By Sherry Robinson
All She Wrote

When we look back at fires, California’s and New Mexico’s, we’ll see that the victims got burned twice – once during the event and again when they tried to rebuild and found they couldn’t get insurance. That’s if they had any to begin with. Many don’t.

This is not a rant about insurance companies. Two of my early jobs were with insurance companies. I spent years writing about them as a business writer, so I don’t expect them to act like charities.

New Mexico and California have property insurance problems driven by climate change. The disasters are growing so big and so costly that insurers can no longer provide coverage. Many have been losing money. But California’s insurance troubles are far worse than ours.

The state of California placed price controls on home insurance; any increase in premiums above 7% requires approval from the state insurance commissioner, who is elected. He wants to keep his job, so he’s said no to insurance companies wanting to raise rates to match their risk, and companies have left California. Last year, State Farm, the biggest home insurance provider in the state, cancelled thousands of policies in risky places saying that in the event of a major disaster the allowable premiums would tank the company.

With no other options, Californians have turned to the FAIR (Fair Access to Insurance Requirements) Plan, reported the Los Angeles Times. Provided by the state to cover uninsurable people and funded by a surcharge on insurers still doing business there, it provides limited coverage. That fallback is now strained.

California voters have only themselves to blame for their insurance drought. In 1988 they passed Proposition 103, which required the state to approve premium increases.

California’s ballot proposition system is to governance what chewing gum is to hot pavement. If anybody ever suggests introducing it in New Mexico, vote them out of office quickly.

It’s a bit comforting that we’re not in California’s boat, but New Mexicans have serious issues too. In August the Legislative Finance Committee, meeting in Ruidoso, heard testimony from the state’s insurance regulator that insurers are increasingly reluctant to renew or approve policies in riskier areas since this year’s wildfires, and home insurance premiums have spiked. (We can probably add Roswell’s floods to the list.)

LFC Chairman and Sen. George Muñoz, D-Gallup, commented, “I got denied on a commercial property in the middle of Gallup next to a fire hydrant because of wildfires.”

The Office of the Superintendent of Insurance (OSI) sued State Farm, the state’s largest insurer, saying it improperly denied some claims after the South Fork and Salt fires. The state lost, reported Source New Mexico.

New Mexico hasn’t seen quite the exodus of insurance companies as California; despite losses in 2016, 2017 and 2022, they’re mostly profitable here. Nationally insurers have paid out more than they’ve taken in over the last ten years.

New Mexico also has a FAIR Plan, and it too is a fallback that costs more than conventional insurance and provides minimal coverage — $350,000 for homes and cash value, not replacement cost, for a home that’s lost. Protection is too thin to get a mortgage. You can see how this cascades into economic impacts on builders and local economies.

OSI can’t use a stick to force coverage, so it’s leaning toward carrots. That might mean property owners creating defensible spaces around their homes or new zoning regulations that prevent building in high-risk areas. It might mean beefing up FAIR plans but stopping short of competition with insurers. Fire departments might ask for more help.

We’ll probably see insurance-related bills in the upcoming legislative session. Let’s hope they get serious attention and don’t get lost in the usual crush of a 60-day session.

Sherry Robinson is a longtime New Mexico reporter and editor. She has worked in Grants, Gallup, the Albuquerque Journal, New Mexico Business Weekly and Albuquerque Tribune. She is the author of four books. Her columns won first place in 2024 from New Mexico Press Women.