California Bans Companies From Dropping Insurance Coverage Due to Wildfires

Imagine losing your home to a wildfire only to realize that the insurance company you sent checks to every month was dropping your coverage. In California, that is a very real fear that is becoming a reality. Some people are even denied coverage just for being in a high fire-risk area. To shield residents from this practice, California banned insurers from dropping policies due to climate-related risks in fire-prone zip codes. But larger questions of how to address climate change and insurance policies remain: Profit loss may become so great that companies price some Americans out of home insurance altogether.

California’s wildfires have grown so costly and damaging that insurance companies — a homeowner’s last hope when disaster strikes — have increasingly been canceling people’s policies in fire-prone parts of the state.

On Thursday, however, California took the highly unusual step of banning the practice, a decision that exacerbates the insurance industry’s miscalculation of the cost of climate change.

The new policy imposes a one-year moratorium preventing insurers from dropping customers in or alongside ZIP codes struck by recent wildfires. The moratorium covers at least 800,000 homes around the state. The state has also asked insurers to voluntarily stop dropping customers anywhere in California because of fire risk for one year.

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