Wildfires and the Future of California Home Insurance
Published Date: 09/11/2024
As flames sweep across California’s hillsides once again, the question isn’t just about what’s burning — it’s about what’s breaking.
For years, the state’s insurance market has been stretched thin by a relentless cycle of catastrophic wildfires, insurer withdrawals, and rising homeowner anxiety. With every new fire season, the same question returns: how much longer can California’s insurance system hold?
In a CBS–KCAL segment aired September 11, 2024, investigative reporter Christine Lazar and insurance expert Karl Susman examined what the latest fires mean for homeowners, insurance availability, and future premiums. Their discussion revealed a system under strain — but also signs of regulatory protection and potential recovery.
California’s Insurance Market Was Already on Edge
Even before the latest fires erupted, California’s insurance market was fragile. Over the past two years, major carriers have paused or restricted new homeowners policies, citing severe wildfire losses and outdated rate regulations that limit how risk can be priced.
Some insurers have requested rate increases of 40% to 50%, while others have stopped writing new business in large parts of the state altogether.
“We’ve had over 900,000 acres burn in California so far this year,” Susman noted. “And about 1,200 structures have been lost. This is exactly what everyone’s been worried about.”
Each major wildfire compounds insurer caution, drives up costs for consumers, and pushes more homeowners into the state’s last-resort California FAIR Plan, which provides only basic fire coverage.
Why Wildfires Disrupt the Insurance Model
Insurance operates on the principle of pooling and predicting risk. When wildfires strike in dense, high-risk zones, insurers face not isolated claims, but massive correlated losses — hundreds or thousands of homes damaged at once.
This concentration of exposure strains the traditional insurance model. In fire-prone regions, losses do not spread out over time; they arrive all at once.
Without the ability to price risk accurately or raise rates quickly under California’s Proposition 103 system, insurers face a difficult choice: pull back from the market or operate at unsustainable losses.
“These are the fires that everyone’s been worried about,” Susman said. “The ones that could destabilize the market again.”
Consumer Protections Activate After Major Wildfires
Despite widespread anxiety, Susman emphasized that California’s Department of Insurance (CDI) moves quickly to protect policyholders after disasters.
“As soon as the perimeter is established, I expect the Department of Insurance to put a lock in place so that carriers don’t have the ability to non-renew people in those areas,” he explained.
That “lock” refers to California’s one-year non-renewal moratorium. Once the governor declares a state of emergency and CAL FIRE establishes the affected perimeter, insurers are legally prohibited from canceling or non-renewing policies in and around the disaster zone for 12 months.
For the Line Fire in San Bernardino County, Governor Gavin Newsom issued a state of emergency, triggering these protections. The moratorium gives homeowners stability during the most vulnerable period of recovery and rebuilding.
How Wildfires Affect Rates and Renewals Long Term
Rate increases do not follow immediately after a wildfire. In California, any adjustment to rates or underwriting must pass through a lengthy regulatory review process with the CDI.
“Any time there’s a change to rates, it has to go through a substantial process,” Susman explained. “So the likelihood of seeing a direct impact right now or in the next few months is pretty low.”
This consumer-focused review system prevents sudden premium spikes but also delays how quickly insurers can recover financially from catastrophic seasons. The full impact of today’s wildfires may not reach consumers for many months — or even years.
Susman expressed hope that by the time new rate filings arrive, the state’s 2024 insurance reforms will already be in place, encouraging more carriers to return and restoring competition.
“Hopefully by the time we start to see changes, the new regulations will already be bringing competition back,” he said.
What Homeowners Can Do Right Now
Even with regulatory protections in place, Susman urged homeowners to take proactive steps — especially in high-risk wildfire zones.
The first priority is creating defensible space around homes. Clearing vegetation, replacing combustible decks and fences, installing ember-resistant vents, and upgrading to Class A fire-rated roofing all significantly reduce fire exposure. Many of these improvements may also qualify homeowners for California’s “Safer from Wildfires” insurance discounts.
Second, safety must always come first. Susman stressed the importance of obeying evacuation orders without hesitation.
“Don’t be the hero,” he warned. “If there’s an evacuation order, get out. No property is worth your safety.”
Finally, homeowners should continue shopping for coverage when possible, even in a restricted market. Independent brokers can access surplus-line and specialty carriers when standard markets are unavailable. Comparing options also helps identify discounts and emerging opportunities as the market evolves.
The Role of Regulation in Market Stability
Susman highlighted California’s Department of Insurance as one of the most pro-consumer regulatory agencies in the country.
“Here in California, we have a very pro-consumer Department of Insurance,” he said. “So we are protected there.”
The CDI is currently implementing major reforms aimed at restoring market balance, including:
- Allowing insurers to use catastrophe models in rate filings
- Accelerating approvals for insurers that commit to writing in high-risk areas
- Increasing transparency around non-renewals and transitions to the FAIR Plan
These changes are part of Insurance Commissioner Ricardo Lara’s broader strategy to protect consumers while ensuring that insurers can operate sustainably in a changing climate.
Climate, Geography, and the New Reality of Risk
Nearly one in four homes in California sits within a high or very high fire hazard severity zone. As drought persists, development expands into wildland–urban interface areas, and vegetation management struggles to keep pace, wildfire risk becomes systemic rather than isolated.
The insurance crisis is no longer just about pricing. It is about how climate change, geography, and development patterns reshape the fundamental economics of risk.
It is no longer a matter of whether fires will happen — but how often and how costly they will be.
Signs of a Stabilizing Market Ahead
Despite current conditions, Susman offered cautious optimism.
“Hopefully by the first quarter of next year, we’ll see the industry start to open up again,” he said. “There will actually be options for consumers to shop around and find competitive coverage.”
As insurers gain new tools for risk modeling and pricing, more companies may return to the state with products better aligned to modern wildfire realities.
Until then, homeowners are urged to remain proactive: know your policy, mitigate your risks, understand your rights, and stay in close communication with your broker.
Final Thoughts on Fire, Insurance, and Resilience
California’s struggle with wildfire is not new, but the financial consequences are more complex than ever. Insurance remains a critical lifeline — not a luxury — in fire-prone communities.
“The Department of Insurance is here to protect consumers,” Susman said. “And that’s exactly what it’s doing right now.”
In a time when fire seasons feel longer, premiums feel higher, and uncertainty feels constant, resilience depends on preparation, shared risk, and informed homeowners. The insurance market is strained — but it is also adapting, just as it has after every major disruption in history.
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