The raging wildfires across California look utterly terrifying, and thus far have destroyed over 1,500 homes and damaged hundreds more. It will take years for the families who are affected by the loss of homes to take stock and rebuild. Displacement of this magnitude is always accompanied by a great deal of stress and anxiety about the future.
The last great bout of wildfires in California was in the San Diego county area in 2003, when a small brush fire developed into a major conflagration that spread all over San Diego County. The wildfire destroyed over 3,500 homes and caused billions of dollars in damages. Furthermore, homeowners filed hundreds of lawsuits against insurance companies, alleging that insurance agents did not advise them properly to purchase enough fire insurance coverage to rebuild their homes. Insurers have generally prevailed in court on this matter.
According to accident analysts, the damages in California so far appear marginal – about 2.5% – compared to what was paid out by insurers in the aftermath of Hurricane Katrina. Insurance companies spent over $40 billion dollars satisfying Katrina claims. Despite the inherent tragedy of the situation, California claims would still represent a very small fraction of these payouts.
California residents should look for the state’s property insurance market, especially in high-risk areas, to become much tighter. Insurance analysts agree that certain policies in some high-risk markets may not be renewed at all.