Insurers Won’t Issue Policies For New Homes in CA - As State Monopolies Fire Things Up

Emma Campbell | June 5, 2023
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Major insurance carriers recently announced that they will no longer insure new homes in California due to the rapidly increasing cost and risk caused by wildfires in the area.

On May 27, State Farm announced that it will no longer be insuring new homes due to the rising costs of construction (which are currently outpacing the rate of inflation) combined with the increasing exposure to catastrophe and “challenging reinsurance market.” 

On Saturday, Allstate confirmed that it ended new home insurance policies last year, for similar reasons. Both companies have assured current customers that they will not lose their insurance, and other types of insurance will still be offered in the state. 

Sources tell ABC 7 in California that Farmers Insurance is headed down a similar track, limiting policies for new customers.

All these decisions come on edge of the approaching wildfire season in the region. 

The decisions by these insurance carriers reveal the widespread negative effects of the federal government mismanaging forest lands—effects that have been in motion from as early as 1976. 

The National Forest Management Act of 1976 was Congress’s attempt to put together a comprehensive process for planning U.S. forests, but it was flawed. Through this piece of forestry regulation, “bureaucratic centralization and environmentalist initiatives have left forests overgrown, vulnerable to fire, and dangerous to individual property owners and the economies of many states,” wrote Jarrett Stepman in a 2017 article for The Daily Signal.

In California’s case, there is another factor at play in the risk of wildfires causing damage to private property: power lines that run across these lands are owned by a company heavily influenced by state government, Pacific Gas and Electric (PG&E). PG&E is a government-licensed energy corporation with government-established caps on its prices.

PG&E draws from a government-controlled system of how much power it can offer, and there is a government-inspired risk tied to the decision of the land over which the lines should run. PG&E virtual monopoly status over the wholesale market of power in CA comes with a deal to run the lines over state-owned lands, rather than having to go to the trouble of actually paying private owners and facing real liability calculations.

PG&E has openly admitted that the power lines could spark and start wildfires in certain conditions, which is why they instituted a policy of “public safety power shutoffs” in 2019. Cutting power to people in at-risk areas so that the lines don’t contribute to the spread of fires. 

Neither PG&E’s contingency plan nor the insurance carriers’ new “no insurance” policies would be necessary if the California government would remove it's price caps, privatize its electric grid and sell off federal and state lands.

As for the privatization of the lands that currently belong to the federal and state governments, there are several points to consider. First and foremost, the U.S. Constitution only explicitly allows the federal government to control three kinds of land—the seat of the federal government (Washington, DC), federal military base property, and federal territories, as MRCTV’s GardnerGoldsmith detailed in a July 2021 blog post. 

Second, the government is insufficiently motivated to properly manage these lands since it is not a private company that can be held liable for its mismanagement and is also largely incapacitated by its own bureaucratic red tape.

If the federally-regulated lands were turned over to the private sector, owners would be financially responsible for any damage caused by extreme wildfire, both to the property they own and to other people’s private property. Effectively incentivizing proper care for those lands so as to lower the likelihood of fires occurring.