California Insurance Crisis: Expert Karl Susman Explains the Challenges

Published Date: 01/11/2025

Inside California’s Insurance Crisis: Why Homeowners Are Paying More—and Getting Less

California’s insurance market is facing one of the most significant crises in its history. From wildfire losses to outdated regulations, insurers, agents, and homeowners are all grappling with a perfect storm of risk, cost, and uncertainty.

In a recent ABC 10 News report, insurance expert and broker Karl Susman broke down the forces driving the crisis—and the harsh realities facing Californians trying to protect their homes. His insights reveal a system at the breaking point, where insurers are retreating, consumers are overpaying, and agents are struggling to close deals.

1. The Breaking Point: How California’s Market Got Here

The story begins with a trend that’s been accelerating for years: major carriers withdrawing from high-risk zones.

“We’ve told you insurance carriers such as State Farm stopped covering thousands of people due to fire concerns,” ABC 10’s Austin Grabis reported.

Those concerns are not unfounded. Wildfires have become more destructive and frequent, fueled by climate change, drought, and urban sprawl. But insurers’ retreat is also a product of regulatory stagnation.

Under California’s Proposition 103, passed in 1988, insurers must obtain state approval for rate increases. The intent was to protect consumers from excessive premiums—but in today’s volatile climate, it’s had the opposite effect.

“Real estate agents couldn’t close deals because clients couldn’t get insurance,” Susman recalled. “And some residents were paying tens of thousands of dollars for policies.”

The bottleneck is simple: carriers can’t charge rates that reflect real risk, so they limit or stop writing new business altogether. The result is a shrinking pool of insurers—and skyrocketing premiums for those still offering coverage.

2. The Consequence: Homeowners Left With Few Choices

The effects are rippling across California. Thousands of homeowners are finding themselves abruptly dropped by insurers with little notice.

One Ramona apartment building owner interviewed by ABC 10 discovered his policy had been non-renewed without warning, leaving him uninsured and unable to meet mortgage requirements.

Susman explained that this is part of a larger trend:

“Insurers are doing whatever they can to limit their risk and not renew clients. What you’ll find is they’ll say, ‘That area is saturated,’ or, ‘That roof is too old.’ I don’t want to say they’re making excuses—they’re legitimate concerns—but carriers that are still writing are very far and few between.”

For policyholders, that means fewer options and higher costs. For brokers, it’s an uphill battle to find available, affordable coverage for clients who are being turned away by mainstream insurers.

3. Why Insurers Are Leaving: The Risk Equation Has Changed

At the heart of the issue lies risk modeling—the statistical engine behind every insurance premium.

For decades, insurers used historic loss data to predict future risks. But with climate change and urban expansion into wildfire-prone regions, those models no longer hold.

The loss frequency and severity are now exceeding what actuaries predicted, forcing insurers to reconsider their entire exposure base.

“Carriers are technically still open,” Susman explained, “but they’re very selective about what they’ll take. It’s not that they’re refusing business—they’re refusing unsustainable risk.”

When carriers can’t price policies high enough to reflect the actual danger—or when reinsurance costs skyrocket—they pull back to preserve solvency.

That’s why entire regions, from Sonoma to the Sierra foothills, have effectively become insurance deserts—areas where no traditional carrier will write policies at all.

4. The Human Toll: Real Estate, Lending, and Consumer Anxiety

The insurance crisis isn’t just an insurance story—it’s a real estate and economic story.

Without proof of insurance, mortgages can’t close, construction projects stall, and property values decline. Some Californians are finding it nearly impossible to sell their homes.

“Real estate agents couldn’t close deals because clients couldn’t get insurance,” Susman said.

In some cases, even long-time policyholders are being told their policies won’t renew because of new fire mapping, changes in vegetation proximity, or even aerial images showing debris or overgrown landscaping.

That level of scrutiny, combined with limited market availability, has turned what was once a routine renewal process into a nightmare of paperwork, inspections, and anxiety.

5. Turning to the FAIR Plan: The Insurer of Last Resort

For those who can’t find coverage through private insurers, the California FAIR Plan offers a safety net—but one with limitations.

