Property insurance at a premium in valley

Proposed laws aim to help consumers

Homeowners and businesses in the Methow Valley are finding it increasingly difficult to get property insurance — or seeing their policies cancelled when they come up for renewal — as more companies decline to issue policies in areas they deem at high risk of wildfire. Those that continue to write policies have raised premiums substantially.

The risk of wildfire to residential areas has been increasing as the climate grows hotter and drier. At the same time, more people are living near forested areas, where fire risk is even higher. That also puts them further from fire stations.

Now, a handful of bills under consideration in the state Legislature seek to provide some help to consumers. Senate Bill 5928 would provide more information about why an insurance company denied coverage, and bill 6079 would offer grants to help people retrofit their home and property to be better protected against the risk of wildfire. Both bills are cosponsored by Sen. Shelley Short (R, 7th Dist.).

Bill 5928 would require insurers to provide consumers with their wildfire-risk score, explain the factors that adversely contributed to the score, and outline steps the consumer can take to improve the score — all in clear language. Insurers would have to offer discounts to people who could show they had taken steps to reduce fire risk. The homeowner would be able to appeal the score and the insurer’s determination.

Bill cosponsor Sen. Judy Warnick (R, 13th Dist.) told the Senate Committee on Business, Trade & Economic Development at a hearing this month that she and Short “hear almost daily” from consumers who have lost insurance or face exorbitant premiums. Insurance companies regularly cancel policies, even for customers who’ve had the coverage for years, Warnick said.

Most insurers subscribe to services offered by companies that provide risk assessments based on satellite imagery, fire science and statistical modeling, and use those scores to set the cost of a policy. That information helps companies decide whether a property is eligible for coverage, David Forte, Senior Property & Casualty Policy Advisor for the Insurance Commissioner, told the committee.

Bill 6079 would provide grants to property owners, contractors and nonprofits to reduce fire risk through the Strengthen Washington Homes Program. It would prevent insurance companies from disqualifying a property from coverage if the home is “wildfire prepared.”

The grant program would use standards from the Insurance Institute for Business & Home Safety, which include retrofitting homes to keep out embers, said Aaron VanTuyl, communications and media manager for the Washington Office of the Insurance Commissioner.

The grant program is one of five recommendations made by the Wildfire Mitigation and Resiliency Standards Working Group in a report to the Legislature in December. Grants would be administered by the Office of the Insurance Commissioner, which requested both bills.

In the past two years, more than 25 communities in the county — most in the Methow Valley — have received Firewise USA certification, said Okanogan Conservation District Forests and Wildfire Lead Eli Loftis, who helps with on-the-ground assessments and technical assistance for communities looking to reduce wildfire risk.

Programs such as Firewise help homeowners identify and prioritize actions to reduce ignition risk to homes, such as clearing vegetation near homes and hardening the structures with nonflammable materials. Some states allow Firewise communities to get discounts on insurance, but there’s no provision in Washington law to permit that, Loftis said.

It’s not uncommon for valley residents to scramble to find a company to insure their home. People who can’t find insurance turn to the Washington FAIR Plan, which provides basic property insurance to applicants who can’t get insurance in the standard market. FAIR is available for dwellings and commercial buildings, but is generally more expensive, according to the plan’s FAQs.

Help for commercial insurance?

As currently written, the wildfire-score legislation would apply only to the residential market. But businesses struggle to find coverage for the same reasons, according to the Washington Hospitality Association, which helps restaurants and lodging establishments obtain insurance. Association Senior Manager of Insurance Services Logan Dozier testified in favor of bill 5928 and urged the Legislature to amend it to include commercial policies.

The Old Schoolhouse Brewery, which operates three pubs in the valley — in Mazama, Winthrop and Twisp — was declined by 12 insurance companies in 2023 based on their location in a wildfire zone, co-owner Jacob Young said. The Mazama Public House was flagged as the highest risk, but the rejection applied to all locations. “It essentially means our insurance premiums have gone up astronomically every year,” he said.

Dozier works with a dozen insurers, and many deny coverage entirely for businesses in areas considered at high risk for fire. Most denials are because of concerns about wildfire, Dozier told the Methow Valley News last week.

Insurance companies often refuse to write policies in certain areas, including Winthrop, Twisp, Wenatchee and Leavenworth. While there can be challenges finding coverage in parts of the state at risk from flooding, most denials are because of wildfire risk, Dozier said.

Businesses that have to turn to the insurer of last resort end up paying higher premiums and additional fees — and getting less coverage, Dozier said. Insurance costs are now often among the top three expenses for a restaurant or hotel — coverage can cost $30,000 to $40,000 for a small diner, Dozier told the Senate committee.

The proposed law would be very beneficial because it would push underwriters to provide a business with details about their decision and show what the business needs to do to be insurable, he said.

Because most large insurance companies cover homes and businesses across the country, premiums can be affected by hurricanes in the southeast or fires in California, not only local wildfire risks, Dozier said.

A representative for Washington Realtors also testified in favor of the bill, saying it would address the increasing danger of wildfire by giving property owners information and tools to better protect their homes and communities.

Risk scores

Most insurers use data analytics from third-party companies to calculate risk scores. The analyses typically use satellite imagery and historical property and insurance-loss data to calculate the scores, VanTuyl said.

The analytics are proprietary and the insurance commissioner doesn’t review underwriting decisions nor create risk categories. Insurance companies are not required to insure properties they deem a bad investment, VanTuyl said.

The Washington Surveying and Rating Bureau (WSRB) produces data for insurance companies and consumers, resulting in a protection-class rating from 1 to 10. Most insurance companies writing in Washington state use WSRB data, which is one of several inputs used to determine a premium for fire insurance.

WSRB looks only at fire stations, fire hydrants and water supply, emergency communications, and enforcement of local fire and building codes. Dwellings and businesses in an area cannot get a better rating than the one WSRB assigns to the entire town. WSRB does not look at the ignition risk around a home.

The Northwest Insurance Council supports some aspects of the risk-score bill, but is concerned it could create another layer of regulation, council President Kenton Brine told the Senate committee.

The council wants details to be provided only at the request of a policy holder after a cancellation or premium increase — providing that information to all policy holders and applicants would add even more costs to already expensive homeowner’s insurance, Brine told the Methow Valley News.

A requirement that insurance companies obtain approval of underwriting guidelines from the insurance commissioner would interfere with companies’ freedom to decide what to include in policies and which markets they want to serve, ultimately reducing price and policy options for consumers, Brine said.

Some states that don’t allow companies to charge rates that align with wildfire risk have seen insurers stop writing homeowners’ insurance altogether, pushing more people into the market of last resort, Brine said.

The National Association of Mutual Insurance Companies opposed the bill altogether, saying it could cause insurers to drop the wildfire scores entirely and instead use a less accurate system that would increase premiums across the board.

The Methow Valley News reached out to insurance companies for more information about the market, but none responded by press time.