Give me a solution, not just a problem

Give Me a Solution, Not Just a Problem: Rethinking California’s Insurance Crisis

California’s insurance market is at a breaking point. Policies are being canceled, premiums are skyrocketing, and entire neighborhoods are finding it nearly impossible to secure coverage. On a recent episode of The Insurance Hour, host Karl Susman tackled this issue head-on, inspired by an open letter from several California legislators to Insurance Commissioner Ricardo Lara.

The letter — co-signed by Congressman John Garamendi and others — called attention to the “chaos” in the state’s insurance market and urged the Commissioner to stabilize rates and require carriers to provide affordable coverage across all regions. But as Susman points out, while the letter identifies the problem, it doesn’t present a solution.

And that, he argues, is where the conversation must begin: not just with complaints or political sound bites, but with practical, data-driven strategies to fix a system that’s been straining for years.

The Root of the Crisis: Risk, Regulation, and Reality

Susman begins by cutting through the noise: “Insurance is not complicated,” he says. “It’s just math.”

That may sound overly simple, but it’s true. Insurance pricing is a mathematical balancing act — premiums must be high enough to cover claims and operating costs, but low enough to attract customers and comply with regulatory constraints. When either side of that equation falters, the system breaks down.

In California, the breakdown is severe. Over the past several years, carriers have withdrawn from writing new policies, citing unmanageable losses from wildfires, floods, and other extreme weather events. As of 2025, nearly 87% of insurers in the state have restricted or stopped writing new business altogether.

Why? Because the numbers don’t add up. Between rising claim costs and outdated regulatory models, insurers can’t charge rates that reflect actual risk — and they’re unwilling (and often legally unable) to operate at a loss.

Susman summarizes it bluntly: “If you collect $1,000 and you pay out $1,200, at some point that game’s going to run out.”

A Perfect Storm: Climate, Catastrophes, and Costs

Susman reminds listeners that California’s crisis isn’t occurring in isolation. The nation as a whole is experiencing a surge in weather-related losses.

As he explains, “Right now, there are 478,962 emergency responders working on 6,545 wildfires in California.” Those fires, along with 25 separate billion-dollar weather disasters across the U.S. this year alone, have put unprecedented pressure on the insurance industry.

Extreme heat, record rainfall, tropical storms, and megafires are driving payouts higher than ever. Even states not traditionally prone to such risks — like Missouri, Kentucky, and Arizona — are seeing billion-dollar events.

“This isn’t political,” Susman says. “It’s just math. The weather is creating significantly higher payouts that the insurance industry is paying. We have to accept that.”

That’s the hard truth policymakers often avoid: if the frequency and cost of disasters increase, someone has to pay for it. Either insurers absorb the losses (which isn’t sustainable), consumers face higher premiums, or governments step in with subsidies or backstops. Without systemic reform, none of these options provide long-term stability.

Outdated Rules for a New Reality

California’s regulatory system, rooted in Proposition 103 (1988), was designed to protect consumers by tightly controlling how insurers set rates. The law requires state approval before carriers can raise premiums, and it limits the types of risk modeling insurers can use.

In theory, this system ensures fairness and transparency. In practice, it has made it nearly impossible for insurers to respond quickly to changing risk patterns.

“We’re operating on rules that were put in place 20 or 30 years ago,” Susman explains. “They simply don’t work the way they did back then.”

The result? Insurers can’t use modern data analytics or climate models to price risk accurately. They’re forced to rely on outdated assumptions, treating vastly different regions — and risks — as if they were the same.

That “homogenized” approach punishes low-risk homeowners while driving high-risk ones out of the market entirely. It’s a lose-lose scenario.

The Misconception of Profit and the Myth of the “Evil Insurer”

A common public perception, Susman says, is that insurers are greedy corporations hoarding profits while consumers suffer. But this, too, is a misunderstanding.

“The average insurance company works on razor-thin margins,” he explains. “If a carrier collects $100 in premium, it hopes to pay out $97 or $98 in claims and expenses. That’s only a few cents of profit per dollar.”

Insurance is a volume business. When losses spike — as they have from wildfires, floods, and hurricanes — even small margins evaporate. “You can’t force a private company to lose money indefinitely,” Susman says. “They’ll just stop writing coverage.”

And that’s exactly what’s happening. Most insurers have pulled back from California’s highest-risk areas, leaving the California FAIR Plan as a last-resort option. The FAIR Plan, a state-mandated pool funded by private insurers, has become overwhelmed, insuring tens of thousands of homes that once had private coverage.

It’s Not About Blame — It’s About Balance

Susman emphasizes that the goal isn’t to side with insurers or regulators — it’s to create balance. “We have two sides that both want the same thing,” he says. “Insurers want to sell insurance. Consumers want to buy insurance. So where’s the problem?”

The problem lies in the framework. Carriers need flexibility to underwrite based on real data. Regulators need to protect consumers from unfair practices. But the current system satisfies neither — and the result is paralysis.

“Same makes same,” Susman says. “Change makes change. If we agree that something has to change, then we have to actually make those changes.”

Possible Solutions: From Regulation to Innovation

So what can be done? While no single “magic wand” exists, Susman outlines several actionable steps:

Update Underwriting Regulations
Allow insurers to use modern risk modeling — including wildfire maps, satellite data, and real-time climate analytics — to set rates more accurately. That doesn’t mean deregulation, but modernization.
Encourage Competition
The key to affordability isn’t price caps — it’s competition. “The more companies that are writing policies, the lower the rates will be,” Susman says. When insurers can operate profitably, they’ll return to the market.
Expand Mitigation Incentives
Reward homeowners who invest in fire-resistant roofs, defensible space, and home hardening measures. The FAIR Plan’s new 14.5% wildfire discount program is a step in this direction — tying premiums to actual risk reduction.
Reinsurance and Public Backstops
The state could consider limited reinsurance programs or catastrophe bonds to help carriers absorb extreme losses, similar to what Florida and Texas have done.
Consumer Education
Homeowners need better guidance on reducing risk. As Susman quips, “Sometimes, preventing a fire can be as simple as removing your front doormat.” Seemingly small steps can have measurable impacts on loss prevention and insurance pricing.

From Complaints to Collaboration

At the heart of Susman’s message is a call for collaboration. The open letter from legislators correctly identifies the crisis — but as he says, “Don’t come to me with a problem without a solution.”

It’s easy to point fingers at the insurance commissioner, at carriers, or even at climate change. What’s harder is crafting actionable policies that balance consumer protection with industry sustainability.

And yet, that’s exactly what California needs. Without reform, the insurance market will continue to contract, premiums will rise further, and homeowners will face growing uncertainty.

As Susman concludes:

“Believe me, if an insurance carrier refuses to write business — and that’s how they make money — they’re only doing it because they can’t make money. They don’t just wake up and say, ‘I think I’ll stop doing what I make money at.’ Nobody does that.”

Conclusion: A Call to Action

Karl Susman’s challenge to California’s policymakers is simple: move beyond acknowledgment and toward implementation. The market doesn’t need more debates about whether there’s a crisis — it needs measurable solutions grounded in data, economics, and cooperation.

Insurance isn’t politics. It’s math. And until the state aligns its policies with that reality, Californians will keep paying the price.

It’s time for regulators, insurers, and lawmakers alike to sit at the same table and design a new, sustainable model — one that protects consumers, encourages competition, and ensures that insurance in California remains what it’s meant to be: a promise of protection, not a privilege of affordability.

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