Pacific Palisades blaze may hike California home insurance rates. Image: Rolling Stone
(The Post News)- The Pacific Palisades area, one of the most expensive neighborhoods in the United States in Los Angeles, has been consumed by wildfires. The neighborhood was home to Hollywood A-listers and multimillion-dollar mansions. Interestingly, before the recent disaster struck, the area actually had some of the lowest insurance costs nationwide.
According to analysts, all that may change as the scale of losses anticipated in the wildfires now ringing. Los Angeles and the regulated changes implemented in late 2024 could possibly end cheap homeowners’ insurance like the Palisades, which are elevated risk for wildfires.
Philip Mulder, a professor at the University of Wisconsin who studies the industry, says one could see relatively low premiums in high-risk markets in California, but that might be starting to change.
Officials say the fires raging around Los Angeles might be the most damaging in state history. The wildfire has ravaged thousands of homes and businesses across a vast area. It stretches from the Pacific coast to the hills north of Los Angeles. As of Thursday morning, the fire remained completely unconstrained. Furthermore, at least five people have died. Estimated damages range from $10 billion to over $50 billion.
The low cost of insurance in the Pacific Palisades is the reflection of the vagaries of a homeowners’ insurance market in the United States. Prices can vary widely due to the differing regulatory policies from state to state. California’s consumer-focused regulations have helped keep insurance prices in check, even in areas prone to natural disasters. However, this has led to a backlash from insurers, many of which have reduced their coverage offerings in the state. California’s consumer-focused regulations have helped keep insurance prices in check, even in areas prone to natural disasters. However, this has led to a backlash from insurers, many of which have reduced their coverage offerings in the state. California’s consumer-focused regulations have helped keep insurance prices in check, even in areas prone to natural disasters. However, this has led to a backlash from insurers, many of which have reduced their coverage offerings in the state.
Ricardo Lara, the state’s insurance commissioner, announced an overhaul in December. The overhaul will make it easier for insurers to raise rates and factor in climate risks. Reinsurance costs will play a role when setting prices. However, it would also require them to offer coverage in high-risk areas, which will take effect this month.
Vice president of insurance with Morningstar, Patric Douville says that insurers will try to continue to offer coverage in California, which is one of the most lucrative markets in the country. Although they will have problems providing affordable coverage in areas like Pacific Palisades, which will remain risky even after the fire dies out.
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