The FAIR Plan provides basic fire coverage only. It doesn’t include liability, theft, water damage, or loss-of-use protection unless supplemented with a separate “wrap-around” policy from a private carrier.

Despite its gaps, the FAIR Plan has become a lifeline for over 300,000 households, many of which are now located in wildfire-prone ZIP codes.

“The FAIR Plan isn’t meant to be a long-term solution,” Susman often reminds audiences, “but it’s become one because the private market has shrunk so much.”

Its growing enrollment, however, raises concerns about long-term financial stability. Since it’s a shared market pool funded by participating insurers, major disasters could strain its capacity—potentially triggering statewide assessments on all carriers.

6. Reform Efforts: California’s “Sustainable Insurance Strategy”

The California Department of Insurance (CDI) recognizes the crisis and is working to modernize regulations through the Sustainable Insurance Strategy, announced in 2024 by Commissioner Ricardo Lara.

The initiative aims to:

• Allow insurers to use forward-looking catastrophe models in rate filings.
• Require carriers to write in both urban and high-risk areas rather than selectively avoiding wildfire zones.
• Shorten the rate approval process, which can currently take years.
• Create incentives for home-hardening and community mitigation efforts.

Susman supports these reforms but cautions that they’ll take time to stabilize the market:

“Even with reform, it’ll be years before we see insurers returning at full scale. Rebuilding trust in California’s insurance ecosystem doesn’t happen overnight.”

7. The Rising Cost of Reinsurance: A Hidden Driver of Premiums

Another underreported factor in California’s insurance turmoil is reinsurance—the insurance that insurance companies buy to protect themselves from catastrophic losses.

As global disasters intensify, reinsurers (often based in Europe or Bermuda) have raised prices dramatically or reduced capacity. Those higher costs trickle down directly to policyholders.

In many cases, insurers can’t pass those costs through under current state regulations—so they simply withdraw from the market instead.

“Reinsurance costs are up 30–50% for many carriers,” Susman explained in other forums. “If they can’t adjust their premiums accordingly, they can’t stay profitable—or even solvent.”

This global ripple effect shows that California’s crisis isn’t just local—it’s part of a broader recalibration of risk worldwide.

8. What Homeowners Can Do Right Now

While market reforms and regulatory changes unfold, Californians still need immediate protection. Susman offered several practical steps for navigating this turbulent environment:

✅ 1. Contact Your Broker Early

Don’t wait for a non-renewal notice. Proactively check with your insurance agent or broker months before renewal. Options are limited, and waiting can leave you uninsured.

✅ 2. Maintain Defensible Space

Clearing brush, trimming trees, and hardening your home with fire-resistant materials can improve eligibility for coverage and reduce premiums.

✅ 3. Keep Documentation Handy

Photos, videos, and records of your property’s condition can help during renewal reviews or claims disputes.

✅ 4. Understand the FAIR Plan

If you’re forced onto the FAIR Plan, pair it with a wrap-around policy to cover non-fire perils.

✅ 5. Budget for Higher Premiums

Until reforms take full effect, expect higher rates. Consider it a cost of living in high-risk regions—and a reminder to review coverage limits annually.

9. The Bigger Picture: Balancing Risk and Regulation

At its core, California’s insurance crisis is a balancing act between consumer protection and actuarial reality.

Regulators want to keep insurance affordable. Insurers want to ensure they can stay solvent.
Caught in the middle are consumers—many of whom feel punished for simply living in the state they love.

“It’s not about greed,” Susman explained. “It’s about sustainability. If insurers can’t price for risk, they can’t offer coverage. And if homeowners can’t afford insurance, no one wins.”

California’s challenge now is to modernize without destabilizing—a delicate process that will define the state’s housing and insurance future for years to come.

10. Conclusion: A Market in Transition

California’s insurance market is at a crossroads. The combination of climate change, regulatory inertia, and financial strain has created a crisis that touches every homeowner, broker, and policymaker.

But amid the chaos, experts like Karl Susman see opportunity. With reforms underway, public awareness growing, and new technologies enhancing risk modeling, there is cautious optimism that the system can adapt.

For now, the message is clear:
Stay informed. Stay proactive. And above all, stay insured.

Because in California, the greatest risk isn’t just wildfire—it’s being caught unprepared when it strikes.