That was a slight increase from 2019, but more than triple the number of new FAIR Plan policies in 2018.

To reverse that trend, insurance companies argue they must be allowed to set rates based on the wildfire risk caused by the climate crisis. The industry wants to use computer models to predict future fire danger and guide the approach to policies. That would increase premiums, but it would also enable insurers to write policies for more high-risk areas and drop fewer homeowners, insurance companies say.

“We’re dealing with regulations that say we can only look backward and we can’t look forward,” said Taylor, with the Personal Insurance Federation. “That’s what’s missing from the conversations to increase availability.”

The state insurance department – which under a voter-approved 1988 law called Prop. 103 must sign off on changes to insurance companies’ policies – currently requires insurers to determine rates based on historical damages. Providers have been able to raise rates in recent years, but they contend it’s not enough to shield their risk.

State insurance officials and consumer advocates say changing that policy and allowing so-called “catastrophe modeling” could unfairly raise rates for homeowners through an opaque and potentially discriminatory process.

“The insurance companies have been claiming ‘we need to use algorithms to set insurance rates,’” said Harvey Rosenfield, founder of Consumer Watchdog. “But under Prop. 103, they’re required to use historic data, which is empirical.”

With seemingly no resolution on the horizon, that could mean more lost policies and rising premiums in the years ahead.

Sean Murawsky had to buy a FAIR Plan policy after his insurer stopped covering his home in Boulder Creek following the CZU fires. His annual premium is now around $3,000, roughly three times what he was paying before.

Despite the increased cost and growing wildfire threat, he has no plans of moving his family from the area.

“I’m not scared off,” he said. “I know there’s high risk, but there’s high risk in many areas of California.”