ABC - KXTV - There's A Real Crunch: The Home Insurance Headache Hitting California

Published Date: 01/17/2024

“There’s a Real Crunch”: Why California’s Home Insurance Market Is Breaking Down

California’s homeowners are running into a crisis that’s no longer limited to wildfire zones or rural areas — it’s spreading everywhere.

In a revealing ABC 10 News report by Austin Grabish, insurance experts and property owners described what’s being called a “real crunch” in the state’s insurance market: shrinking availability, rising premiums, and growing anxiety about what happens next.

“In California right now, there’s a real crunch for insurance availability,” said longtime insurance broker Karl Susman.

The latest blow? Foremost Insurance, a division of Farmers, announced it would stop writing new home insurance policies in California starting immediately — another domino in a chain of exits and pullbacks that have left millions scrambling for coverage.

1. Another Insurer Bows Out

As of this week, Foremost will no longer offer new home insurance policies in California.

The company joins a growing list of carriers — including State Farm, Allstate, and Liberty Mutual — that have either frozen new business, withdrawn certain product lines, or begun non-renewing existing customers.

“Another insurance company is pulling back from California,” Grabish reported. “Starting today, Foremost will no longer take new business in the state.”

For homeowners, that means one less option in an already constricted market. For insurance professionals, it signals a deeper, systemic issue.

“We called every single one of them,” Susman said of the state’s supposedly active carriers. “And there were less than a dozen that were writing without restrictions.”

2. The View From the Ground: “They Didn’t Even Want to Talk to Me”

For property owners like Tim Gordon in Oceanside, the crisis isn’t abstract — it’s personal and immediate.

Gordon, who owns a few rental properties, was stunned when his insurer abruptly canceled his commercial policy covering two buildings.

“It was stressful,” Gordon said. “I started calling other vendors as a backup — and then I realized just how ugly it was.”

When he mentioned one of his property ZIP codes — Ramona, a region with higher wildfire exposure — potential insurers hung up or refused to quote.

“The minute I shared a Ramona ZIP code, they didn’t even want to discuss it with me.”

After weeks of searching, Gordon finally found coverage — but at double the cost of what he was paying last year.

“I thought I was locked in before,” he said. “But that uncertainty is exactly what’s scary.”

3. A Market in Retreat

According to the California Department of Insurance (CDI), there are technically “more than 100 insurance companies writing new homeowners insurance policies in the state.”

But that number is misleading.

“That’s not actually the case,” Susman explained. “We called every single one of them — and there were less than a dozen writing without restrictions.”

In practice, that means most insurers either:

• Restrict new business to low-risk ZIP codes,
• Require large deductibles or bundled auto policies, or
• Only write renewals for existing customers.

The remaining “open” carriers are now overwhelmed, leading to bottlenecks and delays for new homebuyers trying to close escrow.

“We’ll get calls from real estate agents panicking,” Susman said. “In the 11th hour, they’re trying to get their clients’ escrows to close, but the lenders can’t finalize without a policy.”

4. Why This Is Happening

California’s insurance crisis has been building for years, fueled by three major pressures:

🔥 1. Climate-Driven Wildfires

The cost and frequency of wildfires have exploded. Since 2017, insurers have paid out more than $30 billion in wildfire losses. Reinsurers — the global firms that backstop insurers — have raised prices or pulled out of California entirely, forcing carriers to take on more risk themselves.

💸 2. Inflation and Rebuilding Costs

The price of labor and materials has surged 30–40% since 2020. Even modest claims cost significantly more to settle than they did five years ago.

⚖️ 3. Outdated Regulation (Proposition 103)

California’s Prop 103, passed in 1988, limits how insurers calculate rates. Companies must base prices on historical losses, not future risk, and can’t freely adjust premiums when exposure increases.

As a result, insurers argue they’re trapped between rising costs and frozen pricing models.

When risk outpaces regulation, carriers retreat — exactly what’s happening now.

5. The Ripple Effect: From Homeowners to the Economy

When insurers pull back, it doesn’t just hurt individual homeowners — it ripples across the housing market and economy.

