The recent devastating fire in Northern California, where 3,135 homes and apartments were destroyed in the Oakland and Berkeley area, will have a chilling effect on the national insurance industry. Premium rates for real property fire insurance will be forced up substantially over the next five years.
That's the opinion of Judy Sather, a longtime owner of an independent insurance agency. Those increasing rates could have a particularly strong impact on homeowners whose property is located in brush areas.
For homeowners in those high-risk areas, new problems may quickly emerge. New fire coverage policy applications are much more likely to be rejected, Ms. Sather said. And existing policyholders may receive non-renewal notices from their insurance companies.
How can a homeowner in a brush area obtain needed fire insurance coverage for his property? In many cases, he must turn to his state's FAIR Plan Association, if such a group has
been formed. It's a lot more expensive, but it is a source of insurance for owners of high-risk homes.
A FAIR Plan is an association of all fire insurers who have certificates of authority in that state. The participating firms pool their resources to make essential fire coverage available where hazards beyond the property owner's control make writing fire insurance unprofitable, according to Bob Reinertson, underwriting manager for California FAIR Plan.
FAIR stands for Fair Access to Insurance Requirements. The special program was created by legislative action to make insurance available in all high-risk situations, including coverage for fire, earthquake and civil disorders in urban areas.