When Leah Fisher and her husband bought their mountaintop home in Chelan County four years ago, they were not naive to the potential for wildfire. They cleared the trees and created a vast green space around their house, already flanked by a fire-resistant metal roof and siding.
“Even if a fire came through, we feel like we are in a pretty good position and our structure would survive,” she said.
Her insurance carrier disagreed.
Last year, in early July, the Fishers received a letter from their carrier, Scottsdale Insurance Company, a subsidiary of Nationwide, informing them that, sight unseen, the property was too dangerous to insure. They had four weeks to find new insurance, it said. By that time, the first late summer fires would begin to burn.
“It seems criminal to take our money all year then cancel our insurance in August when we are at most risk for forest fires,” Fisher wrote in a letter to the Washington Office of the Insurance Commissioner, seeking help. Her mortgage depended on the coverage, she explained.
Instead, the state told her there was nothing it could do and marked her complaint closed.
Fisher is one of dozens who recently sought help from the commissioner for this problem and found the state ineffectual. The number of such complaints reported since 2022 is roughly 10 times higher than the annual average of the previous six years and speaks to a growing problem for Washington residents: insurance companies using wildfire risk scores to discontinue insurance policies.
Washington does not actively track or prevent this practice, and the state provides little recourse for residents when they lose coverage.
Nationally, use of wildfire risk scores that predict the possibility of natural disasters destroying homes is rapidly becoming the industry standard. In places like California, where the severity of wildfires – and the insurance ramifications – are most blatant, some lawmakers and regulators are taking action.
California publicly tracks nonrenewals and requires insurers to be transparent about risk assessments and to allow homeowners to appeal their scores. A new law passed this spring in Oregon attempted to block state risk maps from influencing insurance policymaking.
But Washington does none of this, meaning the full scope and impact of nonrenewals in the state is unknown.
To the Washington residents who filed complaints about lost insurance, the state repeatedly said there was little it could do. “We unfortunately cannot tell or force the company to reinstate the policy,” state compliance analysts wrote back. “No violation found.”
What’s a wildfire risk model?
Risk models were first designed by the federal government to help homeowners identify proximity to possible natural disasters and take steps to withstand them.
But as the cost and scale of disasters escalated, insurers began using these models to inform underwriting decisions – with increasing sophistication and advancing technology.
Yet the models used to deny coverage are far from uniform and often obscured from consumers, making their use largely at the will and interest of the company. Insurers employ various third-party vendors that draw from different data sources and consider different factors for insurability.
Most employ a melange of satellite images, census data, historic fire information or climate projection that can roughly determine a home’s probability to burn – not only today, but over the next 30 years.
The definition of “high risk,” therefore, is highly subjective.
This practice has left residents at a loss. Home and business owners say they have done everything to make their properties fire-safe – and even been assured by local fire chiefs, or worked with the state Department of Natural Resources, to ensure that their home, or community, has a low risk of wildfire.
But the best way to protect a home from fire is also not standardized, and so insurability can come down to a simple bottom line: an address or ZIP code-based fire score.
“I have done all the right things but yet without even knowing me, or coming out to visit my property – anything – they said we don’t want you, get lost. After 21 years,” said Ernst Bentsen, a former Pemco customer.
Dawn Lee, Pemco Insurance vice president, said in an email that the company made “the difficult decision” to reduce less than 1% of coverage to homes in Washington and Oregon to balance its overall risk.
“Because of the changing dynamics of wildfire risk and our concentration of homeowners policies, however, a policyholder can do all these things [to reduce risk] and we are still no longer able to insure their property.”
Lee said this became necessary for Pemco and many other insurers because of the increasing threat of wildfires regionally, inflation and the growing number of homes built in wildfire-prone areas.
Bentsen, who lives in a development with trim lawns and 24-hour security monitoring, asked his fire chief in Wenatchee (who called Pemco on his behalf), the mayor and ultimately the state insurance commissioner to help him appeal Pemco’s decision. It had no effect.
“They are licensed by the state of Washington. They should have some basic laws for what they are doing,” Bentsen said in an interview. It felt, he said, like “unilateral discrimination.”