• Home sales are delayed or canceled when buyers can’t obtain coverage in time for closing.
• Lenders get cautious, requiring higher proof of coverage or escrows.
• Landlords face higher overhead, driving up rents.
• Small businesses and contractors dependent on property insurance for permits or financing also feel the squeeze.

The ABC 10 report captured this domino effect vividly — from homeowners stuck in renewal limbo to brokers overwhelmed by calls from desperate agents and clients.

“There’s a real crunch,” Susman said. “Everyone is competing for the same limited capacity.”

6. The Human Side of the Crisis

For many homeowners, the experience is emotionally draining.

“It was stressful,” Gordon repeated. “I thought I was safe, then my insurer dropped me.”

Even when coverage is available, the cost shock can be devastating — particularly for retirees or middle-income families on fixed budgets.

“He was finally able to get his rentals insured,” Grabish reported, “for double what he was paying just one year ago.”

That sense of vulnerability — of being one claim or one renewal away from losing coverage — has become the defining feature of California’s insurance landscape.

7. What Experts Are Advising Homeowners

Susman and other brokers interviewed by ABC 10 offered practical advice to homeowners navigating the turmoil.

✅ 1. Keep Your Policy on Auto-Pay

This might sound simple, but in today’s environment, missed payments can lead to immediate cancellations.

“Companies are starting to cancel policies as soon as payments lapse,” Susman warned. “They’re doing it to cut down on risk exposure.”

With carriers pulling back, reinstating a canceled policy is often impossible — even if the lapse was accidental.

✅ 2. Don’t Let Coverage Expire

Start renewal discussions early — 60 to 90 days before your policy end date. Once you’re dropped, it’s harder to find replacement coverage.

✅ 3. Work With an Independent Broker

Independent agents can access multiple carriers and help identify regional or specialty insurers still writing in your area.

✅ 4. Strengthen Your Home’s Fire Defenses

Invest in defensible space, Class-A roofing, ember-resistant vents, and fire-hardened siding. These improvements can make you more insurable — and may qualify you for premium discounts under new mitigation regulations.

8. The Role of the FAIR Plan

When no private insurer will take a homeowner, the California FAIR Plan — the state’s “insurer of last resort” — steps in.

But FAIR Plan coverage is limited, often providing fire-only policies that must be supplemented with separate liability and theft coverage.

Premiums are high and growing as more homeowners join. The FAIR Plan’s risk pool has ballooned in recent years, raising concerns about sustainability.

“It’s a stopgap, not a solution,” Susman often notes in his commentary on similar cases.

9. What’s Next: A Market Waiting for Reform

The state’s Insurance Commissioner Ricardo Lara is pursuing his Sustainable Insurance Strategy, which aims to modernize California’s system by:

• Allowing forward-looking catastrophe models,
• Requiring insurers to write more policies in high-risk areas, and
• Streamlining rate approval processes.

These changes are expected to take full effect by December 2024 — but that’s little comfort to homeowners and agents facing cancellations this year.

Until then, brokers expect continued volatility, higher premiums, and restricted underwriting.

10. The Bigger Picture

California’s insurance crisis isn’t just about policy renewals — it’s a structural problem born of climate risk, economic inflation, and regulatory inertia colliding all at once.

As Foremost joins the growing list of carriers stepping back, the message is clear: without modernization and balance, the system itself is unsustainable.

For homeowners like Tim Gordon, that means living with uncertainty — not just about fires or floods, but about whether coverage will even exist next year.

“I thought I was locked in before,” Gordon said. “But I thought wrong.”

The Bottom Line

“There’s a real crunch,” as Karl Susman told ABC 10 — and it’s more than a headline. It’s the new reality for California homeowners navigating a fragile, overburdened insurance system.

Until reforms take hold, the best defense is vigilance: pay on time, maintain your property, stay informed, and work with professionals who understand the shifting landscape.

Because in this market, getting coverage isn’t just about protection — it’s about persistence.