Dozens Died in California Wildfires. Why Is the State Forcing Insurance Companies To Ignore Risks?
California was besieged by wildfires all summer, torching more than 4 million acres of land, leaving thousands without homes and 31 dead.
While wildfires are a common occurrence in the Golden State, 2020 is wrapping up to be the harshest in modern history, a result of a mix of climate change, poor forest management, and citizens’ insistence on moving into wooded areas prone to fires.
Unfortunately, California seems hellbent on prohibiting market solutions from fixing that third problem. The state’s insurance commissioner has announced that the state is mandating that companies that provide fire insurance cannot drop coverage of properties within the areas affected by wildfires. This is the second year in a row he has done so.
This counterintuitive announcement by Commissioner Ricardo Lara is the result of a state law passed in 2018 that forbids insurance companies from canceling or refusing to renew policies of a residential property for a year after a declaration of emergency on the basis of the property being in an area in which a wildfire has occurred. Lara was actually the primary sponsor of the bill when he was a state senator, so while his hands are technically tied here, he’s directly responsible for this legal state of affairs.
This is a terrible law and an unethical one at that. The marketplace has efficient tools for discouraging building homes in dangerous environments. When insurance companies refuse to insure people who live in places prone to fire, flooding, or other natural disasters, the market is sending consumers a very important message: “It’s not safe to live here. If you make the decision to ignore this warning, we’re not going to be fiscally responsi
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