Residents say they are struggling to find new policies and end up paying much higher rates, or can only obtain partial coverage. The Fishers’ new fire policy will cover less than half the value of their home, far less than they would need to rebuild.
Growing number of nonrenewals
Eric Kossian had run an independent, statewide insurance agency in Leavenworth for 18 years when he noticed an alarming trend. Dozens of homeowners were being dropped from longtime insurers, despite never having filed a claim. Each was given the same rationale: wildfire risk scores. Kossian said he has rewritten more than 100 policies in the last year alone. The previous year he saw just one such client.
“It is a pretty dramatic thing,” he said of wildfire risk scoring. Kossian said many premiums have more than doubled and new buyers are unable to find home insurance or afford the cost when they do.
Insurance through the larger companies regulated by the state, known as preferred or admitted carriers, is also harder to come by, he said. Instead, Kossian has seen an increasing reliance on surplus carriers for insurance, which are able to charge higher premiums without approval from the state.
When even those carriers deny coverage, homeowners must turn to Washington’s FAIR Plan, the state-backed plan of last resort that offers meager coverage at a higher cost. Kossian is seeing more people resort to this option.
These strains do not exist just for homeowners, but for people who own condos and businesses too. A restaurant owner in Yakima County said her annual insurance policy – on the Washington FAIR plan – soared to $50,000 in the last year. The owner of a small 18-room hotel in Okanogan County was quoted over six figures annually.
Using census data, which looks at population by ZIP code, and federal fire data, Verisk, one of the primary third-party companies used by insurance providers, found 20% of Washington homes face moderate to extreme risk of wildfire.
A separate data analysis found the number of homes at risk in Washington is expected to grow by nearly 30% in the next 30 years, according to a report released this week by First Street Foundation, a Brooklyn, N.Y.-based nonprofit focused on climate risk research.
Some areas, like King County, have minimal fire risk over time. But in coming decades, other Washington ZIP codes could see a more than 200% increase in the number of properties at risk of wildfire, and of losing insurance coverage as a result, according to First Street. Some ZIP codes that currently have no homes at risk are projected to have hundreds of vulnerable properties by 2053.
“Anywhere where risk is high, this is how insurance companies are responding,” said Jeremy Porter, First Street’s head of climate implications research. The nonprofit also developed a tool – riskfactor.com – that both businesses and the public can use to see the various climate risks at any address, from wildfire to heat and flood threats. Insurers use the tool too.
Growing wildfire risk in Washington
Analysis by First Street Foundation found the number of homes at risk in Washington is expected to grow by nearly 30% in the next 30 years. Compare wildfire risk data by ZIP code from this year and projected for 2053 in the following two maps.
“We know insurance companies are using it and banks are using it,” Porter said, but “we would rather the data to be out there, and the risk to be known, than for it not to be known.”
The insurance industry’s withdrawal from disaster-prone areas is “a once-in-a-generation crisis,” Kossian said.
But when Kossian wrote and called the insurance commissioner about the growing impact of wildfire scoring, he received no response.
Washington lags on regulation
Nationally, the insurance industry considers 2017 the year wildfire became a serious financial consideration. That was the first time the cost of wildfires equaled hurricane destruction.
But Washington regulators knew the state had the potential for wildfire to impact insurance coverage years earlier. In July 2014, lightning sparked the Carlton Complex fires that burned more than 250,000 acres and decimated 353 homes in the Methow Valley. Over 400,000 acres burned in Washington the following year.
The Office of the Insurance Commissioner reached out during those fires to insurance companies weekly to track how many customers they were helping. By 2016, the office began receiving the first complaints that wildfire risk was informing underwriting decisions.
As complaints continued to build, Commissioner Mike Kreidler conducted a study in 2019. But the results were not made public and no steps were taken to curb the practice.
“It’s of great concern to Commissioner Kriedler,” David Forte, senior property and casualty policy adviser for the Office of the Insurance Commissioner, said in a phone interview. However, Forte said the Washington insurance market is healthy and “uniquely different” from other Western states.
