Southern Oregon residents and insurers struggle with a changing wildfire landscape

Wildfires in the West are becoming more common and severe. Nationwide, natural disasters are becoming worse and insurance premiums are rising.

In Southern Oregon, residents are seeing spikes in their premiums or are deciding to change insurance companies. One Ashland insurance agent saw a premium on his rental property jump 86%. And for residents in remote, wooded areas, the insurance options are shrinking.

We learn more from Juliet Grable, a JPR contributor covering the issue.

This transcript was created by a computer and edited by a volunteer.

Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. Wildfires in the West are becoming more common and more severe, but it’s not just fires. Climate change is causing extensive and expensive damage all across the country. As the New York Times reported in May, the business of homeowners insurance was unprofitable in 18 states last year causing insurance companies to raise their premiums, narrow their coverage or drop their customers. In Southern Oregon, residents are seeing big spikes in their premiums or are deciding to switch providers. Some people in remote areas have limited options. Juliet Grable covered this issue as a contributor for Jefferson Public Radio and she joins us now. Juliet, welcome to the show.

Juliet Grable: Good morning. Thanks for having me.

Miller: It’s great to have you on. Can you give us a sense just for the scale of some of the insurance rate increases that you’ve heard about in Southern Oregon in recent years?

Grable: Sure. Some people are really seeing some incredible spikes in their premiums. I talked to one couple whose premium went up almost $2,000 a year, from one year to the next. I talked with another couple in my neighborhood community, actually, whose premium was around $700 in 2015. Since then, their premium has spiked to over $2,600 and they saw a significant jump just in the last year. So I’ve heard similar tales both from my community and other communities in Southern Oregon, including around the Ashland area.

Miller: You found that it’s not just increased wildfire risk in Southern Oregon, that’s behind these rate hikes. What else is happening?

Grable: Yeah, that was really interesting to me. So wildfire risk related losses certainly have contributed to the spike in premiums, but there is a kind of a perfect storm of factors that are feeding into this. Insurance companies have to get insurance on their insurance – it’s called reinsurance. Those rates have really gone up as well. At the same time, auto insurance premiums have gone up. And then the economy is contributing to some of this.

As one of the agents I interviewed described it, insurance companies don’t just make money by selling insurance. They also invest the premiums into either real estate or the stock market, and neither one of those things have been a particularly good investment lately. Commercial real estate is not a great investment because occupancy rates for those buildings are still pretty low in the wake of the pandemic. And it’s not a great time to invest in the stock market because the stock market is actually pretty hot right now. So if you follow the “buy low, sell high” ethos, it’s not a great time.

Miller: We’ve talked in the past about the state’s rocky roll out and then roll back, and now a new draft of its wildfire hazard map. Is there a connection between the state’s mapping and insurance rates?

Grable: The short answer is no, there is not. Insurance companies have their own maps that they use to set rates and they do not rely on the state risk map or any other hazard map. Unfortunately, it was a bad coincidence. Property owners received these scary letters in the mail following the roll out of that map that their properties were located in these high hazard areas and in the wild and urban interface. At the same time, they were seeing these insurance premium spikes or maybe not having their coverage renewed at all. So they were jumping to the conclusion that had to do with these maps. But in fact, it was just a coincidence. These things were happening already, these trends that property owners were seeing.

Miller: And insurance companies, they don’t need a state map to wildfire risk, right?

Grable: That’s right. They have their own risk maps that they use. They have their own metrics that they use. This was really interesting for me to learn – some property owners may be familiar with the wildfire score concept. So some insurance companies have a wildfire score that they use to rate properties and use that to determine whether they’re going to offer coverage or what rates they’re going to set, but that varies from company to company. There’s no set protocol that they have to use or some standard that they have to use to set those rates.

Miller: You noted in your article that insurance companies like Allstate and Farmers Direct have declined to write new policies or renew existing ones in response to legislation in California that has made it hard, if not impossible, for them to stay profitable. Is anything like that happening in Oregon?

Grable: Not really. I mean, well, yes and no. Let me back up. So it is true that there are companies that are basically pulling out of some of these high wildfire risk areas, but it’s not in response to legislation like in California. Basically, they’re just calculating a risk. Insurance companies have to look backwards and forwards when they’re setting rates. 2020 was a really devastating year, literally billions of dollars in insurance-related losses. So if they’re looking ahead at a future of more wildfires, then they’re just kind of cutting their losses so to speak and just declining to write policies in certain areas.

Miller: What kinds of consumer protection laws are on the books in Oregon right now?

