As California enters its third year of drought and as another season of wildfires begins which are becoming more common and disastrous, industry officials and consumer advocates agree that wildfires are partly to blame for recent insurance premium increases.

Just in the past year, several large insurance companies won approvals from regulators that granted premium hikes ranging from 4% to 7% as well as requests for similar increases which were submitted to the state insurance commissioner.

Years ago wildfires occurred every six or seven years, but now they are becoming yearly events.

Sadly, more and more fire victims are finding that they did not have enough coverage to pay for the entire cost of rebuilding their homes from recent fires. Even consumer advocates are concerned about the quality of the coverage rather than its costs.

Many people are concerned that insurance companies will use the recent fires as a means to increase their rates which may in turn compound underinsurance problem and thus people will be paying more for less.

Even with an estimated 15 million homes throughout California, there should not be a very large surge in the cost of insuring a home even after the very destructive wildfire that destroyed nearly 2300 San Diego area homes back in 2003.

It should be noted that insurance rate increases, which can only be approved by the State Department of Insurance, are based on three years of loss which may delay the effect on premiums based on fires that occur in any single year.

Even as the nearly 3-week old Station fire, that's still burning through the San Gabriel Mountains and has affected nearly 20,000 homes, is still not even 1% of homes in the state of California.

However, the cumulative effect of six years of larger and costlier fires that are affecting homes that are located in what was a once rural extended suburb is beginning to affect homeowners' insurance bills.

Late last year State Farm Mutual was granted a 6.9% increase in homeowner insurance and Farmers Group Inc got a 4.1% rate increase.

Allstate Corp requested a 6.9% increase but that is still waiting to be approved by the State Insurance Commissioner.

A spokesperson for the State Insurance Commissioner recently stated that the premium increases that have been approved are negligible compared to the rate cuts that began in 2006 by former Insurance Commissioner John Garamendi who is now the states Lieutenant Governor.

Examples of these rate decreases show that Farmers premiums fell 18% in 2006, State Farm's rates dropped 20% in 2007 and Allstate's dropped 28% in mid-2008.

These reductions saved policyholders an estimated $700 million.

Ironically, even as insurers were reducing rates, pressure was mounting to raise them again.

Bob Deverereux, a State Farm spokesman said, "A first wave of wildfires early this decade, combined with the housing boom, led to greater-than-expected increases in rebuilding costs."

Allstate decided in 2007 to limit its risk by no longer providing homeowner insurance to new customers in California.

Even though California still remains a competitive market for homeowner insurance, many consumer advocates are concerned that more companies may follow Allstate's plan by partially or completely pulling out of the state. That was the case in Florida after a rash of powerful hurricanes that severely struck the state.

More people may have fewer choices and be forced into a state-backed, insurance plan that provides very limited coverage for homeowners because a smaller insurance market with sorely lacking coverage could further enhance the underinsurance problem.

Last year, legislation was proposed to encourage policyholders and insurers to make sure that dwellings had enough coverage to pay for their reconstruction, but the bill didn't gain traction and was later dropped.

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