(Airdate: 2024-06-14) NBC - KNBC - New Insurance Options for California Home and Business Owners

Published Date: 06/14/2024

California’s New Insurance Options: How State Reforms Aim to Protect Homeowners and Businesses in High-Risk Zones

For years, California homeowners and business owners have faced an insurance nightmare — non-renewals, skyrocketing premiums, and shrinking coverage options, especially in wildfire-prone areas.

But now, new measures from the California Department of Insurance (CDI) and the Governor’s office are signaling a potential turning point.

As NBC Los Angeles (KNBC) reported in its June 14, 2024 broadcast, the state is rolling out new wildfire risk maps, policy-writing incentives, and regulatory reforms designed to make sure Californians aren’t left without coverage.

Insurance expert Karl Susman joined NBC’s Lolita Lopez to break down what these changes mean — and how they could help both homeowners and business owners regain protection and peace of mind.

The Crisis That Sparked Reform

For years, the situation has been dire.

Wildfires, rising rebuilding costs, and restrictive insurance regulations have combined to drive many major insurers — including State Farm, Allstate, and Farmers — to either stop writing new business or drop existing policies in high-risk areas.

That has forced hundreds of thousands of Californians into the California FAIR Plan, the state’s insurer of last resort.

Originally intended as a temporary safety net, the FAIR Plan has now become a primary coverage source for many homeowners.

“Homeowners have found themselves being dropped from their insurance policies for various reasons and forced to turn to the California FAIR Plan as their only option, instead of the option of last resort as it was intended,” Lopez reported.

The result: incomplete coverage, higher premiums, and frustration across the state.

The State Steps In: A New Blueprint for Insurance Equity

In response, the Department of Insurance has unveiled a sweeping plan to rebalance coverage availability and ensure insurers return to distressed areas.

The plan includes several key innovations:

1. A First-Ever Wildfire Risk Map identifying ZIP codes where insurers must increase policy offerings.
2. Mandated Mitigation Credits — requiring insurers to reward homeowners and business owners who take steps to reduce wildfire risk.
3. Use of Catastrophe Modeling — allowing more accurate, property-specific risk assessment instead of one-size-fits-all pricing.
4. Documentation and Enforcement Rules — ensuring insurers follow through on commitments to expand coverage.

Together, these initiatives aim to reverse the trend of mass non-renewals and restore balance to California’s fragile insurance ecosystem.

The Wildfire Risk Map: Identifying “Distressed” ZIP Codes

One of the most groundbreaking elements of the plan is the new wildfire risk mapping system — the first of its kind in California.

This map highlights ZIP codes where:

• More than 15% of all property policies are written by the FAIR Plan, and
• Low-income neighborhoods are paying disproportionately high premiums.

These zones — concentrated in Los Angeles, San Bernardino, and Riverside counties — will now receive priority attention under the new regulations.

Insurers operating in the state will be required to increase coverage offerings in these areas to help reduce FAIR Plan dependency and close the insurance gap.

“It represents ZIP codes where more than 15% of policies are written by the FAIR Plan,” Lopez explained. “As well as neighborhoods where incomes are low, yet insurance premiums are high.”

For many homeowners who have been living under the constant fear of losing coverage, this targeted approach offers renewed hope.

Rewarding Wildfire Mitigation Efforts

One of the most important shifts in California’s insurance reform is the new emphasis on risk reduction and individual responsibility.

For years, homeowners who spent thousands of dollars hardening their homes — installing fire-resistant roofs, clearing brush, trimming trees — saw little to no reward from insurers.

That’s changing.

Under the Department of Insurance’s updated framework, companies must take mitigation efforts into account when writing or renewing policies.

“Tree trimming, brush clearing — the steps many property owners in California have taken to protect their homes and businesses from wildfires — must be taken into account by insurance companies,” Lopez reported.

Susman agreed, noting that these reforms finally put mitigation “front and center” in how risk is evaluated.

“It’s a good thing because it’s going to enable consumers to know if they’re in a higher-risk area than they thought,” he said. “And insurers will be required to provide steps that the consumer can take to make their home less likely to burn.”

This approach creates a fairer system — one that rewards proactive homeowners and encourages community-wide fire prevention.