Grable: Well, I’d like to highlight in particular Senate Bill 82 which was passed last year. And what it does is it really increases transparency. So insurance companies are now required to reveal specifically why they decided not to renew a policy if it’s related to the wildfire risk. They also have to spell out actions that a property owner could potentially take to mitigate that risk. They also have to provide information about the factors that they use when measuring wildfire risk. And for instance, if they use wildfire scores, they have to provide information explaining how they calculate those scores.

Now to be clear, if a homeowner takes action to mitigate some of those risks, the insurance company is not required to then provide the coverage, but it does make the property less vulnerable and probably, very likely, it makes it more likely that they will be able to find coverage somewhere.

Miller: There is a kind of last gap option for Oregonians who cannot get insurance on the private market. How does the FAIR program work?

Grable: Yeah. So the FAIR plan – a number of states have – is considered the option of last resort. So if a property owner is denied coverage by two or more companies, they can opt for FAIR plan coverage. It’s available for homeowners, for commercial properties and also for farms. Typically, premiums tend to be higher and coverage is capped. For instance, for homeowners, the cap and coverage just went up from $400,000 to $600,000. And that’s just not enough to fully cover some properties. But if it’s your only option then people are taking that.

Miller: Are there any efforts to change that to make this last option more truly helpful for Oregonians who have more to ensure?

Grable: Yes, definitely. And this is something that several of our legislators are working on, and the FAIR Plan Association is working on, and with our state insurance commissioner on this. So there’s basically, as I understand it, kind of two broad ways to expand coverage. You can raise the cap as has been done and you can raise it further. They’re also looking at ways to connect property owners with an option similar to earthquake insurance. So say a property owner gets a policy from a company, but they don’t want to provide wildfire risk coverage, they could get that line elsewhere, kind of as a separate add on policy. That’s one option that’s being discussed.

Miller: But let’s say that even this option and maybe even an expanded FAIR program is maybe too expensive for somebody. What are the dominoes that follow from not being able to get homeowners insurance?

Grable: Well, if a lot of people can’t get insurance, that would really be a problem. Sort of in a worst-case scenario, if people can’t get coverage, property values fall, there’s less property tax revenue going into counties to fund important services like roads and schools. If this happened on a grand scale, there could be a massive domino effect that eventually leads to the implosion of some of these vital services. But hopefully we won’t see that happen here.

Miller: How much can Oregon homeowners do to convince insurers to reduce their premiums or maybe change their minds about not offering policies? You mentioned that insurance companies under this relatively new Oregon law, they’re not required to change their minds if Oregonians do various things. But what are those things that homeowners might do?

Grable: I think number one, creating dense defensible space around the structure is sort of low hanging fruit and something that property owners should do anyway, particularly if they live in a high hazard zone. So that typically involves removing vegetation from right around the structure, removing other combustible material, whether it’s piles of wood or something like that. If there’s trees that are overhanging the roof, thinking about cutting those back or even removing them all together. Keeping your needles and leaves out of your gutters and things like that. And there are good resources available through the Oregon State Fire Marshal to help property owners with that.

Miller: Is there evidence that insurance companies pay attention to these kinds of mitigation efforts? They’re not required to, but I imagine that they’re in the business of wanting to be in business and to have as many customers as possible. They also want to be careful, they can’t lose money every year. I’m just wondering how much they, say, even go to a property or pour through photos, maybe that a homeowner would send in and say, “yes, this property, we will offer you a policy or we won’t charge this much more because we like what you did with the trees around the perimeter.” Do they do that?

Grable: Well, I think so to an extent. The couple that I profiled in my story, the Rowlett’s, were able to get coverage. Well, let me back up. So they had their company send them a letter telling him they weren’t going to renew their policy. And one of the reasons was they thought they were too far away from a tax-based fire department. Their agent came up and walked the property with them and took pictures showing that they had really done a lot of work to mitigate risk. And, based on those photos, the company did offer them a new policy.

I heard from other sources, including Representative Marsh that I spoke with for this story, that actually defensible space is one of the things that companies are most likely to look at. I think, again, because that’s maybe more clear-cut than some of these home hardening measures that homeowners can take that are connected to other factors. I think creating defensible space, even look at a home and say, yeah, they did a good job.

But I do want to stress that there’s only so much an individual property owner can do. If an insurance company is looking at an area that they deem is at a high risk, they still may opt not to cover that property. That’s why it’s really important for people to look at community-level actions, neighborhood-level actions. The Firewise program is a really good example of that. So that’s where the whole neighborhood participates in the program and does things not only to protect and reduce vulnerability around their individual homes, but for the whole neighborhood as well.

Miller: Juliet, thanks very much.

Grable: You’re welcome. Thanks so much for having me on.

Miller: Juliet Grable is a contributor to Jefferson Public Radio.

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