Experts, including Dr. David Marlett, professor in the Department of Finance, Banking, and Insurance at Appalachian State University, weigh in on what they identify as home insurance shortfalls exposed by the Los Angeles wildfires.
Insurance companies were worried about many of the homes in the Pacific Palisades neighborhood of Los Angeles long before this week’s devastating wildfire burned through the area, ravaging homes and forcing evacuations. The Palisades, because of its location next to the brush-heavy Santa Monica Mountains and the high value of its homes, was too vulnerable to fires to insure at permissible rates without the companies losing money. Insurers including State Farm, which dropped nearly 70% of policyholders in Pacific Palisades in July 2024, refused to offer new insurance plans or renew old ones.
As a result, many homeowners were forced to obtain coverage from the state’s insurer of last resort, the California Fair Access to Insurance Requirements (CA FAIR) Plan, which covered 1,430 homeowners in the Pacific Palisades zip code of 90272 in September 2024, an 85% increase from 2023. The FAIR plan insures homes against fire but has higher premiums than traditional home insurance and only covers up to $3 million in damages for residential properties.
Read the article, Home Losses From the LA Fires Hasten ‘An Uninsurable Future.'
The way FAIR Plans work “is really a symptom of the broader insurance market failing,” said Marlett, managing director of the Brantley Risk and Insurance Center at Appalachian State University. “It’s a horrible situation."
About David Marlett
At Appalachian State University, Marlett holds the Independent Insurance Agents of NC Insurance Professorship and is managing director of the Brantley Risk & Insurance Center. He joined App State's faculty in 2003, serving in various leadership roles for the university and its Walker College of Business. Learn more about David Marlett.
About the Brantley Risk & Insurance Center
The Brantley Risk & Insurance Center enhances the academic experience of business students at Appalachian State University by providing space and staff to assist with networking, job placement preparation and contact with faculty members outside the classroom. It provides students with opportunities to participate in professional designation and licensing programs and invites industry leaders to participate in classes and speak to student organizations. It also fosters research and faculty development, assists the insurance industry in the design and delivery of continuing education programs, and helps educate the public about the insurance industry. Learn more at https://insurance.appstate.edu.
David Marlett
Appalachian State University