CBS - KCBS - Amid High Fire Danger, Some Insurers Cancelling SoCal Residents Homeowners' Policies

Published Date: 01/17/2024

When the Fire Isn’t Near — But the Insurance Still Disappears

Why SoCal Homeowners Are Losing Coverage Amid Rising Fire Risks

As Southern California braces for another dangerous fire season, thousands of homeowners are facing a different kind of emergency — one that doesn’t involve flames, but finance.

According to a recent CBS KCBS report, insurers are dropping policyholders across the region, even in areas not currently classified as high fire zones. For many, premiums have doubled — and for others, coverage has vanished altogether.

It’s a story that’s becoming all too familiar in California: homeowners blindsided by non-renewal notices, forced into expensive last-resort insurance options, and caught in the middle of a volatile market where insurers are struggling to manage mounting risk.

1. “We Didn’t Even Know Until We Tried to Refinance”

For Heather Bracca, who lives in an unincorporated part of Chatsworth, the shock came not in the form of smoke but in paperwork.

“We actually didn’t find out we were getting non-renewed until we tried to refinance,” she told CBS. “They needed a copy of our renewal policy because it was almost up.”

By then, her insurer had quietly decided not to renew her policy. Bracca scrambled to find a replacement, but every new quote she received was more than double her previous premium — which had already climbed to nearly $5,000 a year.

“It just seems unfair,” she said. “You don’t have any claims, you don’t make them pay anything out, and they can still just take your money and drop you.”

Bracca’s experience reflects what many Southern Californians are discovering: the problem isn’t just the wildfires themselves, but the insurance market’s response to perceived wildfire exposure — even in neighborhoods that haven’t burned in decades.

2. The Safety Net: California FAIR Plan

After exhausting every private option, Bracca ended up on the California FAIR Plan, the state’s insurer of last resort for residents who can’t find coverage elsewhere.

The FAIR Plan is a state-mandated pool of insurers that collectively provides basic fire insurance when private carriers won’t. But while it serves an essential safety function, it has serious limitations.

“The maximum limitation is that they will only cover up to $3 million in total value for each property,” CBS reported.

That cap might sound generous, but in high-cost regions like Southern California — where home values regularly exceed $1 million and rebuilding costs are soaring — the FAIR Plan’s coverage often falls short of full protection.

Homeowners are encouraged to purchase “difference-in-conditions” (DIC) policies from private insurers to supplement FAIR Plan coverage, but that means paying for two separate policies — and navigating two sets of underwriting requirements.

3. A Growing Coverage Gap

Independent insurance expert Karl Susman, of the Susman Insurance Agency, says this wave of cancellations and cost hikes isn’t limited to those on the FAIR Plan — and that many homeowners with private coverage are underinsured without realizing it.

“Given the increased cost of construction and the shortage of labor, the average homeowner is underinsured by about 10%,” he said.

Susman explains that many policies haven’t been updated to reflect post-pandemic construction inflation. Lumber, labor, and materials have all risen sharply, and those costs directly affect how much it would take to rebuild a home after a loss.

“You’re not talking about thousands of dollars,” he said. “You might be talking about $200 or $300 more per year to go from being underinsured to being properly insured.”

In other words, the cost to fix your coverage is small compared to the cost of being underinsured after a catastrophe.

4. Legal Protections — and Their Limits

California’s Insurance Commissioner, Ricardo Lara, has issued consumer protection orders to prevent insurers from dropping policyholders in the midst of an active wildfire crisis.

“It’s against California law to cancel a policy in the middle of a wildfire emergency — and for a year after a state of emergency is declared,” Lara’s office reminded insurers.

However, those protections apply only to specific ZIP codes affected by declared disaster areas.

That means if your policy is canceled before a fire starts or if you live just outside a disaster-designated zone, your insurer can legally drop you — even if you’re facing similar risk conditions.

This loophole leaves thousands of Californians in a gray area, vulnerable to non-renewals even as statewide fire conditions worsen.

5. Why Insurers Are Backing Away

So why are insurers walking away from California homeowners at such an alarming rate?

It comes down to risk modeling, regulation, and the economics of reinsurance — the system that insurers rely on to protect themselves from catastrophic losses.

• Wildfire frequency and intensity have surged in recent years, pushing claim payouts to record highs.
• Reinsurance costs — the price insurers pay to share risk with global reinsurers — have nearly doubled since 2020.
• California’s strict rate-approval process under Proposition 103 makes it difficult for insurers to raise premiums quickly enough to reflect these new costs.

As a result, insurers argue they are being forced to either absorb unsustainable losses or withdraw from the market entirely.

Susman and other experts have repeatedly emphasized that this isn’t about insurers “abandoning” California — it’s about a regulatory framework that hasn’t kept up with the economics of modern catastrophe risk.

6. The Human Side of the Crisis

While policymakers and insurance executives debate reform, the real impact is felt by homeowners caught in the middle — especially those outside official “fire zones” who now find themselves treated as if they live in high-risk wilderness.

The emotional toll is significant. Families who have never filed a claim are suddenly paying thousands more a year or forced into partial coverage. Homebuyers struggle to close on properties because lenders require proof of adequate insurance.

And with the FAIR Plan now insuring more than 350,000 homes statewide, many of those policies are clustered in exactly the suburban and semi-rural areas that drive California’s housing market.

Without insurance, home values can decline, mortgages can fall through, and entire communities can face economic uncertainty.

7. What Homeowners Can Do

While individual consumers can’t change state policy overnight, they can take practical steps to protect their coverage and control their costs.

Here’s what experts like Susman recommend:

🔹 1. Review Your Coverage Annually

Confirm that your policy’s dwelling replacement cost reflects current construction prices. Updating this figure may cost slightly more now but could save you from financial disaster later.

🔹 2. Work With an Independent Agent

Independent brokers can compare multiple insurance carriers — including regional or specialty companies — that may still write coverage in your ZIP code when larger insurers won’t.

🔹 3. Invest in Fire Mitigation

Create defensible space around your home, clear vegetation, install ember-resistant vents, and upgrade roofing materials. These improvements can lower your fire risk and improve insurability.

🔹 4. Ask About Bundling or Discounts

Combining home and auto insurance or adding safety features (like monitored alarms) can yield discounts even in tight markets.

🔹 5. Understand the FAIR Plan

If you’re forced onto the FAIR Plan, pair it with a Difference-in-Conditions (DIC) policy from a private insurer. This combination can help you maintain broader protection than the FAIR Plan alone.

8. A Market in Transition

California’s insurance commissioner has proposed reforms under the Sustainable Insurance Strategy, which includes:

• Allowing insurers to use forward-looking wildfire risk models,
• Streamlining the rate-approval process, and
• Expanding access to the FAIR Plan while pushing for private-market reentry.

But meaningful change will take time — and for homeowners like Heather Bracca, the crisis is immediate.

Her story is one of many illustrating that the state’s insurance problem isn’t just about fire damage — it’s about regulatory inertia, climate volatility, and market imbalance.

9. The Bottom Line

California’s wildfire insurance crisis isn’t just a story about climate change — it’s a story about system design.

As costs rise and risks evolve, the state’s regulatory system must evolve too. Otherwise, more homeowners will be forced into last-resort options that don’t fully protect their most valuable asset.

For now, the message from experts like Susman is clear:

“Insurance isn’t just about peace of mind — it’s about keeping your financial foundation secure. Even if it costs a bit more today, that protection is worth it tomorrow.”

In a state where fire season never truly ends, that’s advice every Californian should take to heart.