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Insurers' rebuild estimates leave California fire losses underinsured
A review of 74,070 owner-occupied fire claims in California found 71.3% of destroyed homes were underinsured on average by about 19%.
Insurance Business reports a new analysis of California claims data challenges the idea that most underinsurance stems from homeowners choosing lower coverage to save on premiums.
According to the report, law professor Kenneth Klein used aggregated data from the California Department of Insurance, covering 74,070 owner-occupied home fire claims from 2018 to 2023, and defined underinsurance as cases where dwelling coverage fell short of the insurer's own reported incurred loss.
By that measure, 71.3% of destroyed homes were underinsured, with an average shortfall of about 19%. The study also found that catastrophe losses were underinsured 78% of the time, with an average gap near 25%.