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High Risks Equal High Costs
By Mike McManus, Director of Engineering Construction & Industry Relations
Recent reports say that more people are leaving San Diego than are moving in. Is part of it just the costs associated with living here? You may be asking why your insurance policies have increased so much. Part of it, according to the experts, are two things in the automobile insurance industry: Number one is inflation, along with the rising cost of repairing vehicles, including the rising cost of parts. Number two is the rise in higher payments in injury claims for car accidents related to the cost of healthcare. Okay, it is inflation.
The homeowner’s insurance picture is getting out of hand very quickly. For example, in March of this year, State Farm Insurance announced that it is not renewing policies for 30,000 California homeowners and is refusing to cover all commercial apartments by not renewing 42,000 policies. This is happening despite California approving State Farm’s requests to levy double-digit premium increases last year. More of that is coming.
Also, some companies have had their credit rating downgraded because of large payouts across the country in various disasters, which hurt their bottom line. This, in turn, has mortgage companies threatening mortgage payers with having to accept their insurance as a last resort because the credit downgrades have made some insurers unacceptable to mortgage companies.
The answer to why this is happening across the homeowner’s insurance industry in California has been blamed on climate change by our elected Insurance Commissioner.
So, with automobile insurance, it's because the federal government started printing money during the pandemic and has not stopped printing. Thus, every dollar you earn is worth less every day. With homeowners’ insurance, the government has not been successful in stopping the fossil fuel industry; therefore we have a climate crisis.
If you are thinking that San Diego County is being hit with higher insurance premiums, look at what the Federal Emergency Management Agency (FEMA) says about our county’s disaster risk rating. You’ll be surprised. FEMA calls it the National Risk Index. San Diego is in the 99th percentile in disaster risks as compared to the rest of the counties across the country. Who knew?
According to the National Risk Index, San Diego’s expected annual loss due to disaster is “very high,” our social vulnerability is “relatively high,” and our community resilience is “very low.” According to FEMA, social vulnerability is the susceptibility of social groups to the adverse impacts of natural hazards, including disproportionate death, injury, loss, or disruption of livelihood. Community resilience is the ability to prepare for anticipated hazards, adapt to changing conditions, and withstand and recover rapidly from disruptions.
Activities such as disaster preparedness—which includes prevention, protection, mitigation, response, and recovery—are key steps to resilience.
FEMA rates San Diego as high risk or relatively high risk in five areas of potential disaster:
- Earthquakes
- Heat waves
- Landslides
- River Flooding
- Wildfires
San Diego is better prepared than many other counties that are also vulnerable to wildfires. SDG&E has upgraded equipment to limit the possibility of wind-related fire due to its overhead transmission lines sparking. This has lessened the number of backcountry and wind-related firestorms, knock on wood.
However, the picture of flooding disasters has always been an iffy proposition in this region. Chollas Creek and the recent flood disaster could be repeated in many watersheds where agencies should hire contractors to strategically remove vegetation and soil, as well as garbage dams that can raise water levels over the banks flooding homes and businesses. Local governments blame other agencies for permitting roadblocks that prevent them from getting the channel-clearing jobs done. The City of San Diego is soon to find out in court how the law sees that excuse.
FEMA’s National Risk Index is at the heart of it, rating how well local and regional governments are preparing, prioritizing, mitigating, and responding to disasters. The rating is not very flattering.
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