Grace Neumann wishes the insurance news was better for those in debris flow and fire prone areas of Montecito, Santa Barbara and Carpinteria, but it is not.
And the long-range forecast isn’t going to bring smiles to too many faces.
Ms. Neumann is a vice president for Chivaroli Premier Insurance Services, a Westlake-based insurance company for high-net-worth individuals. Following the Thomas Fire and debris flow three years ago that ravaged large sections of Montecito and neighboring areas while claiming more than 20 lives, insurance carriers have been running for the hills ever since.
“The admitted markets — which include, among others, Chubb, AIG and Pure, the high-net-worth markets — are no longer writing in Montecito and the surrounding area, and in fact are non-renewing some clients,” Ms. Neumann said. “We’ve already been through rounds of non-renewals and are going through another round in 2021.”
Ms. Neumann, who is a Santa Barbara-based agent for the company, said it’s only going to get worse for people trying to renew and get new insurance in the fire and debris flow areas.
People who are buying new homes in the affected areas are finding out very quickly that just because the home is insured under the previous owner, that doesn’t mean carriers are going to write new policies. According to Ms. Neumann, it’s just the opposite.
“It’s the carrier’s opportunity to get off the risk when a new buyer purchases a home,” she said.
In that respect, the options are very limited, according to Ms. Neumann. Some carriers are providing quotes in Montecito and fire-prone areas of Santa Barbara, but those quotes are few and far between.
So what does one do?
“One option is the California Fair Plan,” she said. “In 2020, California Fair Plan raised its total insurance value from $1.5 million to $3 million. But keep in mind, the $3 million includes everything such as the dwelling, contents, loss of use, landscape, debris removal, and other structures with no kitchens.
“If there is an outbuilding on the property with a kitchen, it has to be written on a separate policy, which is good news, because that provides up to another $3 million in coverage.”
The California Fair Plan may be an option for some, but it is a very limited policy, and you need a companion policy to go along with it, according to Ms. Neumann.
“The main perils a companion policy provides that the California Fair Plan does not, is liability, water, claims, and theft on contents,” she said.
Ms. Neumann went on to say that if property owners choose to avoid the California Fair Plan, which is a very limited option and should always be used as a last resort, in most cases, their only other option is a non-admitted carrier, like Lloyd’s of London, Scottsdale and Great Lakes, to name a few.
“While we’re lucky to have an option like a non-admitted carrier, they come at a potentially very high premium,” Ms. Neumann said. “The non-admitted carriers are not governed by the California Department of Insurance.
“So basically they can look at a property and charge what they feel is an appropriate premium.”
Ms. Neumann also maintains that it is important to look at a non-admitted carrier that has an A rating, so they can financially pay in the event of a claim.
With non-admitted carriers, it is not uncommon to see premiums of $20,000 and above for multi-million dollar dwellings.
“Another downside to most non-admitted carriers is they do not include occasional worker’s compensation like the admitted carriers do,” Ms. Neumann said. “A lot of property owners have domestic employees such as a gardener, housekeeper or a chef, for example.
“With most non-admitted carriers, worker’s compensation is not included like it is on an admitted policy.”
But with all of that, Ms. Neumann says there is an occasional glimpse of hope when they are able to obtain quotes from admitted carriers. But those in the debris flow areas are few and far between.
As for how long this trend is expected to last, nobody knows exactly, according to Ms. Neumann.
“We wish we had crystal balls, but we don’t,” she said. “One carrier has indicated it will be at least eight years, which we are now three years into.”
For more information or questions you might have, you can contact Ms. Neumann at firstname.lastname@example.org.