“There have been lots of internal discussions on transparency,” he said. “The commissioner’s position is the company should tell the insured more information, not less.”
The state determines the market’s health based on the number of annual FAIR Plan policies, which are among the lowest in the nation.
However, the FAIR Plan does not cover second homes, vacation or seasonal properties – prevalent in Washington’s rural, fire-prone regions.
The only other factor the office uses is the number of complaints it receives, Forte said. But “we are not getting any complaints, other than one or two folks not being able to find coverage,” Forte said.
Public records reviewed by The Seattle Times, however, indicate that nearly 40 wildfire nonrenewal complaints have been submitted in the last 18 months – 60% of all fire-related complaints.
Regulators and lawmakers in other states have taken a more aggressive approach.
California’s Department of Insurance collects, tracks and makes public the number of people who received nonrenewal notices and turned to surplus carriers or the California FAIR Plan.
And in 2022, the California insurance commissioner required insurance companies to make their wildfire risk score determinations public and provide customers the opportunity to appeal the decisions, as well as requiring the companies to provide discounts to homeowners who take certain fire safety measures.
In Oregon, after an uptick in wildfire nonrenewals, a controversial wildfire risk map was released in 2022 by the state but then retracted. The Legislature codified a law saying insurance companies could not use the state maps to justify any type of underwriting decision and requiring transparency around risk scores.
Washington does not track how many people receive notices of nonrenewal or why. It does not track how many people have faced increasing premiums or struggle to afford them. And it does not track how many people are underinsured – like the Fishers – nor how many people go without insurance entirely. The state also does not track how many plans are written by surplus carriers.
“In Washington state, at the broadest level, it would be a mistake to look at California and say, ‘Thank goodness we don’t have that situation,’ ” said Matthew Auer, dean and professor of public and international affairs at the University of Georgia, whose research looked at the correlation between people who live in high fire risk areas nationally and low-income households, and in turn face greater harm from insurance nonrenewals.
“Rather the perspective should be, ‘but for the grace of God,’ ” he said in an interview. “The next big catastrophic wildfire could absolutely happen in Washington state.”
‘Everything is tougher’
Meanwhile, insurers have been hit hard, as extreme natural disasters eat away at reserves and the claims get more expensive due to rising inflation and supply shortages.
The cost of reinsurance – the insurance for the insurance industry – has also soared.
“Everything is tougher,” said Kenton Brine, president of the Northwest Insurance Council. Companies “are scaling back and doing more nonrenewals and doing more rate increases for consumers than they have seen in previous years.”
Some people are forgoing insurance entirely because of the cost, he said.
For low-income communities, individuals with disabilities and older adults, who already have less recourse or ability to protect their homes when wildfires occur, these burdens are particularly amplified, Auer of the University of Georgia said.
Also, the First Street research found an impending financial vulnerability creeping up: a climate housing bubble. When home insurance costs spike, or coverage is unavailable, a home’s value decreases. As insurance becomes unavailable, the more the housing market will be affected, Porter said.
Gordy Skoog has owned his home in Winthrop, Okanogan County, since 1980 and never had an insurance issue until the last few years, when he was dropped twice by carriers because of wildfire risk.
“We have been loyal customers for a number of years,” Skoog wrote to the insurance commissioner, citing the lack of transparency and communication from the company – with no opportunity to appeal the decision.
But the commissioner’s office provided no recourse.
“We started thinking about, can we insure it ourselves? Which is not reasonable. It made us think about, do we go without insurance?” he said in an interview.
Then, on a recent morning, while still grappling with Washington insurance, Skoog watched a video of his tenants fleeing the burning structure of what had been his home in Lahaina on Maui. Without insurance, he said, he would have been left with ashes.
Maybe one day he will have to leave Winthrop, Skoog said, but “not yet. When you love a place, you gotta stick.”
“I always thought that (the insurance commissioner) stood behind good insurance and the public. It is a crushing reality that the state isn’t standing behind the difficulties of its residents,” he said. “And it is only going to get worse.”