California Insurance Crisis Deepens As Thousands To Lose Fire Cover

Thousands of California homeowners are set to lose fire coverage on their properties as the Liberty Mutual Fire Insurance Company continues non-renewing policies for those in at-risk areas of the state.

The insurer, one of Liberty Mutual's California subsidiaries, is in the process of refusing renewal for 17,000 homeowners in the state holding "dwelling fire insurance" policies with the company. The non-renewals, according to filings with the California Department of Insurance, started in September 2023 and will last through November.

This is because the company is retiring its "antiquated" technology system used to handle such policies and said that it's "not feasible to create a new system to support this product in California," as it wrote in the filing. It's a company-wide change that's affecting Liberty Mutual Fire Insurance Co. fire dwelling policies in several states including California, a spokesperson for the company told the San Francisco Chronicle.

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Liberty Mutual told Newsweek that "the decision is not related to wildfire risk; these policies are supported by older systems platforms that we are retiring companywide."

The company stressed that the non-renewals are related to a filing that dates back to 2023 and began last fall.

But in no other state this change is expected to be as painful as in California, where a total of 5,588 wildfires this year have already burned 832,337 acres through the state, killing one and destroying over a thousand structures, according to the California Department of Forestry and Fire Protection, or Cal Fire.

Faced with more frequent and more severe extreme weather events likely to cause millions in damage claims, several private insurers recently decided to cut coverage in the Golden State—especially as they can't increase premiums further than California regulations will allow. The average cost of homeowners insurance in California is currently $1,250 per year, according to Nerdwallet. By comparison, the national average is $1,915 per year.

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Some insurers are both cutting coverage and increasing premiums. Last month, State Farm moved to seek an increase on its home insurance premiums by 30 percent.

Dwelling fire insurance provides coverage for homes that are not the owner's primary residence—including holiday homes, cabins, cottages, and others—and covers the cost of repairs or rebuilding should the property be damaged by fire. Coverage covers the structure of the home but not its content.

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Liberty Mutual Fire Insurance Company cutting 17,000 such policies in the Golden State is another hurtful blow for California homeowners already struggling to find affordable insurance—or to get coverage at all. As of 2023, Liberty Mutual represented about 4 percent of the total property and casualty insurance market in California and 9.8 percent of the state's fire insurance market.

The non-renewals account for roughly 1 percent of the company's total personal insurance policies in California and less than 2 percent of the total fire insurance market.

In a statement reported by ABC7, Liberty Mutual said that the non-renewals have nothing to do with the fire risk in California. "The decision to stop writing this product line is not specific to California and not related to fire risk," the company said.

A spokesperson for Liberty Mutual said that the company will be offering dwelling fire insurance coverage in California under the Safeco Insurance Brand, as reported by the news company.

Are you a California homeowner who had a dwelling fire insurance policy with Liberty Mutual? We want to hear from you. Contact [email protected].

Update 8/30/2024, 4:50 a.m. ET: This article was updated to include comment and background information from Liberty Mutual.