Catastrophe Models: Science Meets Regulation

Another critical element of the reform plan is the state’s decision to allow catastrophe modeling — a major policy shift.

Historically, California prohibited insurers from using forward-looking catastrophe models to determine rates. Companies were forced to rely only on historical loss data, which often underestimated future wildfire risk.

That restriction made it nearly impossible for insurers to accurately price coverage, leading many to withdraw from high-risk areas altogether.

Now, the Department of Insurance is finally embracing predictive modeling — the same technology used in nearly every other state.

These models use advanced analytics, satellite data, and climate projections to simulate how future wildfires might behave — helping insurers set rates that more accurately reflect each property’s real-world risk.

“It’s going to enable a more personalized approach,” Susman said. “No more blanket, one-size-fits-all cost. It will also help consumers understand where they truly stand.”

This not only benefits insurers — by making coverage more financially sustainable — but also helps homeowners by eliminating unfair generalizations based solely on ZIP codes.

Accountability: Forcing Insurers to Follow Through

A recurring concern among Californians is whether insurers will actually comply with new coverage requirements.

Susman says this time, the state has taken enforcement seriously.

“They’re actually going as far as saying what type of documentation needs to be maintained, in what format, and for how long,” he explained. “That’s not something I’ve seen before.”

By embedding these compliance standards directly into the regulations, the Department of Insurance aims to ensure accountability and transparency from carriers — not just promises.

This represents a significant cultural shift within California’s insurance oversight: moving from reactive regulation to proactive enforcement.

The Trailer Bill: Immediate Action

While most of these reforms are slated for implementation by the end of 2024, Governor Gavin Newsom’s trailer bill, attached to the state budget, could accelerate several provisions immediately.

The bill aligns closely with Insurance Commissioner Ricardo Lara’s Sustainable Insurance Strategy, and it’s designed to fast-track regulatory modernization.

Among other things, it:

• Streamlines the rate approval process under Proposition 103.
• Enforces existing 60-day review timelines for filings.
• Allows the use of catastrophe models with DOI oversight.
• Prioritizes insurance access in distressed communities.

“Similarly, there is a trailer bill attached to the California budget that the governor is looking to sign, which would actually put part of these plans in effect immediately,” Lopez reported.

This dual-track approach — long-term reform combined with immediate relief — reflects the state’s recognition of just how urgent the crisis has become.

What Homeowners and Business Owners Can Do Now

Even as the reforms roll out, homeowners still face an uncertain landscape. Susman offered some practical advice for anyone struggling to find or keep coverage:

“It’s a very difficult time,” he said. “The best thing to do right now is keep the policy.”

That means do not cancel your existing policy — even if you’ve received a non-renewal notice. Let it lapse naturally, and work with your broker to find a replacement or companion policy before coverage ends.

Additional recommendations include:

• Document all mitigation work — photos, invoices, and certifications.
• Ask your agent about discounts or new eligibility programs.
• Explore FAIR Plan + companion policy combinations if traditional coverage isn’t available.
• Stay informed about policy updates and reforms through the Department of Insurance website.

Looking Ahead: From “Crisis Mode” to Stability

The introduction of wildfire risk maps, catastrophe models, and enforceable mitigation credits represents a fundamental shift in how California regulates and prices insurance.

If implemented effectively, these reforms could:

• Reduce FAIR Plan dependence,
• Reintroduce competition among private insurers, and
• Empower homeowners to control their own risk and costs.

The combination of regulatory modernization and market accountability could finally restore balance to California’s insurance ecosystem — a goal that has eluded policymakers for years.

“Considering that your home is probably the most important purchase of your life,” Lopez said, “to find out that you can’t get it insured is kind of crazy.”

With these new initiatives, the state is finally taking steps to make sure that doesn’t happen again.

Final Thoughts: A Path Toward a Healthier Market

California’s insurance crisis didn’t appear overnight — and it won’t disappear overnight either. But the latest reforms show real promise.

By blending science, accountability, and fairness, the state’s new strategy could pave the way for a more resilient insurance market — one that protects both the financial health of insurers and the peace of mind of homeowners.

As Susman put it, these changes are about restoring trust and function to a system that has been paralyzed for too long:

“This is a very difficult time. But it’s also an opportunity — an opportunity to fix the system and make sure Californians never have to go through this again.”