Stu Smith got an email from his insurance company last summer with some bad news: His premium was more than quadrupling.
Smith is the co-owner of Smith Madrone, a wine operation in the mountains of California’s Sonoma Valley, and he had held a wildfire insurance policy with the company for more than 30 years. Now, though, the insurer had decided Smith’s property was too risky to keep on its customer rolls at anything close to its longtime price. If Smith wanted to renew his policy, he would have to pay annual premiums of more than $55,000, up from just $12,000 the year before.
The following week, as the LNU Lightning Complex Fire began to spread in the hills just east of Sonoma County, Smith scrambled to find a new insurance company. No private insurer seemed willing to issue him a policy, so at the last moment, he resorted to a state-run insurance plan that covered a portion of his property. The price was still orders of magnitude greater than what he’d grown used […]
This is how insurance works. It is the pricing of risk. If the risk is too great the for profit insurance industry will not provide coverage. What it will also demonstrate is the power (corruption) of lobbying in the State. As the article stated:
For the past two years, California has issued one-year moratoria that prohibit insurers from dropping customers in areas that saw severe fire damage that year. This has slowed the pace of displacement for those in the highest-risk regions, but it has not slowed down the pace of nonrenewals in other areas, nor does it protect homeowners after the moratorium expires.
This demonstrates the power of the wine growers lobby. As the article illustrates, the next step is to cost shift risk to the tax payer. How long that occurs is another indication of the power of the lobby. Once that ends the game is over. In the meantime those who have enjoyed cheap Sonoma and Napa valley wines should brace for double or triple price increases.